p?- 


THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 


A    TREATISE, 


ox 


THE  LAW  OF  BANKS  AND  BANKING 


Vol.  I 


TREATISE   02T  THE  LAW 


OF 


BANKS  AND   BANKING 

BY 

JOHN   T.    MORSE,    Jr. 

JFifti)  lEtiition 

REVISED   AND   ENLARGED 
BY 

JAMES   N.   CARTER,   Ph.B.,   J.M. 
Vol.  I 


BOSTON 
LITTLE,   BROWN,  AND  COINIPANY 

1917 


Copyright,  1879,  1888,  1903,  1907,  1916,  1917, 
By  John  T.  Morse,  Jk. 


N'ortoooti  Press 

Set  up  and  electrotyped  by  J.  S.  Gushing  Co.,  Norwood,  Mass.,  U.S.A. 

Presswork  by  S.  J.  Parkhill  &  Co.,  Boston,  Mass.,  U.S.A. 


PREFACE 

In  preparing  this  edition  the  work  of  the  revision  has  largely 
taken  the  form  of  bringing  the  citation  of  the  cases  to  date  and  of 
adding  illustrative  notes,  and  in  so  doing  about  3000  citations 
have  been  added.  In  the  fourth  edition  the  work  was  carefully 
revised  throughout  and  it  has  met  with  such  wide  and  unanimous 
approval  of  both  the  practising  lawyer  and  the  judge  on  the  bench, 
and  has  been  so  constantly  cited  by  the  courts  as  the  leading 
authority  of  the  law  of  banks  and  banking  that  it,  therefore,  has 
been  deemed  advisable  when  adding  new  matter,  to  take  as  few 
liberties  with  the  text  as  possible. 

The  parallel  citations  of  cases  in  the  National  Reporter  Sys- 
tem, in  the  American  State  Reports,  and  in  the  Lawyers'  Reports 
Annotated  have  been  added  to  the  ordinary  method  of  citation, 
and  after  each  citation  has  been  added  the  year  in  which  the  case 
was  decided. 

The  Federal  Reserve  Act,  with  a  synopsis  and  an  index  sepa- 
rate and  distinct  from  the  general  index  and  placed  after  it,  has 
been  inserted.  This  synopsis  and  index  were  prepared  under  the 
direction  of  the  Federal  Reserve  Board  and  the  editor  wishes  ta 
acknowledge  the  courtesy  of  said  Board  in  allowing  their  use. 

All  references  throughout  the  book  are  to  sections;  those  of 
Part  II,  upon  National  Banks,  being  preceded  by  II.  The 
Second  Part  contains  a  table  by  means  of  which  ready  reference 
may  be  had  to  the  portions  of  this  book  that  concern  any  given 
section  of  the  Revised  Statutes  of  the  United  States.  The  cases 
that  construe  the  words  of  a  given  section  of  the  banking  law  may 
sometimes  be  found  cited  under  that  section,  but  generally  may 
be  found  by  turning  to  that  section  of  Part  II  whose  number  is 
200  plus  the  number  of  the  said  section  of  the  banking  law. 

The  analysis  at  the  head  of  each  chapter  is  intended  as  some- 
thing more  than  an  index.     Wherever  the  treatment  of  a  subject 


670S*~9 


VI  PREFACE 

is  expansive,  great  care  has  been  taken  to  put  an  accurate  and 
comyressed  statement  of  the  hiw  of  that  subject  in  the  analysis. 
It  will  be  found  useful  always  to  refer  to  the  analysis  as  well  as 
to  the  text  in  seeking  the  solution  of  the  problem  in  banking  law, 
for  very  often,  by  reason  of  their  having  been  drafted  from  different 
points  of  view,  they  mutually  elucidate  each  other;  and  the 
reference  in  the  analysis  to  sections  kindred  in  subject  matter 
will  also  be  found  of  value. 

JAMES   N.  CARTER. 

March,  1917. 


CONTENTS 


[All  references  are  to  Sections,  throughout  the  book.] 


VOLUME  ONE 

SEOnON 

CHAPTER  I.     Preliminary 1-12 

Scope  of  Book 

Definitions  .....•••• 

Sources  of  Banking  Law,  especially  of  Usage      .         .         .  6-9 

Conflict 

Between  State  and  Federal  Courts      ....  10 

Between  the  Laws  of  Different  Sovereignties       .         .         11,12 


1 
2-5 


PART  I 
BANKS  AND  BANKING  IN  GENERAL 

PREPARATION   FOR   BUSINESS 

CHAPTER   II.     Organization  and  Location       .         .         .  13-16 

Proof  of  Existence       ......••  14 

Ancillary  Powers  of  a  Bank         ......  l«i 

Appointment  and  Qualification  of  Officers .         ...  16 

CHAPTER   III.     Official   Bonds    and    the    Liability    of 

Sureties     ......•••         17-42 

Notes  on  Evidence,  Measure  of  Damages,  etc.  ...  42 

CHAPTER   IV.     By-Laws  and  their  Effect       ...  43 

BUSINESS    OF   THE   BANK 

CHAPTER   V.     Time  and  Place 44-46 

vii 


VIU 


CONTENTS 


Business  Powers 


CHAPTER   VI 

Express 

Implied 

Original 

Incidental 

Restrictions 
Statutory 
Common  Law 


CHAPTER   VTI.     Expansion  of  the  Powers  of  a  Bank  in 
Reference  to    . 


Purchase  of  Negotiable  Paper 
Dealing  in  Real  Estate 
Handling  Stocks 
Saving  Debts 


SECTION 

47-71 
47 
47 

48-53 

54-67 
68 

69,  70 
71 


72-78 

72,  73 

74-76 

77 

78 


OFFICERS   AND  AGENTS 

CHAPTER   VIIL     General  Principles        ....  80-113 

When  the  Agent's  Act  is  that  of  the  Bank           .         .         .  83-86 

Contractual  Acts          .......  87-101 

Authority  of  Agent 96 

Express           .......  97 

Imphed  or  Inferred        .....  98 

Adverse  Interest  .......  99 

Revocation  ........  100 

Ratification  ........  101 

Tortious  Acts 102 

Representations  ........  103 

Notice  to  the  Bank 104-112 

Competency  of  Bank  Officers  as  Witnesses  for  the  Bank    .  113 

De  Facto  Officers 98  6 

CHAPTER   IX.     Directors 115-141 

Authority 116-124 

Duty 125,  126 

Liability 128-131 

To  the  Bank 128,  129 

To  Third  Parties 130,  131 

When  the  Bank  is  made  Liable  by  Directors       .         .         .  126-132 

Contract      .........  127 

Tort 132 

Crime ..........  132 

Notice 

To  the  Board 133 

To  a  Single  Director 134-137 

Rights  of  Directors 124,  125 

Qualifications      .........  138 

Continuance  in  Office          .......  139 

Pay 140 

Records 141 


CONTENTS 


IX 


CHAPTER   X.     President     . 

Authority 

Duty  .         •         •        .•  .      • 

Representations  and  Admissions 

Notice  to    . 
Liability 

Of  President  to  Bank  . 

Of  one  held  out  as  President 
Personal  Undertakings  for  the  Benefit 
Pay    .         .         . 
Taxation  of         .         .         •         • 


CHAPTER   XI.     Cashier 
Inherent  Powers 
Special  Authority 
Notice  to    . 

Declarations  and  Admissions 
Limitations  of  Time  and  Place   . 
Instruments  in  Form  to  or  from  the  Cashier 
When  the  Cashier  binds  the  Bank 
Liability  of  Cashier  to  Bank 
Cashier's  Subordinates 
Cashier  after  Expiration  of  Charter 


of  the  Bank 


BECnON 

143-150 

143-145 

143 

145 

146 

147 
148 
149 
150 
150  A 

152-176 
153-104,  1(59 
105 
106 
107 
108 
170 
171 
172 
174 
176 


DEPOSIT 

CHAPTER    XII.     Receiving  Deposits 

CHAPTER   XIII.     Kinds  of  Deposit 

Special 

Specific  .  .  .  •  • 
General  .  .  .  •  • 
Change  from  one  Kind  to  another 


CHAPTER   XIV.     Special  Deposit 

Definition 

Power  to  Receive         ... 

Measure  of  Care  to  which  the  Bank  is  held 


CHAPTER   XV.     Specific  Deposits 
Duty  of  Bank     .... 
Ijiability  of  Bank 
Interest       .         .         .         •         • 


CHAPTER   XVI.     Collection 

Nature   of    the   Contract,    its  Duties   and    Liabilities 
General. 

CHAPTER   XVII.     Liability  of  a  Bank  for      . 

Default  of  Notary 

Also  of  Collection  Agencies 

Default  of  its  Correspondent 


178-180  A 

183-187 
183,  184 
185-187 
186,  187 
187 

190-204 

190 

191-204 

194-204 

207-212 

207,  208 

209-212 

205 

214-203 


205-287 

205,  266 

267 

268-287 


X  CONTENTS 

SECTIOIf 

CHAPTER   XVIII.     General  Deposit          ....  289-295 

Relation  of  Bank  and  Depositor 289 

Insolvency           .......••  289 

Forged  Paper  or  Base  Coin         ......  289 

Bills  of  Insolvent  Bank 289 

Checks  on  the  Depositary 289 

Checks  on  other  Banks,  Bills,  Notes,  etc 289 

Writings  in  the  Course  of  Banking  Business        .         .         .  290-295 

Right  to  Inspect  Books 294 

Depositor's  Rights 294 

Right  of  others 294 

Use  of  Bank  Books  as  Evidence 295 

CHAPTER  XIX.     Certificates  of  Deposit        .         .         .  297-309 

Form 297 

Signature 297 

Nature  and  Effect 298 

NegotiabiUty 299 

Transfer 300 

Statute  of  Limitations 301 

Staleness     .....•••••  303 

Payment  by 304,  305 

Lost  Certificate 306 

Interest  on  Certificate         .......  307 

Alternate  Certificate 308 

Interest  Accounts        ........  309 

CHAPTER  XX.     Payment  of  Deposit        .        .        .        .  311-321 

Obligation  of  Bank 311 

In  Money  .....•••••  312 

On  Verbal  Order 313 

Without  Order 314 

In  Part 315 

Void  Paper 316 

Duty  as  to  Trust  Funds 317 

Forced 318 

Insanity  of  Depositor           .......  319 

To  Guardian 319  A 

Succession  of  Banks             .......  320 

CHAPTER   XXI.     Statute    of    Limitations    on    General 

Deposit           .........  322 

CHAPTER   XXII.     Lien  and  Set-off           ....  324-340 
Lien, 

On  what  and  for  what  the  Lien  attaches     .         .         .  324 

Effect 326 

Appropriation  of  Deposits   ......  327 

Unmatured  Debt 329 

Loss  of  Lien         ........  330 

Estoppel 331 

Creation 332 


CONTENTS  XI 

SECTION 

Set-ofif 334 

Insolvency 337 

Of  Depositor          .......  337 

Of  a  Commerf'ial  Bank          .....  338 

Of  a  Savings  Jiank 339 

Of  a  Savings  and  Loan  Association       .         .         .  339  A 

Death  of  Depositor      .......  340 

CHAPTER   XXIII.     Adverse  Claim 342-344 

CHAPTER   XXIV.     Attachment  and  Injunction       .         .  346-348 

CHAPTER   XXV.     The  Clearing-House     ....  349-355 

The  Routine .349 

Effect  of  Rules  on 350 

Third  Parties 350 

Members 352 

Notes  sent  through  the  Clearing-House       ....  353 

CHAPTER  XXVI.     Overdrafts 357-360 

CHECKS 

CHAPTER   XXVII.     Checks  in  General    .         .         .  363-395  A 

Essentials 363-376 

Memorandum  Checks          .......  388 

Antedated  and  Post-dated  .......  389 

Issue 390 

Indorsement 391 

Checks  payable  to  Bearer 393 

Money  given  to  the  Drawer  of  a  Worthless  Check      .         .  394 

Transfer  of  Check  by  Mail 395 

Lost  Checks 395  A 

Conversion  of  Checks 395  B 

CHAPTER   XXVIII.     Revocation  of  Checks     .         .  397-400  A 

By  Countermand         ........  397 

By  Death 400 

By  Insolvency 400  A 

CHAPTER   XXIX.     Statute  of  Limitations       ...  402 

CHAPTER   XXX.     Acceptance  and  Certification    .         .  404-419 

Form 405-411 

Authority   .         .         .         .         .         .         .         .         .         .  413 

Object 414 

Effect 

After  Issue  .........  414 

Before  Issue          ........  415 

Statute  of  Limitations         .......  418 

Mistake 419 


xu 


CONTENTS 


VOLUME   TWO 

CHAPTER   XXXI.     Presentment  for  Payment 
Period  of  Presentment 

Special  Circumstances 
Holder  v.  Drawer 
Holder  v.  Indorser 
Presentment  by  Mail 
Notice  of  Dishonor 

CHAPTER   XXXII.     Payment  of  Checks 
Signature     . 
Agent's 

Married  Woman 
Joint     . 

Joint  and  Several 
Co-Trustees 
Assignees 
Co-Executors 
Firm     . 
Corporation 
Successors  in  Office 
Suspicious  Circumstances 
Insufficient  Funds 
Legal  Tender 
Recalling  Payments    . 
Order  of  Pajnnent 
Payment  by  giving  Credit  . 
Payment  after  the  Bank  is  Insolvent 
Payment  by  Mistake 
Drawer's  Suit  for  Dishonor 
Defences     .... 
Possession  of  Paid  Checks 
Payment  of  Cheeks  on  other  Banks 

CHAPTER   XXXIII.     Forgery  of  Checks 
As  between  Bank  and  Drawer 
Forged  Signature 
Forged  Indorsement    . 
Fraudulent  Alteration 
As  between  Bank  and  True  Owner 
As  between  Bank  and  Person  receiving  the  Money 
Time  within  which  Discovery  and  Notice  must  be 
summated        ....... 


CHAPTER   XXXIV.     Effect  of  a  Check 
As  an  Assignment 

Between  one  Holder  and  Another 
Between  the  Holder  and  the  Creditors  of  the  Drawee 
Bank         ....... 

Between  the  Holder  and  the  Drawer  and  his  Cred 
itors  ....... 

Conlhct  of  Laws  ..... 


SECTION 

421-428 

421 

421-424 

421-426 

421,  422 

427 

428 

431-460  A 
432-440  A 
433 
434 
435 
435 
436 
437 
438 
439 
440 
440  A 
441-445 
446,  449 
447,448 
449 
450 
451 
452 
454 
458 
459 
460 
460  A 

462-489 


463-473 
474 
469,  480 
474 
463,  466-489 
Con- 

487-489 


491-555 

497 

498 

539-541 
542 


CONTENTS 


xm 


As  Payment 

As  a  Gift    .... 

Donatio  Causa  Mortis 

Inter  Vivos 
As  a  Testamentary  Document 


CHAPTER  XXXV.     Payment  of  Notes  an 

Duty  to  Pay 

Note  held  by  Bank     .... 
Rights  of  Indorsers     .... 


CHAPTER   XXXVI.     Title  to  Deposits 
As  between  the  Bank  and  Depositor  . 
As  between  Parties,  neither  of  which  is  the 
As  between  the  Bank  and  Third  Persons 

CHAPTER   XXXVII.     Title  by  Gift 
Inter  Vivos  ..... 

Donatio  Causa  Mortis 


CHAPTER   XXXVIII. 
Nature 
Rules 
Pass-book  . 


Savings  Banks 


CHAPTER   XXXIX.     Insolvency 

Definition  ...... 

Preferences  ..... 

Rights  of  Depositors  .... 

Insolvency  of  Sa\'ings  Banks 

Insolvency  of  Loan,  Trust  and  Investment  Companies 


D  Acceptance 


Bank 


SECTION 

543 
548 
550 
551 
554 

557-564 

557,  558 

559,  560 

562 

566-606 

566-589 

589 

590-603 

608-615 
608-610 
611,  612 

617-620 
617 
620 

619,  620 


622-632  A 
622 
623-627 
628-631 
632 
632  A 


BILLS   AND   STOCK 


CHAPTER   XL.     Bank  Bills 
Issue  .... 

Bill-holder's  Rights     . 
Transfer      .... 

Forged  Bills 

Warranty  of  Solvency 


CHAPTER   XLI.     Stock  and  Stockholders 
Liabilities  of  Stockholders, 
As  Subscribers 
Beyond  Subscription    . 
Lien  of  a  Bank  on  its  Stock 
Shareholder's  Rights  . 
Transfer  of  Stock 
The  Bank  as  a  Shareholder 
Sovereign  States  as  Shareholders 


634-666 
634,  666 
637-658 
659-662 
569 
662 

668-720 

668-674 
675-696 
697-705 
70()-717 
709-714 
716 
718 


XIV  CONTENTS 

SECTION 

CHAPTER  XLII.     Informality,  Ultra  Vires,   and  For- 
feiture .........     723-764 

CHAPTER   XLIII.     Legislative  Continuance  of  the  Cor- 
poration        .........  765 

CHAPTER   XLIV.     Dissolution 766 

CHAPTER   XLV.     Loan,    Trust    and     Investment    Com- 
panies          767-779 


PART  II 
NATIONAL  BANKING    LAWS 

National  Banking  Act,  June  5,  1864 1-63 

Act  of  31  May,  1878 64 

Act  of  14  February,  1880 65 

Act  of  26  February,  1881 66 

Act  of  12  July,  1882 67-79 

Act  of  3  March,  1883 8Q 

Act  of  1  May,  1886 81 

Acts  of  3  March,  1887 82,  83 

Act  of  13  August,  1888 83  A 

Act  of  14  July,  1890 83  B 

Act  of  28  July,  1892 83  C 

Act  of  3  August,  1892 83  D 

Act  of  2  March,  1897 83  E 

Act  of  14  March,  1900 83  F 

Act  of  3  March,  1901 83  G 

Act  of  12  April,  1902 83  H 

Full  Text  of  the  Laws  of  the  United  States  relating  to  Banking, 

passed  in  1874,  1875,  and  1876 84 

Act  of  30  May,  1908 84  A 

Federal  Reserve  Act 85-199 

Amendments  to  the  Federal  Reserve  Act  ....      199  A-199  E 

Cases  upon  their  Construction            ......  200-300 

GENERAL   INDEX 781-865 

INDEX   TO    THE    FEDERAL   RESERVE    ACT          .         .  867-889 


TABLE   OF  CASES 


[All  references  are  to  Sections,  throughout  the  book.] 


Bank 


Abbers  v.  Commercial  Bank 
Abbott  V.  Agricultural  Bank 

V.  Jack      .... 

V.  Smith   .... 

Abeles  v.  Cochran     .     .     . 
Abilene  Nat.  Bank  v.  Dolley 
Abilene  State  Bank  v.  Strachan 
Abrahams  v.  Southwestern  R.  R 
Abrams  v.  Union  Nat.  Bank  . 
Abt  V.  Amer.  Trust  &  Sa\ings  Bank 
Adams  v.  Bank    .... 

V.  Clark    .... 

V.  Darby  .... 

V.  Daunis      .     .     . 

t;.  Mayor,  etc.  of  Nashville 

V.  Nashville  .... 

V.  Orange  Co.  Bank    . 

V.  Otterback      .     .     . 

V.  Railroad    .... 

V.  Robinson  .... 

V.  Spokane  Drug  Store 

Adler  v.  United  States  .  .  . 
Adley  v.  White  Stable  Co.  . 
Aebi  V.  Bank  of  Evansville  . 
.^tna  Indemnity  Co.  v.  Farmers'  Nat. 

Bank 

^tna  Ins.  Co.  v.  Alton  City  Bank 
iEtna  Nat.  Bank  v.  Fourth  Nat.  Bank  . 


679 


85  Mo.  173 
11  Sm.  &  Mar.  405 
136  Cal.  510  . 
4 Ind.  452  .  . 
22  Kan.  405   . 
228  U.  S.  1  .  . 
87  Kan.  577   . 
1  Rich.  N.  s.  441 
31  La.  Ann.  61. 
1.59  111.  467  .  . 
113  N.  C.  335  . 
36  Colo.  65  675, 

28  Mo.  162  .  . 

29  La.  Ann.  315 

16  Alb.  Law  Jour 
95  U.  S.  19  .  . 

17  Wend.  514  . 
12  How.  539  . 
6H.&N.404,Eng 
1  Pick.  461  . 
57  Fed.  888 
182  Fed.  464 
17  Ves.  323  . 
124  Wis.  73 . 


398 
642 
161,  297,  679 
.  .  275 
128,  n.  21 
.  .  413 
59,  679,  716 
. 638,  663 
.  .  481 
.  .  542 
.  .  334 
684,693,694 
.  421 
II.  257 
II.  241  c 
II.  241  g 
.     .     322 
9,  n.  5,  231 
[.  1860   46 
.  .  496 
.  .  338 
.  II.  259 
.  .   43 
.  .  573 


416 


E 


Agar  V.  Atlantic  Ins.  Co.  .  . 
Agnew  V.  Bank  of  Gettysburg 
Agricultural  Bank  v.  Burr 

V.  Commercial  Bank  . 

V.  Robinson  .... 


Aiken  v.  Jones 

Akrokerri  Mines  v.  Economic  Bank 
Alabama   etc.    Transportation  Co. 
Doyle 


169  Fed.  739 21 

25  111.  243  .  .  .  236,  274,  287 
46  N.  Y.  82  .  186,  289.  493, 
511,  524,  557,  568 
3  C.  B.  N.  s.  725  .  .  98,  n.  32 
2  Har.  &  Gill  478  ...  -   14 

23  Me.  25()  ....   669,  672 
7  Sm.  &  Mar.  592  265,  274,  285 

24  Me.  274 761 

93  Tenn.  3()4  .  248,  248  a,  493 
(1904)  2  K.  B.  465  ..  .  248 


210  Fed.  173 768 


XV 


XVI 


TABLE    OF    CASES 


Albany  City  Nat.  Bank  v.  Mahcr 
Albany  County  Bank  v.  Peoples'  Ice 

Co 

Albert  v.  Savings  Bank 

Albion  Nat.  Bank  v.  Montgomery 

Alderson  v.  Pope 

Aldrich  v.  Bingham 


19  Blatchf.  175 


II.  241  X 


V.  Dunham 
V.  .Jackson 
V.  Yates 


Alexander  v.  Burchfield 


V.  First  Nat.  Bank 

V.  Mackenzie     ... 

Alexandria  Canal  Co.  v.  Swann 
Allaire  v.  Hartshorne     ... 
AUen  V.  American  Nat.  Bank 

V.  Dundas     .... 

V.  First  Nat.  Bank 


V.  Freedman's  Sav.  &  Trust  Co. 

V.  Keeves 

V.  Kramer 

V.  Luke 


140  Ga.  266 
6  C.  B.  766 
5  How.  83 
1  Zab.  665 
.3  Laws.  517 
3  T.  R.  125 
23  Ohio  St. 


Merchants'  Bank 


— V.  Puritan  Trust  Co 

V.  Suydam 

V.  Williamsburg  Savings  Bank 

Alley  V.  Rogers 

Alliance  Bank  v.  Kearsly 

AUinson  v.  Hubbell 

Allison  V.  Farmers'  Bank 

Alpena  Nat.  Bank  v.  Greenbaum    .     . 
Alpine  Cotton  ]Mills  v.  Weil  .... 

Alsop  V.  Conway 

Alston  V.  State 


Altman  v.  Phillips  County  Bank 
Alves  V.  Henderson  Nat.  Bank  . 
Amalgamated  Sign  Co.  v.  U.  S. 

Bank 

American  Bank  v.  Adams       .     . 

V.  Wall 

American  Can  Co.  v.  WiUiams   . 


Nat. 


American    Exchange    Nat.    Bank    v. 
Loretta  Gold  &  Silver  Mining  Co.  . 

V.  Gregg 

V.  Mining  Co.    .     .     . 

American  Express  Co.  v.  Haire 
— — —  V.  State  Nat.  Bank     . 
American  Ins.  Co.  v.  Oakley  . 


92  App.  Div.  47    ....     603 

2  Md.  160 125 

54  Neb.  681      ...      II.  230  n 

1  Camp.  404 131 

131  Fed.  363     .     .  675,  679,  683, 
11.  212  a,  212  h,  24i  k 

16  111.  403  309 

5  R.  I.  218  .     .     .     .       477,  662 

95  Fed.  78 678 

7  M.  &  G.  1061     .   231,  238,  243 

245,  380,  421,  n.  9 

569 

...      98,  n.  15 

143 

....    565,  n.  16 

511 

438 

97  ...     .  750,  11. 

.  .  .  228,  229,  244 
14  Fla.  418 755 

1  East  435 389 

2  Brad.  209 421 

141  Fed.  694  .  .  II.  250,  253 
163  Fed.  1008  ....  II.  30 
22  Wend.  215   .     .102,  n.  19,  224, 

250,  265,  270,  272,  274,  278 
211  Mass.  409  .     .317,317a,  493 

20  Wend.  321 252 

69  N.  Y.  314 620 

19  Gratt.  366 216 

6  L.  R.  C.  P.  433  .     .     .     .     439 

17  Ind.  559  .  .  45,  726,  744,  750 
6  Rand.  204   ...  22,  25,  42 

74  Mich.  157 564 

129  N.  C.  452  .  .  .  58.3c,  586 
188  Fed.  .568  675,  679,  693,  696 
92  Ala.  124  .  .  .  .  186,  186  a, 

190,  289  a 

86  Kan.  9.30 311 

89  Ky.  130  ...  .   II.  230  n 

187  Fed.  746 592 

12  Pick.  303   ...  22,  24,  42 

56  Me.  167  .  .  .  .   637,  641 

176  Fed.  816  248  a,  567  a,  589  h, 

II.  208  h  \  250  c 


46  N.  E.  202  . 

...  208 

138  111.  596  .  . 

.   451,  459 

165  111.  103  .  . 

...  629 

21  Ind.  4   .  . 

.   265,  272 

27  Okla.  824  . 

.  463,  466  d 

9  Paige  496   . 

.     . 143,  159 

TABLE    OF    CASES 


XVll 


American  Nat.  Bank  v.  Fertilizer  Go. 
V.  Fidelity  etc.  Co.     .     .     . 


—  V.  Miller 


V.  Minor 

V.  Moroy 

V.  Owcnsboro  Sav.  Bank     .     . 

V.  Presnall 

V.  Ritz 

Amer.  Nat.  Bank  of  Detroit  v.  Bushley 
Amer.  Trust  &  Banking  Co.  v.  Boone 
Ames  V.  Farmers'  etc.  Bank  .     . 

V.  Meriara 

V.  York  Nat.  Bank     .     . 

Amlierst  Bank  v.  Root      .     .     . 
Amicable  Ins.  Co.  v.  Sedgwick   . 

Amis  V.  Witt 

Ancona  v.  Marks 


Anderried  v.  Betteley    .     . 
Anderson  v.  Bank     . 

V.  Commonwealth 

V.  Do  Soer     . 

(;.  First  Nat.  Bank 

V.  Gill 

V.  Pacific  Bank 

V.  Rodgers     .     .     . 


V.  State     .... 

V.  Thompson      .     . 

I'.  Thornton  .     .     . 

Anderson,    Receiver    v.    Philadelphia 

Warehouse  Co 

Anderton  v.  Shoup   .... 
Andover  Bank  v.  Grafton 
Andrews  v.  Blacldey 

V.  Bond 

V.  German  Nat.  Bank 

V.  Knecland  .... 

u.  Northwestern  Nat.  Bank 

V.  President,  etc.  of  Suffolk  Bank 

V.  Wilson's  Assignee  . 

Angle  V.  N.  W.,  &c.  Ins.  Co. 
Anglo-American     Land    etc. 

Cheshire  Provident  Inst. 

V.  Lombard  .... 

Anglo-California  Bank  v.  Ames 

V.  Field 

Ankeny  v.  Blaldey    .... 

Anketel  v.  Converse  .  .  . 
Appeal  of  Bank  of  Commerce 
Apijcal  of  Farmers  &  Mechanics'  Bank 


Co 


125  Tenn.  328 
129  Ga.  12G 

131  Ga.  854 
185  Fed.  338 
229  U.  S.  517 

142  Ky.  792. 
113  Ky.  857. 
146  Ky.  194. 
58  Kan.  69 
70  W.  Va.  409 
45  Mich.  135 

102  Ga.  202 
48  Wash.  328 
98  Mass.  294 

103  Mass.  326 
2  Met.  522  16 
10  Mass.  163 
33  Beav.  619 

7  Hurl.  &  N 

8  Allen  302 

5  N.  D.  421 
117  S.  W.  364 

6  Gratt.  364 
144  Iowa  251 
79  Md.  313  . 


686 


112  Cal.  598 
53  Kan.  542 
114  Ala.  204 
65  Ala.  553  . 
38  Hun  394 
3  Q.  B.  271  . 


Ill  U.  S.  479 
17  Ohio  St.  12 
7  N.  II.  298 

11  Ohio  St.  89 
13  Peters  65 

9  Heisk.  211 
6  Cow.  354  . 
107  Minn.  196 

12  Gray  461 
114  Kv.  671 
92  U.  S.  342 

124  Fed.  464 
132  Fed.  721 
27  Fed.  Rep.  7 
146  Cal.  644 
44  Or.  78   . 

17  Ohio  St.  11 
44  Pa.  St.  423 
48  Pa.  St.  57 


...  428 
.  311,  317, 
317  a,  322  e 
.  .  322  e 
.  146  k,  451 

104,  10().  236, 

451,  569 

.  .  .  332 

2,  289  a,  458 
.  .   248  a 

185,  210,  290 
106,  136  a,  146  k 
...  472 
.  317,  317  a 
.  .  .  133 
.  .441,442 
.  .  .  395 

21,  27,  37,  42 
...  31 
.  .  .  550 
.  494,  529 
.  217,  696 
...  727 
...  768 
...  496 
.  302  b,  309 
.  .  .  421 
.  205,  567  b 
.  .  .  236  b 
.  .  .421 d 
.  .  .  289 
...  610 
...   30 


20 


98, 
102, 


565, 


684 
433 
565 
381 
542 
416 

n.  30 
474 

n.  22 
294 

n.  17 


.  .   622  A 

...  746 

...  392 

.  .  .  14  o 

II.  241  b,  241  s, 

241  ;r.  241  y 

.  .   109,  134 

....  325 

....  561 


X\U11 


TABLE    OF    CASES 


Appleby  v.  Erie  Co.  Savings  Bank 
Appleton  V.  Central  Nat.  Bank  .     .     . 

V.  Citizens'  Central  Nat.  Bank 

Apsey  V.  Kimball 

V.  Whittemore 

Arbogast  v.  Amer.  Exch.  Bank  .     .     . 

Archer  v.  Bokenham 

Ardmore  State  Bank  v.  INTason  .     .     . 

Arkansas    Valley    etc.     Ry.     Co.     v. 

Farmers'  etc.  Bank 

Arkofsky  v.  State  Savings  Bank     .     . 

Arlington  v.  Merrick 

Armat  v.  Union  Bank 

Armour  v.  Bank 

V.  Green  County  State  Bank  . 

V.  McMichael 

Arms  V.  Conant 

Armstrong  v.  Gibson 

V.  Nat.  Bank 


62  N.  Y.  12 
190  N.  Y.  417 
116  App.  Div. 
221  U.  S.  514 
196  Mass.  65 
125  Fed.  518 
11  Modern  161 
30  Okla.  568 


404 


.  .  620 
.  .  65 
65,  II.  208 
.  .  679,  II.  71 
.  .  679,  II.  71 
.  .  .  .  144  c 
.  .  .  9,  n.  7 
.  .698,  699  d, 
701,  709,  714 


V.  Temperon 

Armsworth  v.  Scotten 

Arnold  v.  Hart 

V.  Lyman 

V.  Alacungie  Savings  Bank 

V.  Niess 

V.  Sedalia  Nat.  Bank       .     . 

V.  Suffolk  Bank      .     .     .     . 

V.  Waupaee  Nat.  Bank  .     , 

Arthur  v.  Brown 

V.  Com.  &  R.  R.  Bank    .     . 

Ashbrook  v.  Ryan 


275 


Aspinwall  v.  Torrance 

Assaria  State  Bank  v.  Dolly  .  .  .  . 
Assets  Realization  Co.  v.  Howard  .  . 
Atchafalaya  Bank  v.  Dawson      .     .     . 

Atkin  V.  Barswick 

Atkins  V.  Cobb 

Atkinson  v.  Brooks 

V.  Rochester  Printing  Co.    .     . 

Atlanta  Nat.  Bank  v.  Davis  .  .  .  . 
Atlantic  Bank  v.  Merchants'  Bank 

Atlantic  National  Bank  v.  Franklin    . 

V.  Harris 

Atlantic  State  Bank  v.  Savery    .     .     . 

Atlas  Bank  v.  BrowneU 

V.  Nahant  Bank 

Atlas  Nat.  Bank  v.  Nat.  Exch.  Bank 
Attorney-General  v.  Bank  of  Niagara 

V.  Provident  Inst,  for  Savings 

V.  Utica  Ins.  Co 

V.  Wilson 


21  Okla.  322 
91  Minn.  440 
2  Saunders  414 
2  N.  &  M.  471 
69  Miss.  706 
112  Fed.  631 
36  N.  J.  L.  92 
36  Vt.  745    . 
31  Wis.  61    . 
46  Ohio  St.  412 

90  Ky.  436  . 
41  Fed.  234 
24  Law  T.  n. 
29  Ind.  495  . 
176  111.  442  . 
17  Mass.  400 
71  Pa.  287   . 
36  Leg.  Int.  437 
100  Mo.  App.  473 
27  Barb.  424 
126  Wis.  362 

91  S.  C.  316 

9  Sm.  &  Mar. 
2  Bush  228  . 
1  Lans.  381  . 
219  U.  S.  121 
211  N.  Y.  430 
13  La.  495  . 
1  Strange  165 
56  Ga.  86  . 
26  Vt.  574  . 
114  N.  Y.  168 
96  Ga.  336  . 

10  Gray  532 


55  N.  Y.  238 
118  Mass.  147 
18  Hun  36  . 
9  R.  I.  168  . 
3  Met.  581  . 
178  Mass.  531 

1  Hopk.  354 
201  Mass.  25 

2  Johns  Ch.  371 
1  Craig  &  Ph.  1 


430 


6,  56,  127  a 

.     . 620  6 

.  .   27 

.  .  650 

313,  317  a 

.  .  178 

.  .  600 

.  .   46 

.  .   49 

.   474  a 

223,  573 

.  .  325 

.  .  610 

.  .  637 

291,  622  A 

.  .  499 

.  .  342 

.  .  338 

.  . 289  a 

.  .  698 

152,  167 

.  . 146  d 

.  .  672 

.  .  615 

128,  n.  22 

.  .   13 

683,  688,  693 

.  760 

.  589 

.  593 

565,  n.  16,  600 

.  623 

.  458 

80,  89, 

103,  413,  590 

565,  n.  15 

147,  II.  244 

72,  136 

.   33 

.  161 

.  353 

13,  760 

.  320 

13 

.  128 


83 


TABLE    OF    CASES 


xa 


Atwood  V.  Bank  of  Chillicotho   .     .     . 

V.  Rhode  Island  Agricult.  Bank 

Aubert  v.  Walsh 

Augusta  Bank  v.  Hamblet     .... 

Aurora  v.  West 

Austin  V.  Aldermen        

V.  Board  of  Aldermen  of  Boston 

V.  Daniels 

V.  Miller 


Auten  V.  United  States  Nat.  Bank 
Auto  etc.  Mfg.  Co.  v.  Merchants'  Nat. 

Bank 

Averell  v.  Second  Nat.  Bank      .     .     . 

Ayer  v.  Hughes 

Ayers  v.  Dorsey  Produce  Co.      .     .     . 

Aymar  v.  Beers 

Ayrault  v.  Pacific  Bank 

Ayres  v.  Farmers  &  Merchants'  Bank 


10  Ohio  526 
1  R.  I.  370  . 
4  Taunt.  293 
35  Me.  491  . 
22  Ind.  8S  . 
7  Wall.  G94. 
14  Allen  359 

4  Den.  299   . 

5  McLean  154 
174  U.  S.  125 


...     645 

693,  694,  G96 

391,  393,  552 

.     144,  n.  24 

.     565 

II.  241/,  241  I 

.     .11.241  I 

...     172 

...       10 

.     .    11.250 

575,  577,  582 

179,  450 

...       65 

...     728 

422 

249,  250,  265,  272 


116  Md.  179 

6  Mack.  358 
87  S.  C.  382 
101  Iowa  141 

7  Conn.  705 
47  N.  Y.  570 
79  Mo.  421 573 


Babeoek  v.  Benham 

V.  Rocky  Ford 

Backhouse  v.  Charlton 

Bacon  v.  Brown 

V.  Robertson 

Bacon's    Administrators    v.    Bacon's 

Trustees 

Badger  v.  Bank  of  Cumberland  .  . 
Baeschlin    v.    Chamberlain    Banking 

House 

Bagley  v.  Robertson 

Bailey  v.  Bacon 

V.  Bodenham 

V.  Bunker 

V.  Burgess 

v.  Farmers'  Nat.  Bank   .     .     . 

V.    New    Bedford    Inst,    for 


4  Hill  129 233 

25  Colo.  App.  312      ...  421  b 
8  Ch.  D.  444     ..     .       317,  439 

3  Bibb  35 103 

18  How.  480 706 


94  Va.  686 
26  Me.  428 


.     325 
159,  171 


Savings 


O'Neal 
Partridge 

Sawyer 


V.  Taber 


Bailie  v.  Augusta  Savings  Bank      .     . 

Bain  v.  Brown 

Baird  v.  Bank  of  Washington     .     .     . 

Baker  v.  Atlas  Bank 

V.  Baker 

V.  Beach 

V.  Berry  Hill  Mineral  Springs 


67  Neb.  196 594 

57  Ga.  145 295 

26  Miss.  455 637 

12  W.  R.  865    .     .231,  427.  428 

2  Hill  190 696 

5  Ohio  St.  15    .     .     .       494,  534 
97  111.  App.  66 .     .  48,  65,  II.  205 

192  Mass.  564 609 

92  Ark.  327       .      116,128,130/ 

134  111.  188 546 

9  Leg.  News  191,  Thomp.  Nat. 
Bank  Case  356  II.  212  b,  250  d 

5  Mass.  286 565 

95Ga.  281  .     .     .     .       252,583 

56  N.  Y.  285 125 

11  Serg.  &  R.  411  .  .  48,  98, 
119,  125,  127 
9  Met.  182  .  .  .  677,  678,  693 
123  Md.  32  .  .  317,  604  6,  609 
86  Fed.  836 686 


Co. 


V.  Hedrich 


112  Va.  280 

85  Md.  645  , 


101  a 
604  b 


XX 


TABLE   OF   CASES 


Baker  v.  Moody 

V.  New  York  Nat.  Exch.  Bank 

V.  Old  Nat.  Bank 

V.  Sehofield 

V.  State 

V.  Williams  Banking  Co.      .     . 

Balbaeh  v.  Frelinghuysen 

Balch  V.  Wilson 

Baldinger  etc.  Mfg.  Co.  v.  Manufac- 
turers' Citizens'  Trust  Co.       .     .     . 
Baldwin  v.  Bank  of  Louisiana    .     .     . 

V.  Bank  of  Newbury  .... 

V.  Canfleld 

V.  Proctor 

Baldwin's  Bank  v.  Smith 

Ball  V.  German  Bank 


1  Ala.  315 346 

100  N.  Y.  31 326 

86  Fed.  1006 680 

221  Fed.  322 74  6 

54  Wis.  368 178 

42  Or.  213 309 

15  Fed.  675       .     .  573,  586,  .589 

25  Minn.  299    ...     .    II.  252 

156  N.  Y.  S.  445  ....     419 

1  La.  Ann.  13   .       102,  n.  15  and 

17,  236,  265,  274,  287 

1  Wall.  2.34  .     152,  157,  170,  171 

26  Minn.  43      ....    II.  228 


Ballard  v.  Fuller 

V.  Home  Nat.  Bank   .     .     .     . 

Ballard  Bros.  v.  Bank  of  Madison  .  . 
Ballen  &  Friedman  v.  Bank  of  Krem- 

bin 

Ballou  V.  Boland 

Ballston  Spa.  Bank  v.  Marine  Park  . 
Baltimore  v.  Wrightstown  .  .  .  . 
Baltimore  etc.  Ry.  Co.  v.  First  Nat. 

Bank 

Bandel  v.  Isaac 

Bank  v.  Bailey     . 

— — ■ — ■  (;.  Bank 


82  Ind.  370  . 
215  N.  Y.  76 
187  Fed.  750 

32  Barb.  68 
91  Kan.  91   . 
121  Ga.  525 

37  Okla.  112 
14  Hun  355 
16  Wis.  120 
63  Md.  81    . 


—  V.  Baxter 

—  V.  Bre^ving  Company 

—  V.  Butler 

—  V.  Chambers      .... 

—  V.  Clapp 

—  V.  County  Court    .     .     . 

—  V.  Durfee 

—  V.  Elmore 

—  V.  Griffin 

— •  V.  Kennedy 

—  V.  Lanier 

—  V.  Latimeer 

—  V.  Lindeman      .... 

—  v.  Little 

— ■  V.  Merchants'  Nat.  Bank 
— -  V.  Nebeker 

—  V.  Ober 

—  V.  O.xford 

—  V.  Peltz 

—  V.  Pettel 

—  V.  Pinson 

—  V.  Russell 

—  V.  Slayden 

—  V.  Strauss 


.  .  .  137 
236  b,  289,  451 
.  .  623,  11. 
250,  250  A,  252 
...  358 
.  325,  493 
.  .  .  167/ 


102  Va.  753 
13  Md.  202  . 
12  Blatchf.  480 
118  N.  C.  786 
31  Vt.  101  . 
50  Ohio  St.  151 
41  Ohio  St.  519 
11  Rich.  657  . 
76  N.  C.  482  . 
36  W.  Va.  341  . 
118  Mo.  431   . 
7  Rep.  110  (Iowa) 
168  111.  314  .  . 
17  Wall.  22  .  . 


11  Wall.  369  .  709,  711,  II.  212 


64  Mo.  App.  321 
161  Pa.  St.  199 
17  Gr.  Ch.  R.  685 
91  N.  Y.  106  . 
3  App.  Cas.  D.  C. 
31  Kans.  599  . 
70  Miss.  513  . 
176  Pa.  St.  513 
41  111.  492  .  . 
,58  Miss.  421   . 
2  Dill.  215  .  . 
8  Tex.  Civ.  App.  63 
66  Miss.  484  .  . 


...  493 
495,  511,  .541 
160,  171,  666 

...  308 


.  .  493 

.  .  750 

.  II.  245 

219,  493 

419,  464 

289  o,  324,  439 

215,  265 

.  .  600 

.  .  317 

II.  241h 

.  .  713 

.  .  755 

143,  144 

II.  250  a 


427,  428,  458 

...  407 

...  306 

...  322 

190  .  II.  241 

.   265,  274 

.   II.  241  b 

562 

407 

698 

248 

331 

630 


TABLE   OF   CASES 


XXI 


Bank  v.  Union  Trust  Co 

V.  Western  Union  Tel.  Co.  .     . 

Bank  Commissioner  v.  N.  H.  Banking 


Co. 


V.  Security  Trust  Co.       .     .     . 

V.  Watertown  Sav.  Bank     .     . 

Bank  Commissioners  v.  Bank  of  Brest 

V.  Bank  of  Buffalo      .... 


V.  Lafayette  Bank       .... 

V.  Rhode  Island  Central  Bank 

V.  St.  Lawrence  Bank 

Bank  of  Albia  v.  City  Council  .  .  . 
Bank  of  America  v.  McNeil  .... 
V.  Waj'-dell 

Bank  of  Attica  v.  Manuf.  &  Traders' 
Bank 

Bank  of  Augusta  v.  Earle       .... 

Bank  of  Australasia  v.  Breillat  .     .     . 

Bank  of  Bay  Biscayne  v.  Monongahela 
Nat.  Bank 

Bank  of  Bengal  v.  Radakissen  Mitter 

Bank  of  Bethel  v.  Pahquioque  Bank   . 

Bank  of  Big  Cabin  v.  EngUsh      .     .     . 

Bank  of  Blakey  v.  Buchanan  .  .  . 
Bank  of  Brighton  v.  Smith  .... 
Bank  of  British  N.  America  v.  Cohn  . 

V.  Hooper 

V.  Merchants'  Nat.  Bank     .     . 

Bank  of  Calif,  v.  San  Francisco  .  . 
Bank  of  Carlyle  v.  Ilopldns  .... 
Bank  of  Charlotte  v.  Hart  .... 
Bank    of    Chattanooga    v.    Bank 

Memphis 

Bank  of  Chillicothe  v.  Dodge      .     . 

V.  Swayne 

Bank  of  Columbia  v.  Fitzhugh   .     . 

V.  LawTence 

V.  Magrudor 

V.  Patterson's  Adm'r  .     .     . 

Bank  of  Commerce  v.  Bogy   .     .     . 

V.  Bright 

V.  Goos 

V.  Hart 

V.  Harrison 

IK  Ingram 

V.  ^lilliT 

V.  Union  Bank 

of    Commonwealth    of    Ky. 


149  111.  343 247 

52  Cal.  280 4o7 

74  N.  H.  292 632  d 

75  N.  H.  107 032  d 

81  Conn.  201     .     .     3,  017,  032  / 
Harr.  Ch.  (Mich.)  100    .     .    120, 

761,  n.  12 
6  Paige  497      117,  125,  126,  128, 
11,  761,  n.  11 
.     .     .     045 
.    761,  n.  13 
51,  149,  298 
.     II.  242  m 
...     714 
.     .     .    214, 
217,  583  c 


4  Edw.  Ch.  287 

5  R.  I.  12  .  . 
3  Seld.  513  .  . 
86  Iowa  28  .  . 
10  Bush  54  .  . 
103  xVpp.  Div.  25 


20  N.  Y.  501 698 

13  Pet.  519 46,  63 

6  Moore  P.  C.  173  .  .  47,  127 

126  Fed.  436  .  .  218,  II.  208  b 
4  Moore  P.  C.  140  ..  .  502 

14  WaU.  383  II.  246,  250  «,  257 
41  Okla.  546  ..  .   218,  219 

.  .  578 

.  .  508 

.  .  19 

.  .  747 

.  .  365 

.  .  344 

.  .  13 

.  .  19 

.  .  637 


27  Olda.  334 
16  Ga.  App.  793 
5  Allen  413  . 
79  Cal.  463  . 
5  Pick.  507  . 
91  N.  Y.  106 
142  Cal.  270 
1  Monr.  245 
07  N.  C.  264 


of 


9  Heisk.  408 
8  Barb.  233 
8  Ohio  257  . 
7  Cranch  299 

I  Pet.  578  . 

6  Har.  &  J.  172 

7  Cranch  299 
44  Mo.  15  . 
77  Fed.  949  . 
39  Neb.  437 
37  Neb.  149 

II  N.  M.  50 
33  Okla.  46  . 
105  111.  App 
3  N.  Y.  230 


Bank 

Wister 

Bank  of  CuUoden  v.  Bank  of  Forsyth 
Bank  of  Delaware  Co.  v.  Broomhall   . 


2  Pet.  318     . 
120  Ga.  575 
38  Pa.  St.  135 


.  n 


224 


51, 


19.  220. 
.  89, 


749 
298 
746 
220 
233 
229 
205 
499 
65  c 
458 
59/ 
309 

252.  2.")2  (/,  578 
247 
480 


221.  240, 
463,  466, 


312.  053,  718 

098,  709,  711 

226,  255 


xxu 


TABLE    OF    CASES 


Bank  of  Des  Are  v.  Moody  .... 
Bank  of  England  v.  Anderson  .  .  . 
Bank  of  Genesee  v.  Patchin  Bank  .     . 

Bank  of  Georgia  v.  Harrison  .... 
Bank  of  Greensboro  v.  Clapp     .     .     . 
Bank  of  Hardinsbury  v.  Amer.  Bond- 
ing Co 

Bank  of  Hartford  v.  McDonald       .     . 

Bank  of  Hickory  v.  McPherson  .  . 
Bank  of  Houston  v.  Kirkman  .  .  . 
Bank  of  Ind.  T.  v.  First  Nat.  Bank  . 
Bank  of  Ireland  v.  Trustees  .... 
Bank  of  Kentucky  v.  Adams  Express 

Company 

V.  Hickey 

V.  Schuylkill  Bank      .... 

V.  Thornsberry 

Bank  of  La  Grange  v.  Cotter  .  .  . 
Bank  of  Lawrenceville  v.  Roekmore    . 

Bank  of  Leavenworth  v.  Hunt  .  .  . 
Bank  of  Le  Roy  v.  Purdy       .... 

Bank  of  Lisbon  v.  Bank  of  Wyndmere 
Bank  of  Louisville  v.  Bank  of  Newark 

V.  First  Nat.  Bank  of  Knoxville 

V.  Summers 

Bank  of  Marietta  v.  Pindall  .... 
Bank  of  Martinsburg  v.  State  .  .  . 
Bank  of  Metropolis  v.  First  Nat.  Bank 

V.  Jones 

V.  New  England  Bank    . 

Bank  of  Middlebury  v.  Bingham     .     . 

V.  Rutland  &  Wash.  R.  R.  Co. 

Bank  of  Midland  v.  Harris  .... 
Bank  of  Millvale  v.  Ohio  Valley  Bank 
Bank  of  Missouri  v.  Benoist  .... 

Bank  of  Mobile  v.  Brunn 

V.  Huggins 

V.  Meagher 

Bank  of  Monroe  v.  Field 

Bank  of  Monticello  v.  Dooly  .... 
Bank  of  Montreal  v.  Clark  .... 
Bank  of  Mount  Airy  v.  Greenboro 

Loan  etc.  Co 

Bank  of  New  Hanover  v.  Keenan  . 
Bank  of  New  London  v.  Ketchum  . 
Bank  of  New  South  Wales  v.  Goulburn 

Valley  Butter  Co 

Bank  of  Niagara  v.  Johnson  .     .     .     . 

V.  McCracken 

Bank  of  Northern  Liberties  v.  Cresson 
V.  Jones 


109  Ark.  39  .  .   128,  128  r,  671 

4  Scott  50 408 

3  Kern.  309 .  .   14  a,  98,  n.  34, 

154,  158,  745 

66  Ga.  696 720 

76  N.  C.  482  ..  .  421,  n.  18 

153  Ky.  579 21 

107  Ark.  232  .  106,  146  k,  232, 
289  a,  367 
102  Miss.  852  .  .  .  317  a,  604 
156  Mo.  App.  309  .  152,  159 
109  Mo.  App.  665  247,  414,  414  g 

5  H.  L.  C.  410   ....  480 


93  U.  S.  174   ... 

.  .  275 

4  Litt.  225  .... 

.  .  644 

1  Pars.  Sel.  Cas.  236  . 

122,  127 

3  B.  Mon.  519  .  .  . 

.  .  645 

101  Ga.  134   ... 

.  .  326 

129  Ga.  582   .  . 

178,  291  b, 

324,  326,  334 

11  Wall.  391   .  . 

II.  208  e 

100  App.  Div.  64  . 

.  99,  106, 

145  b,   146  k 

15  N.  D.  299  .  . 

463,  466  d 

7  Chic.  Leg.  News  76 

.    II.  212 

8  Baxter  101  ..  . 

265,  274 

14  B.  Monr.  306  .  . 

.  .  648 

2  Rand.  465   .  . 

46,  n.  13 

58  W.  Va.  559  .  . 

II.  241  d 

22  Blatehf.  58  .  . 

326,  593 

8  Pet  12   .  .  . 

.  .  167 

1  How.  234  .  .  . 

. 332,  591 

33  Vt.  621  ..  . 

.  .  750 

30  Vt  159  .  .  . 

.  .  124 

114  Ky.  344   .  . 

.  .  694 

234  Pa.  St.  1  .  . 

.  .  701 

10  Mo.  519  .  .  . 

.  .  322 

42  Ala  108  .  .  . 

.  .  374 

3  Ala.  N.  s.  206  . 

232,  265 

33  Ala  622  .  .  . 

.  .  648 

2  Hill  445  .  .  . 

. 103,  167 

113  Wis  590  .  . 

.  .  173 

108  lU.  App.  163  . 

.  299,  302  b 

159  N.  C.  85  .  240,  252,  252  e 
76  N.  C.  340  ...  .  240,  252 
64  Wis.  7 101 


(1902)  H.  C.  543  . 
8  Wend.  645  .  . 
18  Johns.  495  .  . 
12  Serg.  &  R.  306 
42  Pa.  St.  536  .  . 


.  .  317 
.  .  129 
.  .  644 
.  .  17,19 

. 289,  568 


Bank  of  Orleans  v.  Merrill 
V.  Smith  .... 


Bank  of  Overton  v.  Thompson   .     . 
Bank  of  Pennsylvania  v.  Farnsworth 
V.  Reed 


Bank  of  Pittsburg  v.  Xeal 
V.  Whitehead     .     . 


Bank  of  Poughkeepsie  v.  Ibbotson 
Bank  of  Repul)lic  v.  Carrington 
Bank  of  Rixie  v.  Lampton      .     . 
Bank  of  Rocliester  v.  Jones    .     . 
Bank  of  Rocky  Mount  v.  Floyd 


TABLE    OF    CASES  XXIU 


2  Hill  295 51,298 

3  Hill  500 249,  250 

118  Fed.  798  .  .  106,  l(j(j,  :il7 
18  111.  563  .  .  .  51,  298,  299 
1  Watts  &  S.  101  .  159,  105,  171 

22  How.  90 565 

10  Watts.  397  .     .     .       133,  134 

24  Wend.  473 093 

5  R.  I.  515 000 

104  Miss.  427 144 

4  Comst.  497 599 

142  N.  C.  187  .     .        230,  230  a, 

230  c,  252,  274 


Bank  of  St.  Albans  v.  Farmers'  Bank       10  Vt.  141    .     .        402,  403,  488 
Bank  of  St.  INTarv's  v.  Calder     ...     3  Strobh.  Law  408     .     .   37,  3o7 

t;.  St.  John 25  Ala.  N.  s.  566    .     .      128,051, 

070,  087 

Bank  of  Spartanburg  v.  Mahon       .     .     78  S.  C.  408 329 

Bank  of  State  of  N.  Y.  v.  Muskingum 

Branch  of  Bank  of  State  of  Ohio      .     29  N.  Y.  032     ..     .       158,  391 

Bank  of  the  State  v.  Burton  ....     27  Ind.  420 193 

V.  Comegvs 12  Ala.  772 172 

Bank  of  U.  S.  v.  Bank  of  Georgia  .     .     9  Wheat.  907,  10  Wheat.  333  107, 

171, 289, 403,  480,  037,  000,  718 

V.  Carneal 2  Pet.  543     ....       230,  503 

V.  Dandridge .12  Wheat.  64 98 

y  Davis        2  Hill  451     ..     .      49,  52,  108, 

112,  134,  150,  232 

y.  Dunn 0  Pet.  51       ....       117,107 

V.  Goddard 5  Mason  366 232 

V.  Macalester 9  Pa.  St.  475     .     .   324,  343,  360 

V.  Owens 2  Pet.  538 747 

J,   Sill  5  Conn.  100     9,  n.  9,  049,  650,  651 

V.  Stearns 15  Wend.  314      14  a,  113,  180  A 

V.  Waggoner 9  Pet.  399 750 

Bank  of  Utica  v.  City  of  Utiea  ...     4  Paige  399 66 

;,  Magher 18  Johns.  341    ....    14,  158 

V   Smalley 2  Cow.  770        ....  699,  713 

V.  Smedes 3  Cow.  684 46 

V.  Smith 18  Johns.  230   ..     9  E,  9,  n.  19 

Bank  of  Vergennes  v.  Ward  ....     6  IMunf.  166 050 

^.Warren 7  Hill  91  .     .     .98,159,105^171 

Bank  of  Washington  v.  Barrington      .     2  Pa.  St.  27       .     .     .    27,  37,  42 

..Triplett 1  Pet.  25       .       9,  n.  21.  221,  232. 

252,  274,  281,  599 

Bank  of  Washtenaw  v.  Montgomery  .     2  Seam.  428 46 

Bank  of  Whittier  v.  First  Xat.  Bank        124  111.  App.  102  .     .     .     .  236  a 
Bank  of  Williamson  v.  ISIcDonald  Co. 

Bank 66  W.  Va.  545  .     .     466  h,  466  d 

Bank  of  Wilmington  &  Brandywine  v. 

Wollaston 3  Harr.  90 32.35 

Bank  of  Wooster  v.  Stevens  ....     1  Ohio  St.  233 746 

Banks  v.  Dardon 30  G a.  580 128 

^ V  Poitiaux 3  Rand.  136      ....    74.  763 

Barber  v.  Gingell 3  Esp.  60     .     .     .   440.  403,  468 


XXIV                                                  TABLE   OF  CASES 

Barbour  v.  National  Exchange  Bank  .  45  Ohio   St.   133  II.  230,  n.  59 

V.  Bank 50  Ohio  St.  90  .     II.  230  I,  230  n 

Barclay  v.  Lucas 3  Dougl.  321 29 

Barke  v.  Bishop 27  La.  Ann.  465    ....     400 

Barker  v.  Bradley 42  N.  Y.  316 499 

V.  Frye 75  Me.  29 610 

V.  Parker 1  T.  R.  295 27,  29 

Barnard  v.  Kellogg 10  Wall.  383     .     .     .     .     9,  n.  9 

Barnes  v.  Ontario  Bank 19  N.  Y.  152     .      9,  n.  1,  51,  63, 

70,  98,  n.  36,  70,  155,  160, 
171,  297,  298,  414,  n.  14, 
743 

V.  Ringgold 80  Ky.  289 217 

Barnet  v.  First  Nat.  Bank     ....     148  Iowa  667 194 

V.  Second  Nat.  Bank  of  Cin- 
cinnati       98  U.  S.  555      .     .     .      II.  230  fc 

V.  Smith 10  Foster  (N.  H.)  256    .     .     408 

Barnett  v.  Brandao 12  CI.  &  F.  787,  6  M.  &  G.  630 

325,  326 

Barney  v.  Newcomb 9  Cush.  46 170 

Barough  v.  White 4  Barn.  &  Cr.  325      ...     442 

Barrett  v.  Bloomfield  Inst,  for  Savings  64  N.  J.  Eq.  425  .     .3,  617,  632 

Barrick  v.  Austin 21  Barb.  241 158 

Barrington  v.  Bank  of  Washington      .  14  Serg.  &  R.  405      .     .     24,  25 

V.  Warden 12  Cal.  311 499 

Barron  v.  McKinnon .179  Fed.  759 56 

V' 196  Fed.  933     ..     .     II.  208  a, 

228  a,  235 

V. 196  Fed.  333 78  e 

Barston  v.  People 35  lU.  App.  573     ....     373 

Barter  v.  Commonwealth 3  Penn.  &  W.  253      ...       43 

Bartholomew  v.  Bentley 1  Ohio  St.  37 139 

V.  Henley      .......     3  Phil.  317        554 

Bartlett  v.  First  Nat.  Bank   ....  247  111.  490  .     .     .    474,  476,  477 

V.  Hamilton 46  Me.  435  ......     590 

V.  Isbell 31  Conn.  296 255 

V.  Remington 59  N.  H.  364 610 

V.  Woodbine  Savings  Bank      .  57  111.  App.  425     .     .     .     .  146  c 

Bartlett  Estate  Co.  v.  Eraser      ...  11  Cal.  App.  373  .         143,  144  b 

Bartley  v.  State 53  Neb.  311 451 

Barton   Seed  etc.   Co.   v.   Mercantile 

Nat.  Bank 128  Tenn.  320 586 

Basket  v.  Hassell 107  U.  S.  602 611 

Bass  V.  CUne 4  Maule  &  S.  13    .     .     .     .     463 

Bassett  v.  AUison 158  Ky.  621      ....       147  a 

V.  Lederer 1  Hun"  274 9 

Batchelder  v.  Central  Nat.  Bank    .     .  188  Mass.  25    ...     .      317  a 
Batchelor  v.  Planters'  Nat.  Bank  of 

Louisville 78  Ky.  435 38,  172 

Bates  V.  Capital  State  Bank  ....     18  Idaho  424 311 

V.  First  Nat.  Bank     ....     89  N.  Y.  286 314 

Bath  Savings  Inst.  v.  Fogg    ....  101  Me.  188      ..     .    604  c,  609 

Batson  v.  Alexander  City  Bank      .     .     179  Ala.  490 324 

Bauernschmidt  v.  Maryland  Tr.  Co.   .     89  Md.  507 777 

Baughman  v.  Lowe 41  Ind.  App.  1 543 


TABLE    OF  CASES                                                    XXV 

Baughman  v.  State  Bank 2  Ala.  451 750 

Baven  ;;.  Needles  Nat.  Bank       ...     87  Fed.  430 65 

Baxcndalo  v.  Bennet 3  Q.  B.  D.  525       ....     6.58 

Ba.xter  v.  Coughlin 70  Minn.  1 628  6 

V.  Ellis 57  Me.  180 565 

Bay  V.  Coddington 5  Johns.  Ch.  54     .     .     .     .     652 

Bayard  v.  Shunk 1  Watts  &  S.  92    .     .     .     .     662 

Baver  v.  Coninionwealth  Tr.  Co.     .     .  144  Mo.  App.  676      .    290,  620  d 

Bayer  v.  Amer.  Trust  &  Sav.  Bank     .     157  111.  62 188 

Beale  i;.  Parrish 20  N.  Y.  407 252 

Beals  V.  Olmstead 24  Vt.  115 103 

Bean  v.  Briggs 1  Iowa  488 299 

Beard  v.  Kirk 11  N.  H.  397 100 

V.  Milminc 88  Fed.  868 144 

V.  Peoples'  Sav.  Bank     ...  53  Ind.  App.  185     568,  II.  241  d 

Beaumont  v.  Embank (1902)  1  Ch.  889  ...     .     550 

Beauregard  r.  Knowlton 156  Mass.  395 421  g 

Beck  V.  Gillis 9  Barb.  35 606 

Becker  v.  First  Nat.  Bank     ....     15  N.  D.  279 224 

V.  Seyraore 71  Minn.  394 325  a 

BeckAvith  V.  Union  Bank 4  Sandf.  604      ..     .       324,  329 

BedeU  v.  Hoffman 2  Paige  199 342 

Bedford  Railroad  Co.  v.  Bowser      .     .     48  Pa.  St.  29 127 

Beeching  v.  Gowcr 1  Holt  313 421 

Beeman  «;.  Duck 11  M.  &  W.  251    .     .     .     .     468 

Beers  v.  Maynard 1  Bail.  Eq.  168      .     .     .     .     641 

V.  Phoenix  Glass  Co 14  Barb.  358     ...      98,  n.  27 

V.  Robinson 9  Pa.  St.  229 499 

Begbie  V.  Levy 1  C.  &  J.  180 368 

Belcher  v.  Wilcox 40  Ga.  396 687 

Belden  v.  Lamb 17  Conn.  44 255 

V.  Meeker 47  N.  Y.  307 625 

Belknap  v.  Nat.  Bank  of  N.  America  .     100  Alass.  376 480 

Bell  V.  Alexander 21  Graft.  1  .     .      423,  421,  n.  13 

V.  Dagg 60  N.  Y.  528 565 

y.  Hanover  Nat.  Bank    .     .     .     57  Fed.  821 144 

V.    Hunt 3  Barb.  Ch.  391     ...     .     342 

V.  Nat.  Provincial  Bank      .     .  (1904)  1  K.  B.  149     ..     .     320 

Bellamy  v.  Marjoribanks 8  Eng.  L.  &  Eq.  517       .     .    2S9, 

^  480,  493,  568 

Bellasis  v.  Hester 1  Ld.  Raym.  280  .     .     .     .     409 

Bellemire  v.  U.  S.  Bank 1  Miles  173,  4  Wharf.  lOo      236, 

265,  274,  283 

Bellmont  Branch  Bank  v.  Hoge       .     .     35  N.  Y.  65 565 

Bellows  )'.  Hallowell  &  Augusta  Bank      2  Mason  31 765 

Bellows  Falls  Bank  v.  Rutland  Co.  Bank     40  Vt.  377         298,  299,  302,  322 
Benedum  v.  Citizens'  Bank    ....     72  W.  Va.  124      125,  622  A.  623, 

687,  693,  696,  717 
625  O 


Benjamin  v.  Staples 93  Miss.  507      .  . 

Bennett  v.  Thorne 36  Wash.  253    .  . 

Ben  Roy  Irvine  v.  Dean 93  Tenn.  350     .  . 

Bensinger  v.  Wren 100  Pa.  St.  500  . 

Benson  v.  Heathorn 1  You.  &  C.  Ch.  326 

Benton  County  Bank  v.  Boddicker      .  105  Iowa  548    .  . 

Berens  u.  Poetker 175  Ind.  554     .  . 


678 

335 

29 

125 

734  a 

169  o 


XXv'l                                                     TABLE    OF  CASES 

Bergh  v.  Security  Sav.  Bank       ...     122  Wis.  514 6f)& 

Berkshire  Woollen  Co.  v.  Proctor    .     .  7  Cush.  417       ...        9,  n.  16 

Bernheiraer  v.  Converse 206  U.  S.  516 675 

V.  Marshall 2  Minn.  78 463 

Bernstein  v.  Coburn 49  Neb.  734 338 

Bertelot  v.  Stoner 164  111.  App.  605  ...     .     298 

Bertles  v.  Numan 92  N.  Y.  152 604 

Bessemer  Sav.  Bank  v.  Anderson    .     .  134  Ala.  343     .        342,  344,  604 

Bickerdike  ;;.  BoUman 1  Tenn.  405 421 

Bickford  v.  First  Nat.  Bank  of  Chicago  42  111.  238     .     414,  n.  14  and  15, 

421,  432,  440,  451,  494,  530 

Bicklev  V.  Bank ,     .     .  39  S.  C.  281      ....  143,  179 

Bierce  v.  State  Nat.  Bank      ....     33  Okla.  776 451 

Bigelow,  Clerk,  etc.  v.  Bridge      ...     8  Mass.  275 27 

Billing  V.  Devaux 3  M.  &  G.  571       ....     380 

Billings  V.  Collins 44  Me.  271  ...     .    565,  n.  14 

BiUingsley  v.  Pollock 69  Miss.  761 248  a 

1  /us 178  Fed.  653     ....    II.  259 

Bills  V.  Nat.  Park  Bank 47  N.  Y.  Sup.  Ct.  302    .     .     417 

Binghampton  Tr.  Co.  v.  Auten        .     .     68  Ark.  294 777 

—  V.  Clark 32  N.  Y.  App.  Div.  151      .     777 

Binney's  Case 2  Bland  Ch.  142    ..     .    62,  721 

Birch  ..  Fisher 51  Mich.  39      .     .     .       302,303 

Birehall  v.  Third  Nat.  Bank  ....  15  Wk.  Notes  of  Cas.  174  .     458 

Bird  V.  Lanius 7  Ind.  615 499 

V.  La.  State  Bank 93  U.  S.  96 253 

Bird's  Executors  v.  Cochran  .....  2  Woods  32      .     .     .      II.  257  c 

Birdsall  V.  Russell 29  N.  Y.  220 650 

Birmingham  Tr.  Co.  v.  La.  Nat.  Bank  99  Ala.  379  ...     .       166,  774 

Bishop  V.  Countess  of  Jersey      ...  2  Drew.  143      ...       289,  568 

V.  Seaman's  Bank  for  Savings  83  App.  Div.  (Hun)  181      .     610 

BisseU  V.  First  Nat.  Bank      ....  69  Pa.  St.  415  .     .     .     .   46,  168 

V.  Heath 98  Mich.  472 679 

V.  Michigan  So.  R.  R.  Co.  .     .     22  N.  Y.  258 756 

Black  V.  First  Nat.  Bank 96  Md.  399 73 

V.  Ottoman  Bank 10  W.  R.  871 33 

V.  Special  School  Dist.  No.  2   .  173  S.  W.  846  .     .  675,  694,  696 

Blades  v.  Dewey 136  N.  C.  176 27 

Blaffer  v.  La.  Nat.  Bank 35  La.  Ann.  251     .     .     .     .     352 

Blaine  v.  Bourne 11  R.  I.  119      ...      326,  593 

Blair  V.  Baird 43  Tex.  Civ.  App.  134   .     .     324 

y.  First  Nat.  Bank  of  Mansfield  2  Flippin  111  U.  S.    ...     158 

J,.  Wilson 28  Gratt.  165    .     .     .       544,  546 

Blake  v.  First  Nat.  Bank 96  Md.  399 134 

V.  Hamilton  Dime  Sav.  Bank  79  Ohio  St.  189     .   399  406,  414, 

414  e,  414  g,  415,  493 

V.  Nat.  Banks 23  Wall.  307      ..     .      II.  241  s 

V.  State  Sav.  Bank     ....     12  Wash.  619 568 

V.  Third  Nat.  Bank    ....  219  Mo.  644      ...     .       169  a 

Blanchard  v.  Commercial  Bank       .     .     75  Fed.  249 750 

V.  HilUard 11  Mass.  88 220 

V.  Stevens 3  Cush.  168       .     .         565,  n.  16 

Blasdel  V.  Locke 52  N.  H.  280    .     .     .      609,  610 

Bleaseby  v.  Crossley 3  Bing.  430 552 

Bletz  V.  Columbia  Nat.  Bank     ...  87  Pa.  St.  87     .     .     -     II.  230  m 


TABLE    OF    CASES 


XX\'ll 


Blinn  Lumber  Co.  v.  McArthur      .     . 

Bliss  V.  Couch 

Blodgett  V.  Morrell 

Blood  V.  Kane 

V.  Northrup 

Bloodgood  V.  Mohawk  Railroad  Co.    . 
Bloom  V.  Wintherup  State  Bank     .     . 

Bloomer  v.  Bloomer 

Bloomquist  v.  Johnson 

Blount  V.  Windley 

Blumenthal  v.  Brainard 

Blumer  v.  Ulmer 

Board  of  Commissioners  v.   Citizens' 

Nat.  Bank  of  Fariliault       .... 
Board  of  Commissioners  v.  Elston  . 
Board  of  Education  v.  Union  Tr.  Co. 
Board  of  Missions  v.  Mechanics'  Sav. 

Bank 

Boardman  v.  Boardman 

Boatman  v.  Stockmen's  Nat.  Bank 
Boatman's  Sav.  Inst.  v.  Bank  of  Mo. 

V.  Holland 

Bobbett  V.  Pinkett 

Bobo  V.  People's  Nat.  Bank  .... 
Boddington  v.  Schleucker       .... 

Bodenham  v.  Hoskdns 

V.  Purchase 

Bodine  v.  Berg 

Boehm  v.  Stirling 

Boettcher  v.  Colo.  Nat.  Bank     .     .     . 

Bohanan  v.  Pope 

Bohl  V.  Carson 

Boisgerard  v.  New  York  Banking  Co. 

Bolton  V.  Puller 

V.  Richard 

Bonar  v.  MacDonald 

Bond  V.  Bank  of  Ga 

t'.  Farnham 

Bone  V.  Holmes 

Bonnet  v.  First  Nat.  Bank     .... 

Bonnette  v.  Scone 

Boody  V.  Lincoln  Nat.  Bank       .     .     . 

Boom  V.  City  of  Utica 

Boone  v.  Citizens'  Sav.  Bank      .     .     . 
Booth  V.  Atl.  Clearing  House      .     .     . 

V.  Farmers'  etc.  Nat.  Bank 

V.  Preto 

V.  State 

V. 

Borie  v.  Commissioners  of  Fayetteville 
Born  V.  Bank 

Borneman  v.  Siddinger 

Borough  Bank  v.  Rosenweig  .... 


L50  Cal.  GIO 
4(j  Kan.  400 
20  Vt.  509  . 
UO  N.  Y.  514 
1  Kan.  28  . 
10  Wend.  9  . 
121  Iowa  101 


295 
219 
009 

:i;i4 

299 
102,  n.  10 
328,  459,  494,  531 


2  Bradf.  339  (N.  Y.) 
107  111.  App.  154  .  , 
68  N.  C.  2  .  .  .  . 
38  Vt.  410  ...  . 


.  611 

.  546 

.  637 

109.  134 


44  So.  161 6250 

23  Minn.  280  .  II.  241  a,  241  o 

32  Ind.  27 II.  241 

136  Mich.  454 186  a 

40  Hun  120 611 

78  Conn.  451 717 

56  Colo.  495 474 

3  Mo.  497 646 

38  Mo.  49 ()00 

1  Ex.  D.  368 245 

92  Tenn.  449  .  .  II.  230,  230  g 
1  Nev.  &  M.  540,  4  B.  &  Ad.  752 
238,  243,  421 
13  Eng.  L.  &  Eq.  222  .  .  326 
3  Barn.  &  Aid.  39  289,  355,  568 
82  N.  J.  L.  662  .  .  101,  101  d 


7  T.  R.  430  . 
15  Colo.  16  .  . 
42  Me.  93  .  . 
63  Fed.  26  .  . 

2  Sandf.  Ch.  23 

1  B.  &  P.  539  . 
6  T.  R.  139   . 

3  II.  L.  Cas.  226 

2  Kelly  92  .  . 
5  Mass.  120   . 
195  Mass.  495  . 
24  Te.x.  Civ.  App.  613 
153  App.  Div.  73 
70  Hun  392 
2  Barb.  104 
84  N.  Y.  83 
132  Ga.  100 
53  Or.  576  . 
81  Conn.  636 
131  Ga.  750 
134  Ga.  163 
75  N.  C.  267 
123  Ind.  78  . 


15  Me.  429  . 

147  App.  Div.  175 


380,  443 
.  493 


.  .  499 
.  .  195 
.  .  743 
.  .  324 
.  .  569 
.  .  31 
.  .  750 
421,  n.  14 
.  .  608 
.  II.  242 
.  .  609 
.  604  g 
.  .  89 
.  .  604 
623,  625  O 
.  .  559 
.  .  337 
.  .  627 
.  .  627 

II.  241  s 
.  414  h, 
414  c,  415,  543 

608,  611 
.  338 


XX\'lll 


TABLE   OF    CASES 


Borup  V.  Nininger 

Boston  Bank  v.  Hodges 

Boston  Hat  Manufactory  v.  Messinger 
Bostwick  V.  Van  Voorhees  .... 
Boswell  V.  Citizens'  Sav.  Bank  .     .     . 

BoswcU  V.  Smith 

Boughton  V.  F'lint 

Bouts  V.  Ellis 

Bowdell  V.  Farmers  &  Mechanics'  Nat. 

Bank  of  Baltimore 

Bowden  v.  Johnson 

V.  Morris 

V.  Santos 

Bowen  v.  Needles  Nat.  Bank      .     .     . 

V.  Newell 

Bowers  v.  Industrial  Bank     .     .     .     . 

Bowker  v.  Haight 

Bowling  V.  Arthur 

Bowman  v.  Cecil  Bank 

V.  Nat.  Bank     .     .     .     ...     . 

V.  Van  Kuren 

Bowman  Bank  &  Tr.  Co.  v.  First  Nat. 

Bank 

Boyce  v.  Broekway 

V.  Edwards 

Boyd  V.  Emmerson 

■ V.  Nasmith 

V.  Redd 

V.  Schneider      ...... 

V. 

Boyd's  Ex'r  v.  First  Nat.  Bank      .     . 
Boyenton  v.  Commonwealth 
Boyenton  Nat.  Bank  v.  Fridenberg    . 

Boyer  v.  Boyer 

Boyer's  Appeal 

Boyle  V.  Northwestern  Nat.  Bank  .     . 

V.  Union  Nat.  Bank  .... 

Boylston  Nat.  Bank  v.  Richardson 
Brabrook  v.  Boston  Five  Cents  Sav. 

Bank 

Bracken  v.  Nicol 

Bradford  v.  Fox 

Bradford  Banking  Co.  v.  Briggs  .  . 
Bradley  v.  Bank  of  the  State      .     .     . 

V.  Delaplaine 

V.  Hunt 

V.  Root 

V.  The  People 

Bradley  Lumber  Co.  v.  Bradley  Co. 

Bank 

Bradstreet  v.  Everson 

Brady  v.  Evans 


5  Minn.  523       9,  n.  10,  224,  255 


9  Pick.  420  .  . 

.  .  9  a,  n.  19 

2  Pick.  223  .  . 

....   27 

91  N.  Y.  353  . 

.  .  20,  21,  36 

123  Ky.  485   . 

.  .   346,  494 

6  Car.  &  P.  60 

....  552 

74  N.  Y.  476  . 

....  302 

17  Beav.  121  . 

.  .   549,  550 

14  Bank.  Mag. 

387  ..  .  680 

107  U.  S.  251  . 

....  683 

1  Hughes  378  . 

.  .   II.  250  d 

1  Hughes  158  . 

.  .   II.  250  d 

87  Fed.  430   . 

408  c,  419,  421  d 

5  Sandf.  326   . 

.  220,381,387 

64  111.  App.  300 

.  .  .  .421  d 

146  Fed.  257  . 

....  493 

34  Miss.  41  .  . 

236,  265,  266, 

274,  285 

3  Grant  33 

....  666 

9  Wash.  614   . 

....  248 

29  Wis.  220   . 

.  .  565,  n. 15 

18  N.  M.  589  . 

....  309 

31  N.Y.  490   . 

....  248 

4  Pet.  Ill  .  . 

....  408 

2  Ad.  &  E.  184 

.  .   409,  572 

17  Ont.  R.  40 

....  426 

120  N.  C.  335 

.  .   679,  702 

124  Fed.  239 

.  .  56,  II.  200, 

250,  253 

131  Fed.  223   . 

128,  128  a,  289, 

717,  II.  253 

128  Ky.  468   . 

.  143,  144,  290 

114Va.  84  .  . 

.  .  628,  628  6 

206  Pa.  St.  243 

.  .  .  .  78  6 

113  U.  S.  689 

II.  241  w,  241  y 

103  Pa.  St.  387 

.    II.  241,  n.  97 

125  Wis.  498 

326  /,  590  c,  604 

162  Cal.  277 

....   77 

101  Mass.  287  . 

....  449 

104  Mass.  228  . 

....  610 

124  Ky.  628   . 

.  .   679,  683 

39  Barb.  203  . 

....  453 

31  Ch.  D.  19  . 

....  699 

20  Ind.  528  .  . 

....  750 

5  Harr.  305   . 

.  .   381,  383 

5  Gill  &  Johns. 

58   .  .  .  637 

5  Paige  632. 

....  511 

4  WaU.  459  . 

.  .   II.  241  t 

206  Fed.  41 

....  247 

72  Pa.  St.  124 

.  .   267,  285 

78  Fed.  558 

....  132 

TABLE    OF  CASES                                                    XXIX 

Brady  v.  Mattem 125  Iowa  158 13 

Bragg  f.  Meyer 1  McAll.  411 10 

Brahm  v.  Adkins 77  111.  203     ....       180,  322 

507,  508,  574 

Branch  v.  Baker       03  G  a.  502 004 

V.  Dawson 33  Minn.  399 322 

V.  Rol)erts 50  Barl).  4.35 057 

i'.  United  States 12  Bank  Mag.  01  .     .     .     11.245 

Branch  Bank  v.  CoUins 7  Ala.  95 140 

V.  Kno.x 1  Ala.  .v.  s.  148      .     .     .  232,  205 

t;.  Poe 1  Ala.  390 1.59 

V.  Scott 7  Ala.  107 140 

V.  Steele 10  Ala.  915 102 

V.  U.  S.  Bank 50  Xeb.  470 2.50 

Brandao  v.  Barnett 12  CI.  &  P\  787     .     .       324,  325 

Brandon  v.  Scott 7  El.  &  Bl.  234      ....     435 

Brandvwine  Bank's  Assignment      .     .  1  Chester  Co.  431  (Pa.  St.)     630 

Braswell  ?;.  Pamlico  Banking  Co.    .     .  159  N.  C.  628  .     .     .    128,130/ 

Bremer  Co.  Bank  v.  Moses    ....     73  Iowa  289 358 

Brennan  v.  Tillinghast 201  Fed.  609     .     .        589,  589  b, 

590  c,  629  a 

Brent  v.  Bank  of  Washington     ...     10  Pet.  616 099 

Brewer  v.  Dyer 7  Cush.  340 499 

V.  Knapp 1  Pick.  332 502 

Bridonbccker  v.  Lowell 32  Barb.  9    .     .     .     .       158,  159 

Bridgeport  Bank  v.  Dver 19  Conn.  136    .     .     9,  n.  19,  9  A 

V.  X.  Y.  &  X.  H.  K.  R.  Co.     .     30  Conn.  231 709 

V.  Schuvler 34  X.  Y.  30 709 

Bridgeport  Sav.  Bank  v.  Feitner     .     .  191  N.  Y.  88     .     .     .      II.  241  r 

Bridgers  t'.  First  Xat.  Bank  .     .     .     .  152  X.  C.  293   .     ...      11.11 

Bridges  v.  Hawkesworth 16  Jur.  1079 654 

V.  Troy  Xat.  Bank     ....  185  X.  Y.  146  .     .      II.  212,  236 

Bridgman  v.  Gill 24  Beav.  302     ..     .      322,  343 

Briggs  V.  Central  Xat.  Bank       ...     89  X.  Y.  182 574 

V.  Merrill 58  Barb.  379     ..     .    565,  n.  14 

V.  Ponniman 6  Cow.  387 693 

V.  Spaulding 141  U.  S.  133 139 

Brind  v.  Hampshire 1  M.  &  W.  372      .     .     .     .     398 

Brine  v.  Ferrier 7  Sim.  549 554 

Brinen  v.  T^Iuskegon  Sav.  Bank       .     .     174  :Mich.  414 697 

Brinkerhoff  v.  Bostwick 23  Hun  237      717,  II.  250  a,  253 

Brinkwortli  v.  Hazlett 04  Xeb.  592 087 

Brinton  v.  Lewiston  Xat.  Bank       .     .  11  Idaho  92       .     .     .  289  «,  398 

Briscoe  v.  Kentucky  Bank     ....     11  Pet.  207 51,  064 

Bristol  V.  Barker 14  Johns.  205 13 

Bristol  Bank  v.  Keavy 128  Mass.  298 159 

Bristol  Knife  Co.  v.  First  Xat.  Bank  of 

Hartford 41  Conn.  421     ..     .  457,  460  A 

British    &    Amer.    Mortgage    Co.    v. 

Til)l)alls 63  Iowa  468    .     9,  n.  19,  47,  305 

Brittain  i;.  Bank  of  London   .     .     .     .  11  W.  «fc  R.  569     ....     407 

Britton  ?;.  Xicolls 104  U.  S.  757     .     102,  n.  16,  205, 

n.  10,  n.  13 

Brixen  v.  Xat.  Bank 5  Utah  504        .     .     .       473,  487 

Broadway  Bank  v.  McElrath      ...     2  Beas.  20 713 


XXX  TABLE   OF   CASES 

Brock  v.U.S 149  Fed.  173     .     .        II.  55,  259 

Broderiek  v.  Waltham  Sav.  Bank        .     109  Mass.  149 610 

Bromley  v.  Brunton 6  L.  R.  Eq.  275     ....     550 

V.  Commercial  Nat.  Bank        .     9  Phila.  522 446 

Brook  V.  Hook L.  T.  R.  24  Exch.  34      .     .     464 

Brooke  v.  King 104  Iowa  713 590  d 

V.  Tradesmen's  Nat.  Bank       .     69  Hun  202 557 

Brookljm  City,  etc.  R.  R.  Co.  v.  Nat. 

Bank  of  Republic 22  Alb.  Law  Jour.  189       10,  758 

Brooklyn  Tr.  Co.  v.  Toler      ....     65  Hun  187 419 

Brooks  V.  Bigelow  142  Mass.  6     . .     .     .       574,  581 

V.  Erie  Co.  Sav.  Bank     ...     169  App.  Div.  73  .     ,     .       620  b 

Brothers  v.  Bank 84  Wis.  381 166 

BrouwQr  v.  Appleby 1  Sandf.  158 144 

V.  Harbeck 9  N.  Y.  589 625 

Brown  v.  Adams 4  Ch.  App.  764      ....     355 

V.  Brown 18  Conn.  410 608 

V.  Citizens'  Nat.  Bank    ...     38  Bank  Mag.  135     .     .     .     306 

V.  Clark 80  Conn.  419 566 

•  V.  Cow  Creek  Sheep  Co.  .     .     .     21  Wyo.  1    .     .     .     .    398,  398  c 

V.  Davies 3  T.  R.  80 443 

V.  Dougherty 120  Fed.  526 314 

V.  First  Nat.  Bank     ....     216  Mass.  298       .     .    185,  317  a 

V.  Foster       4  Cush.  214 346 

V.  Hitchcock 36  Ohio  667 682 

V.  Hull 33  Gratt.  23 217 

V.  Jackson 1  Wash.  Cir.  Ct.  512      .     .     593 

V.  Leckie 43  111.  497    ...     .     336,  414, 

451,  494,  530 

V-  Lusk 4  Yerger  210     ..     .      381,  538 

V.  Lynchburg  Nat.  Bank     .     .     109  Va.  530  80,  289  a,  290 

V.  Marion  Nat.  Bank      ...     169  U.  S.  416    .     II.  230  d,  230  n 

V.  McEkoy 52  Ind.  404 302 

V-  Merrimac  River  Sav.  Bank      67  N.  H.  549    ....       620  c 

V.  Mott 7  Johns.  361 551 

V.  New  Bedford  Sav.  Inst.        .     137  Mass.  262 325 

V.  O'Brien 1  Rich.  268 499 

V.  People 173  111.  34 628  & 

V.  People's  Nat.  Bank     .     .     .     170  Mich.  416       ....     474 

V-  Pike 34  La.  Ann.  577     ..     .       322  a 

V.  Schintz 98  lU.  App.  452     ..     .      421  a, 

421  d,  494 

V.  Schleier 118  Fed.  981       .     74,  74  a,  74  c, 

II.  236,  250,  250  Aa 
.     .     .74  c 
.     .    II.  230 
186  a,  284  a, 
304,  329,  568  b 

565 

769 
61 

480 
21 

290 
299,  302 


V. 194  U.  S.  18 

V.  Second  Nat.  Bank  of  Erie    .  72  Pa.  St.  209 

V.  Sheldon  State  Bank    .     .     .  139  Iowa  83 

V-  Spofford 95  U.  S.  481 

^-  Thulkeld 154  Ky.  833 

V.  Winnisimmet  Co 11  Allen  326 

Bruce  ;;.  Bruce 5  Taunt.  495 

V.  Buler 2  M.  &  R.  3 

Bruen  v.  Howe 2  Barb.  586 

Brummagin  v.  Tallent 29  Cal.  503 


TABLE   OF   CASES 


XXXI 


Brunnor  v.  Citizens'  Bank      .... 
Brunswick  Terminal  Co.  v.  Nat.  Bank 

Brust  V.  Barrett 

Bruyn  v.  Receiver 

Bryan  v.  Sturges  Nat.  Bank  .... 
Bryant  v.  Abington  Sav.  Bank  .     .     . 

V.  Bank  of  Commerce      .     .     . 

V.  Damariscotta  Bank     .     .     . 

V.  Nat.  Bank 


Bryden  v.  Bryden 
Bryon  v.  First  Nat.  Bank 
Buchlin  v.  Chaplin    .     .     .     . 
Bucldngham's  Appeal  .     .     • 
Buckwaltcr  v.  U.  S.       .     .     . 

Buell  ('.  Warner 

Buenz  v.  Cook 

Bufe  V.  Turner 

Buffalo  City  Bank  v.  Codd 
Buffalo  Co.  Bank  v.  Hanson 
Buist  I'.  Williams      .     .     . 


134  Ky.  283  . 
192  U.  S.  386  . 
82  N.  Y.  400  . 
9  Cow.  413  .  . 
40  Tex.  Civ.  App. 
19G  Mass.  254 
95  Wis.  476 
18  Me.  240  . 
205  Pa.  St.  7 
11  Johns.  187 
75  Or.  296    . 

I  Lans.  443  . 
60  Conn.  143 

II  Serg.  &  R.   193 

33  Vt.  570  . 
15  Cal.  38  . 
6  Taunt.  338 
25  N.  Y.  163 

34  Neb.  455 
81  S.  C.  495 


307 


Bull-r.  First  Nat.  Bank 
Bullard  v.  Bank  .     .     . 

V.  Bell       .     .     . 

V.  Randall     .     . 


7,  13,  14,  46 
675,  679,  680 
.     402 
338,  641 
706,  70S 
.     608 
144  m 
.     644 
.     569 
.     443 
48,  <)3 
.     290 
.     610 
II.  230  m 
.     717 
675  a 
.       21 
.     666 
.     324 
675,  675  a, 
690,  694,  696 
.     .     374 
713,  II.  212 
.  640,  653 
.46,  168, 
412,   414,   451, 


Bullett  V.  Bank  of  Pennsylvania 

Bullock  V.  Boyd 

Bult  V.  Morrell 

Bundy  v.  Town  of  Monticello  . 
Bunn  V.  Markham  ...'.. 
V.  Winthrop 


Bunnell  v.  CoUinsville  Sav.  Society 

Burdock  v.  Taylor 

Burgess  v.  Northern  Bank  of  Ky.   . 

Burk  V.  Bishop 

Burke  v.  State 

Burkhalter  v.  Second  Nat.  Bank     . 

Burleson  v.  Davis 

Burley  v.  Bowen 

Burn  V.  Carvalho 

Burnell  v.  San  Francisco  Sav.  Bank 

Burnes  v.  Pennell 

Burnett  t'.  First  Nat.  Bank    .     .     . 

Burnham  v.  Webster 

Burns  v.  Kohn 

Burr  V.  Sickles 

Burress  v.  Blair 

Burridge  v.  Geauga  Bank       .     .     . 
Biu-rill  V.  Dollar  Sav.  Bank    .     .     . 


V.  Nahant 
V.  Smith  . 


123  U.  S.  105 
18  Wall.  589 
1  ^lason  243 

1  Gray  605 
289,  346,  379, 
493,  568 

2  Wash.  C.  C.  172  ..  .  650 
2  Edw.  Ch.  293  ...  .  290 
12  Ad.  &  El.  745    .  .  .  440 

84  Ind.  119 326 

7  Taunt.  224 611 

1  Johns.  Ch.  329  ...  .  610 
38  Conn.  203    .  .   566,  617 

16  Pick.  335 12 

4  Bush  600 -177 

27  La.  Ann.  465  .  .   400,  550 

66  Ga.  157 298 

42  N.  Y.  538  240,  247,  454.  544 
141  S.  W.  559  ...  671  A 
MS "" 

495,  541 

159  b,   179 

.  .  132 

326.  590 

171,  232 

.  .  389 

.  .  395 

.  .  606 

.  .  648 

.9,  n.  19, 


Burroughs  v.  Bank  of  Charlotte. 


4  Mv.  &  Cr.  690  . 
136  Cal.  499  .  . 
2  H.  L.  C.  497  . 
38  Mich.  630  .  . 
19  Me.  232  .  .  . 
47  Mo.  App.  214  . 
17  Ark.  428  .  . 
61  Mo.  133  .  . 
Wright  (Ohio)  688 
92  Pa.  St.  134  .  . 

566,  617,  620 

2  Met.  163 116 

7  Pick.  291   487 

70  N.  C.  284 652 


XXX II 


TABLE   OF    CASES 


Burroughs  v.  Lowder 8  Mass.  373 19 

Burrows  v.  Bangs 34  Mich.  304 304 

V.  Smith 10  N.  Y.  550     .     .     .     .II.  206 

Burstein  v.  People's  Tr.  Co 143  App.  Div.  165     ..     .     604 

Burton  v.  Bridgeport  Sav.  Bank     .     .     52  Conn.  398 614 

—  V.  Burley 12  Leg.  News  178,    9   Biss.    253 

46,  101,  II.  208  g 
V.  Payne 2  Car.  &  P.  520     ....     460 


y.  U.  S 196  U.  S.  283    . 

Bury  V.  Woods 17  Mo.  App.  245 

Bush  V.  Brown 49  Ind.  573  .     . 

Bushnell  v.  Chautauqua  Nat.  Bank    .  10  Hun  387 

Butcher  v.  Butler 134  Mo.  App.  61 


Butler  V.  Western  German  Bank    .     .  159  Fed.  116 

Butterworth  v.  Peck 5  Bosw.  341 

Butts  V.  Wood 38  Barb.  181 

Buxen  v.  Nat.  Bank 5  Utah  504 


568,  575 
.  .  592 
.     .     565 

II.  208c 
183,  186, 
205,  289  a,  568 
.  .  248a 
.  .  493 
.  .  125 
.     .     473 


Cabanissa  v.  State 

Cabot  Bank  v.  Morton 

Cadle  V.  Baker 

V.  Tracy 

Cady  V.  So.  Omaha  Nat.  Bank  .     .     . 
Cahill  V.  Kalamazoo  Ins.  Co. 

V.  Orig.  Big  Green  Benefit  Ass'n 

Cake  V.  First  Nat.  Bank  of  Lebanon 

Caldwell  v.  Nat.  Mohawk  Valley  Bank 

California  Nat.  Bank  v.  Ginity       .     . 

V.  Utah  Nat.  Bank    .... 

Calisher  v.  F'orbes 

Callahan  v.  Bank  of  Anderson   .     .     . 

Callender  v.  Dinsmore 

V.  KeUy 

Camas  Prairie  St.  Bank  v.  Newman    . 
Camden  v.  Camden  Safe  Dep.  Co. 

V.  Va.  Safe  etc.  Corp 

V. 

Camden  Safe  Dep.  Co.  v.  Lord  .     .     . 

V.  Doremus 

Camidge  v.  AUenby 

Camp  V.  First  Nat.  Bank       .... 

V.  Laud 

Camp's  Appeal 

Campbell  v.  Manufacturers  Nat.  Bank 


V.  Miss.  Union  Bank  .     . 
V.  Nat.  Broadway  Bank 


8  Ga.  App.  129 

,    ^ 

128a 

4  Gray  156 

463,  659 

20  WaU 

.  650  . 

.   II 

.  202,  250 

11  Blatchf.  101 

. 

.  II.  257 

46  Neb. 

756   . 

. 

.  .  590 

2  Dougl 

.  (Mich.) 

124 

.  43,  758 

94  Md. 

350   . 

.  .  691 

Thomp. 

Nat.  Bank  Cas 

.  890 

II.  230 

64  Barb 

.  333   . 

.  52, 

164,  165, 

191, 

II.  208  h 

108  Cal. 

148   . 

, 

.    II.  230 

190  Fed 

318   . 

272,  280 

41  L.  J. 

Ch.  56 

.  .   45 

69  S.  C. 

374  .  311,  324,  329, 

331 

,  374, 

458,  459 

55  N.  Y 

.  200,  208 

9,  n. 

9  and  10 

190  Pa. 

St.  455 

.  .  773 

15  Idaho  719  . 

.  .  388 

84  N.  J. 

L.  37  . 

II.  241  b 

115  Va. 

207   . 

632  A 

115  Va. 

20  .  .  . 

.  125 

67  N.  J. 

Eq.  489  . 

.  774 

3  How.  ^ 

il5  .  . 

9,  n.  19 

6  B.  &  C.  373  .  . 

425,  448 

44  Fla.  497   .  . 

.  289  a,   563, 

568, 

[I.  250  A 

122  Cal. 

167   .  . 

.  108/ 

36  Conn 

.88   .  . 

.  608 

67  N.  J. 

L.  301   . 

101 

a,  169  a, 

171 

144 ; 

},  II.  250 

6  How.  625  .  .  . 

, 

.  636 

130  Fed. 

699  .  . 

.   . 

169  a 

TABLE    OF    CASES 


XXXIU 


Campbell  v.  Perth  Amboj'  Shipping  Co. 

V.  Schenectady  Sav.  Bank  .     . 

V.  Upton        

V.  Watson 

Can  V.  Read         

Canadian  Bank  of  Com.  v.  Bingham     . 

Canal  Bank  v.  Bank  of  Albanj'  .     .     . 

Candee  v.  Com.  Sav.  Bank  .... 
Canfield  v.  State  Nat.  Bank  .... 
Cannonsburg  Iron  Co.  v.  Union  Nat. 

Bank 

CantrcU  v.  Davidson 

Capital  and  Counties  Bank  v.  Gordon 
Capital  Nat.  Bank  v.  Coldwater  Nat. 

Bank 

Capitol  State  Bank  v.  Lane   .... 

Caponigri  v.  Altieri 

Carew  v.  Duckworth 

Carey  v.  Greene 

V.  McDougald 

Carley  v.  Tod 

Carlson  v.  Kies 

Carman  v.  Franklin  Bank      .... 

Carncross  v.  Lorimer 

Carnegie  v.  Morrison 

Carnegie  Tr.  Co.  v.  First  Nat.  Bank  . 
Carolina  Nat.  Bank  v.  A¥allacc  .     .     . 

Carpenter  v.  Butterfield 

V.  Farnsworth 

V.  Nat.  Bank 

V.  Nat.  Shawmut  Bank 

V.  Northborough  Nat.  Bank     . 

V.  Northfield  Bank     .... 

Carpy  v.  Dowdell 

Carr.  v.  Carr 

V.  Nat.  Security  Bank  .  .  . 


70  N.  J.  Eq.  40  . 

114  App.  Div.  837 

06  App.  Div.  590 
62  N.  J.  Eq.  396 

3  Atk.  695  .  . 
30  Wash.  484  . 

1  Hill  287 

81  Conn.  372  . 

1  N.  W.  173   . 

34  Pitts.  L.  J.  93 
180  Mo.  App.  410 
(1903)  A.  C.  240 

69  N.  W.  115  . 
52  Miss.  677  . 
29  App.  Div.  304 

4  L.  R.  Exch.  313 

7  Ga.  79  .  .  . 
7  Ga.  84  .  .  . 
83  Hun  53  .  . 
75  Wash.  171  . 
61  Md.  467  .  . 
3  Macq.  830   . 

2  Met.  402  .  . 
213  N.  Y.  301  . 
13  S.  C.  347   . 

3  Johns.  Cas.  145 

106  Mass.  561  . 
50  N.  J.  L.  6  . 
187  Fed.  1  .  . 
123  Mass.  69  . 
39  Vt.  46      .  . 

115  Cal.  677  . 
1  Mer.  541    .  . 

107  Mass.  45    . 


Carradine  v.  Carradine      .... 
Carrol  Exch.  Bank  v.  First  Nat.  Bank 
Carroll  Co.  Bank  v.  Rhoades      .     . 

Carruthers  v.  West 

Carson's  Adm.  v.  Phelps   .... 
V.  Whallev 


Carter  v.  Philadelphia  Coal  Co. 
Cartwcll  V.  Com.  Bank  etc.  Co. 


Casalc  V.  Guion 
Cascade  Bank  v.  Yoder 
Casco  Bank  v.  Keene    .     . 
Casco  Nat.  Bank  v.  Clark 
Case  V.  Bank        .     .     .     . 

;;.  Beauregard    . 

•  V.  Berwin 


.     .     .14  a 

620  b,  620  c 

169  a 

.      14  a,  128 

.  43S,  440  B 

.      463,  406, 

466  (/,  466  e 

474,  476,  480, 

489 

.  608,  620  d 

.      II.  208  a 

.     334 

101,  169 

.     248 

.     630 
.     252 
II.  230  I 
380,  425 
.     648 
.     744 
.     II.  230,  n 
.       186,  568 
.     .      440  A 
...     472 
499 
414  a,  414  6 
.     .     .     233 
...     640 
365,  432.  440 
.      II.  230  g 
.     .219,  232 
...     464 
.       312,  447 
.     .       171  g 
.      289,  568 
289,  407.  493, 
499,  520.  568 

58  Miss.  286 608 

58  Mo.  App.  17     ....     543 

09  Ark.  43 317 

11  Q.  B.  143 565 

40  Md.  73 610 

1  B.  &  Ad.  11 131 

77  Pa.  St.  286  .     .  9,  n.  12,  n.  19 

153  Ky.  798      ...     .  13.  124. 

622  A,  62S 

132  App.  Div.  889     .     .     622  A 

.39  Mont.  202 14 

53  Me.  103 478 

139  N.  Y.  307 134 

100  U.  S.  446    .     .     .     .11.  2,50 

1  Woods  126 590 

22  La.  Ann.  321    ..     .    II.  250 


XXX IV 


TABLE   OF   CASES 


Case  V.  Burt 

V.  Citizens'  Bank  of  La. 

V.  Dennison 

V.  Hawkins 

V.  Henderson 

— V.  Mechanics'  Banking  Ass'n. 

V.  Morris 

V.  Small 

V.  Terrell 

Casey  v.  Galli 


V.  La  Societe  de  Credit  Mobilier 

Cassedy  v.  First  Nat.  Bank  .... 

Cassidy  v.  Uhlmann 

Cate  V.  Patterson 

Catlin  V.  Sav.  Bank 

Cawein  v.  Browinski 

Cay  Co.  Bank  v.  Daniels        .... 

Cecil  Bank  v.  Farmers'  Bank      .     .     . 

Cecil  Nat.  Bank  v.  Watsontown  Bank 

Central  Bank  v.  Davis 

V.  Empire  Stone  Dressing  Co. 

I'.  Hammet 

■ —  V.  State 

Central  Ga.  Bank  v.  Cleveland  Nat. 
Bank 

Central  Guarantee  etc.  Co.  v.  White  . 

Central  Nat.  Bank  v.  Conn.  Mu.  Life 
Ins.  Co 

V.  Levin 

V.  Nat.  Bank 

V.  North  River  Nat.  Bank  .     . 

V.  Pratt 

— — —  V.  Richland  Nat.  Bank   .     .     . 

V.  Valentine 

Central  R.  etc.  Banking  Co.  v.  Farmers' 
Loan  etc.  Co 

Central  R.  R.  Banking  Co.  v.  First  Nat. 
Bank  of  Lynchburg 

Centralia  t'.  U.  S 

Chadwick  w.  U.  S 

Chaffee  v.  First  Nat.  Bank  of  Ravenna 

V.  Fort 

Chambers  v.  Land  Credit  Tr.  Co.  .     . 

•  V.  Miller 

— — — •  V.  Union  Nat.  Bank   .... 

Champion  v.  Gordon 

Champion  Ice  etc.  Co.  v.  Amer.  Bind- 
ing etc.  Co 

Chandler  v.  Monmouth  Bank     .     .     . 

Chapman  v.  AUen 

V.  Beckington 

V.  Farmers'  etc.  Nat.  Bank.     . 

V.  Hart 


15  Mich.  82 
2  Woods  23 
7  R.  I.  88     . 
53  Ala.  702  . 
23  La.  Ann.  49 
4  Comst.  166 
31  Pa.  St.  100, 
4  Woods  78 
11  Wall.  199 
94  U.  S.  673 

II 
2  Woods  77      . 

30  Minn.  86 
170  N.  Y.  505 

25  Mich.  191 
7  Conn.  487 
6  Cush.  457 
47  N.  Y.  631 
22  Md.  148  . 
105  U.  S.  217 
19  Pick.  373 

26  Barb.  23 
50  N.  Y.  159 
139  Ga.  54  . 


104 


...  409 

II.  246,  252 

611,  612,  615 

.  .  143 

493,  518 

.  .  393 

421,  n.  14 

II.  212  a 

.  II.  201,  250  a 

....   14, 

212  b,  244,  250  d 

.     .      II.  250  A, 

250  c,  252 

300,  302 

116,  128 

51,  298 

.  179 

.  421 

.  599 

592,  593 

.  701 

9,  n.  17 

.  757 

.  565 

.  627 


583,  591, 


59  Ga.  667 
206  Pa.  St. 


611 


104  U.  S.  54   . 
6  Mo.  App.  543 
31  App.  Cas.  (D. 
44  Hun  115 
115  Mass.  539 
52  How.  136  . 
18  Hun  417   . 


...  224 

414  b,  414  e 

317,  326,  343 
...  146 

C.)  391  .  474 
.  477 
.  130 
II.  257  a 
.  599 


114  Fed.  263  . 

73  Ga.  383  .  . 
221  Fed.  755  . 
141  Fed.  225  . 
40  Ohio  St.  10  . 
2  Lans.  81 
92  Kan.  30  .  . 
13  C.  B.  N.  s.  125 
78  Pa.  St.  205 
70  Pa.  St.  476  . 


115  Ky.  863 
1  Green  255 
15  Tex.  278 
3  Q.  B.  722 
121  Md.  343 
1  Ves.  Sr.  271 


6,  65 

.  593 

.   II.  250  c 

II.  259 

494,  511,  534 

...  589 

...  775 

.   449,  569 

...  489 

373,  384,  389 

.  .  486 

.  .  140 

324  c 

29 

II.  230  g 

637,  654 


TABLE   OF   CASES 


XXXV 


Chapman  v.  Union  Bank 

V.  White 

Chappie  V.  Kansas  Vitrified  Brick  Co. 

Charles  v.  Blackrwell 

V.  Carter 

Charleston  v.  People's  Nat.  Bank  . 

Charleston  Nat.  Bank  v.  Bradford 
V.  Melton 


Charleton  v.  Cousins 

Charlotte  Iron  Works  v.  Amer.  Exch. 

Nat.  Bank        

Charnley  v.  Dallas 

Chase  v.  Petroleum  Bank       .     .     .     . 

V.  Redding 

V.  Waterbury  Sav.  Bank 

Chase  etc.  Co.  v.  Nat.  Tr.  etc.  Co. 
Chatham  Bank  v.  Brobston  .     .     .     . 
Chatham   Nat.   Bank   v.   Merchants' 

Nat.  Bank 

Chattahoochee  Nat.  Bank  v.  Schley  . 
Chautauqua  Bank  v.  Risley  .  .  .  . 
Cheek  v.  Merchants'  Nat.  Bank  .  . 
Chemical  Bank  v.  Deposit  Co.  .  .  . 
V. 


Chemical  Nat.  Bank  v.  Bailey 


V.  Kohner 


Cheney  v.  Scharmann 


Cherokee  Nat.  Bank  v.  Union  Tr.  Co. 
Cherry  v.  City  Nat.  Bank 

V.  Territory  .     .     . 

Chesapeake  Bank  v.  First  Nat. 


of  Baltimore 

V.  Swain 


Chesbrough  v.  Woodworth     . 
Chester  Glass  Co.  v.  Dewee  . 
Chestnut  St.  etc.  Co.  v.  Hart 
Chetwood  v.  Calif.  Nat.  Bank 
Chew  V.  Ellingwood       .     .     . 
Chiarello  v.  Savoy  Tr.  Co. 
Chicago  Bank  v.  Farwell 
Chicago,  etc.  Ry.  Co.  v.  Ayers 
Chicago   Marine  &   Fire    Ins. 

Carpenter 

V.  Stanford    .... 


V.  .... 

Chicago  Sav.  Bank  v.  Block  . 
Chicago  State  Bank  v.  Carr  . 
Chiekaska  Nat.  Bank  v.  Cloud 
Chicopee  Bank  v.  Eager    . 

V.  Philadelphia  Bank 


B 


ank 


Co 


32  How.  Pr.  95     ....     254 

2  Seld.  412 .54,  289, 

380,  493,  568,  573 

70  Kan.  723 495 

1  Com.  P.  D.  548       ...     474 

96  Tenn.  617 214 

5  S.  C.  Rich.  L.  103  .     .11.  213, 

241  s 
51  W.  Va.  2.55  .  .  .  .II.  230 
171  Fed.  743  ....  \A\  g 
103  Tex.  116 48 

34  Hun  26  248,  565,  567,  599 
8  Watts  &  S.  353       ...     299 

66  Pa.  St.  169 188 

13  Gray  418  .  .  .  549,611 
77  Conn.  295  620,  620  c,  620  d 
215  Fed.  633  ...  .  2,  .50 
99  Ga.  801 680 

4  Thomp.  &  C.  196  .  II.  206,  257 
58  Ga.  369   ...     .       196,  204 

19  N.  Y.  369 48 

10  Heisk.  (Tenn.)  618,  II.  230  d 
161  U.  S.  1  .  .  .  II.  246,  252 

156  111.  522 625  A 

12  Blatchf.  480   ....  289, 

II.  246,  250  c 

58  How.  Pr.  R.  267  .  .  .  159 

145  N.  Y.  App.  Div.  456  .  687, 

693 
33  Okla.  342  ..  .  466  (/,  476 

144  Fed.  587 160 

17  Olda.  221  589,  589  6,  II.  252 


40  Md.  269  .  .  . 

II.  257  a 

29  Md.  483  .  .  . 

184,  295 

195  Fed.  875  . 

.  II.  2.53 

16  Mass.  94   .  . 

.  752 

217  Pa.  St.  506 

772,  775 

113  Cal.  649  . 

.   717  d 

86  Mo.  260 

.     37,  38 

144  App.  Div.  141 

.   252  e 

10  Biss.  270   . 

II.  241  V 

39  111.  App.  607 

.     .     360 

28  111.  300  .  . 

.  .  312 

28  111.  168  .  . 

178, 

315,  494 

25  111.  21   .  . 

.  .  530 

126  111.  App.  128 

474,  480 

130  N.  C.  479  . 

.  .  14  a 

40  Olda.  ()23   . 

11.  241  h 

9  Met.  584  .  . 

9 

n.  9  and 

19 

,  220,  233 

8  WaU.  041 

. 

230,  252 

xxx^'l 


TABLE   OF    CASES 


Child  V.  Hudson's  Bay  Co. 
Childs  V.  Blethen      .     .     . 

V.  Cleaves     .     .     . 

Chiles  V.  Garrison     .     .     . 


Chipman  v.  McClellan       .     .     . 
Chism,  Churchill,  &  Co.  v.  Bank 

Choate  v.  Boyd         

Chouteau  v.  Rowse 

Chowne  v.  Baj'lis 

Christmas  v.  Russell      .... 
Christopher  v.  Xorvell .... 


Christy  y.  Sill 

Chrystie  v.  Foster 

Church  V.  Ayer 

V.  Farnham 

u.  Johnson 

Chute  V.  Warner , 

Cincinnati,  etc.  R.  R.  Co.  v.  Bank 
Citizens'  Bank  v.  Bank  of  Waddy 

V.  Bowen 

V.  Carson 

V.  Douglas         .... 


V.  Fromholtz 
V.  Grafflin 
V.  Houston    . 


■  V.  Howell 

V.  Importers  and  Traders' Bank 

V.  Jones 


V.  Kalamazoo  Co.  Bank 
V.  Schwarzschild     . 


Citizens'  Bank  etc.  Co.  v.  Thornton    . 
Citizens'  Central  Nat.  Bank  v.  Apple- 
ton      

V.  New  Amsterdam  Nat.  Bank 

Citizens'   Life  Ins.   Co.  v.  Owensboro 

Sav.  Bank        

Citizens'  Nat.  Bank  v.  Alexander   .     . 

V.  Brown 

V.  Columbia  Co 

V.  Davisson        

V.  Donnell 


V.  Elliott  .     . 
V.  Kentucky 

V.  Leming 
V.  Lofton 
V.  McKenna 


2  P.  Wms.  207   . 

9,  n.  11,  43 

40  Wash.  340  ..  . 

693,  696 

95  Me.  498  .  .  .  . 

.  .  688 

32  Mo.  475  .  .  .  . 

.  .  188 

159  Mass.  363 

146  c 

96  Tenn.  651  .  . 

.  466  h 

59  Kan.  682   .  . 

.     .     690 

56  Mo.  65  .  .  . 

.  .  421 

31  Beav.  351  .  . 

.   II.  42 

14  Wall.  69   .  . 

493,  513 

201  U.  S.  216  .  . 

675,  679, 

II,  200,  263 

131  Pa.  St.  492   . 

.  .  694 

61  Fed.  551   .  . 

144,  144  i 

80  Fed.  543   .  . 

.  .  696 

1  Sheld.  393   .  . 

.  .  421 

93  Iowa  544   .  . 

.  .  750 

8  App.  Div.  40   . 

.  .  330 

54  Ohio  St.  60  .  . 

.  .  493 

126  Ky.  169   .  . 

.  .  63,  160 

21  Kan.  354   .  . 

.  .  .  334 

32  Mo.  191  .  .  . 

.  .  .  557 

178  Mo.  App.  664 

.  .  .  123, 

1 

52,  166,  171 

64  Neb.  284   .  . 

.  .   322  a 

31  Md.  507  .  .  . 

.  .  .  454 

98  Ky.  141  .  .  . 

.  .   252  a 

8  Md.  530  .  .  .2 

65,  274,  287 

119  N.  Y.  195  .  . 

.  .  .  474 

121  Cal.  30  .  .  . 

.  .  .  297 

117  Wis.  446  .  . 

.  .  .   14 

Ill  Mich.  313  .  . 

.  701, 703a 

109  Va.  539   .  . 

.  .  .  455 

174  Fed.  752  .   50 

,  144,  II.  250 

216  U.  S.  196  .  . 

.  65,  755  a 

128  App.  Div.  554, 

198  N.  Y. 

520   .... 

.  .  .  352 

Citizens'  Sav.  Bank  v.  Blakesley 
V.  Mitchell 


150  Ky.  161 144 

120  Pa.  St.  476  ...  .  326 
11  N.  E.  799  (Ohio)  .  299,  306 
23  Wash.  441  ..  .   II.  241  b 

229  U.  S.  212 204 

172  Mo.  384,  195  U.  S.  369  .  II. 
230,  230c,  230  d, 
230  n,  230  k 

55  Iowa  104 101 

217  U.  S.  443  ..  .  II.  241  b, 
241  g,  241  h,  241  r 
8  Inter.  Rev.  Ree.  132  II.  230  d 
85  Ind.  341  .  .  .  .  II.  241  I 
168  Mo.  App.  254  ...  610 
42  Ohio  St.  645  ..  .  89,  320 
18  R.  I.  739 612 


TABLE   OF    CASES 


XXX\ll 


Citizens'  Sav.  Bank   v.  Vaughn 
Citizens'  State  Bank  v.  Cowles 

V.  Garceau 

V.  Tessman 

V.  Worden 


Citizens'  etc.  Tr.  Co.  v.  Rogers  .     .     . 

City  and  County  of  San  Francisco  v. 

Crocker-Woolworth  Nat.  Bank  .     . 

City  Bank  v.  Cutter 

V.  P^'irst  Nat.  Bank      .... 

V.  Perkins 

V.  Weiss 

City  Bank  of  Columbus  v.  Beach  .  . 
City  Bank  of  Macon  v.  Kent  .  .  . 
City  Bank  of  WheeUng  v.  Bryon      .     . 

City  Nat.  Bank  v.  Burns        .... 

V.  Chemical  Nat.  Bank  .     .     . 

V.  Cooper 

V.  Crow 

V.  Paducah 

V.  Stout 

City  Nat.  Bank  of  Poughkeepsie  v. 

Phelps 

City  of  Carthage  v.  First  Nat.  Bank  . 
City  of  Elizabeth  v.  Force  .... 
City  of  Richmond  v.  Scott  .... 
City  Sav.  Bank  v.  Hopson     .... 

Clafflin  V.  Bank 

Claflin  V.  Farmers  &  Citizens'  Bank    . 

V.  Wilson 

Claghorn  v.  CuUen 

Clancarty  v.  Latouehe 

Claridge  v.  Hoare 

Clark  V.  Bank  of  Union 

V.  Clark 

V.  Desmoines 

V.  Farmers'  Nat.  Bank  .     .     . 

V.  First  Nat.  Bank     .... 

•  V.  Hawkins 

V.  Merchants'  Bank    .... 

V.  Metropolitan  Bank     .     .     . 

V.  Nat.  Bank  of  City  of  N.  Y. 

V.  Nat.  Shoe  and  Leather  Bank 

V.  Nat.  Metropolitan  Bank 

V.  Ogelvie 

V.  School  District        .     .     .     . 

V.  Stacldiouse 

V.  Toronto  Bank 

Clark  Company  v.  Mt.  Morris  Bank  . 
V. 


115  Mich.  156       ....     329 
89  App.  Div.  103  .     .     .  46,  46  a 

22  N.  D.  576 166 

121  Minn.  34 246 

95  Neb.  53        .     .     .      1S6, 289, 

289  a,  322  a  568 

155  N.  W.  155       .     .         632  A/ 


92  P^ed.  273   .  . 

.   II.  241  V 

3  Pick.  414  .  9,  n 

.  19,  9  A,  220 

45  Tex.  203   .  . 

477,  479,  489 

29  N.  Y.  554  .  . 

.   158,  165 

3  S.  W.  299  (Tex.) 

...  217 

1  Blatchf.  C.  C.  425  .  .  46,  63 

57  Ga.  283  ..  . 

...  471 

72  W.  Va.  29  .  . 

106,  136  f/, 

1 

46  i,  160,  299 

68  Ala.  267  .  .  . 

...  569 

80  Fed.  859   .  . 

...  160 

91  S.  C.  91  .  .  . 

.   247,  272 

27  Okla.  107  .  . 

.  .  II.  253 

5  Cent.  Law  Jour. 

347  .  .   II. 

241  a,  241  k 

61  Tex.  567   .  . 

...  483 

86  N.  Y.  484  .  . 

.  .  II.  244 

10  Rep.  469   .  . 

.   II.  241  0 

29  N.  J.  Eq.  591  . 

...  650 

48  Ind.  568  .  .  . 

.   II.  241  c 

53  Conn.  453  .  . 

...  234 

25  N.  Y.  293  .  . 

144,  n.  14 

36  Barb.  540  .  . 

.   155,  413 

51  Iowa  15 

...  326 

13  Pa.  St.  133  .  . 

...    6 

1  BaU  &  B.  420  . 

...  309 

14  Ves.  Jr.  59  .  . 

...   42 

72  W.  Va.  491  .  . 

...  128 

622  A, 

687,  696,  717 

108  Mass.  522 

...  610 

19  Iowa  199   .  . 

...   43 

124  Kv.  563   .  . 

.  .  . 322  a 

57  Mo.  App.  277  . 

.  317,  317  a 

5  R.  I.  219  .  .  . 

...  641 

2  N.  Y.  380   .  . 

...  574 

3  Duer  241    .  . 

...  762 

llDalv237   .  . 

.  .  .  290 

32  App.  Div.  (Hun 

,  N.  Y.)   316 

472 

2  ISIacArthur  249 

.  421,  n.  19 

111  Ky.  181   .  . 

679,  II.  263 

3  R.  I.  199    .  . 

...   54 

2  Mart.  (La.)  319 

...  442 

72  Kan.  1  .  .  . 

...  493 

85  App.  Div.  362 

...  362 

181  N.  Y.  533  .  . 

...  459 

XXXVlll 


TABLE   OF   CASES 


Clarke  v.  Man.  Ins.  Co 

Clarke  Nat.  Bank  v.  Bank  of  Albion  . 

Clark's  Adra'r  v.  Farmers'  Nat.  Bank 

Clary  v.  Fitzgerald 

Clasen  v.  City 

Clay  V.  Layton  

Clay  City  Nat.  Bank  v.  Conlee       .     , 

Clayton's  Case 

Clement  y.  U.  S 

Clement  Nat.  Bank  v.  Vermont  .  . 
Clemraer  v.  Drovers'  Nat.  Bank     .     . 

Cleveland  v.  Burnham 

V.  Hampden  Sav.  Bank  .     .     . 

Cleveland,  etc.  R.  R.  Co.  v.  Keary 

Clews  V.  Bank 

V.  Bank  of  N.  Y.  Nat.  Banking 

Ass'n 

Clifford    Banking    Co.    v.    Donovan 

Commission  Co 

Clisby  V.  Martin 

Clough  V.  Clough 

Coates  V.  First  Nat.  Bank      .... 

V.  Preston 

Coats  V.  Donnell 

Cobb  V.  Beeke 

Cobe  V.  Coughlin  Hardware  Co.  .  . 
Coch  V.  Mo.  Lincoln  Tr.  Co.  ... 
Cocheco  Nat.  Bank  v.  Haskell   .     .     . 

Coehituate  Bank  v.  Colt 

Cochran  w.  U.  S 

Cockrill  V.  Joyce 

Cocks  V.  Masterman 


8  How.  235  . 
52  Barb.  592 


124  Ky.  563   .  . 
155  App.  Div.  659 

46  La.  Ann.  1  .  . 

134  Mich.  317  .  . 

106  Ky.  788   .  . 

1  Mer.  608   .  . 

149  Fed.  305  .  II 

231  U.  S.  120  .  II. 

157  111.  206  .  .  . 
55  Wis.  598,  64  Wis. 
182  Mass.  110 
3  Ohio  St.  201 
114  N.  Y.  70 


.  .   21 

.  98,  n.  3, 

155,413 

309,  604  e 

.     .  609 

.   289  a 

.  .  610 

427,  456 

.  .  355 

55,  67,  259 

241  u,  241  y 

.  326/ 

347  .  685 

.  610 

.  102 

.  478 


Codd  V.  Rathbone 

Coddington  v.  Bay 

V.  Canady 

Codman  v.  Lubbock 

Cody  V.  City  Nat.  Bank 

Coffee  Springs  Bank  v.  McGiloray 

Coffey  V.  Nat.  Bank  of  Mo 

Coffin  V.  Henshaw 

Coggill  V.  Amer.  Exch.  Bank      .     .     . 

Cogswell  V.  Norwich  Second  Nat.  Bank 


Cogswell  V.   Rockingham  Ten  Cents 

Sav.  Bank 

Cohea  v.  Hunt 

Cohen  v.  Hule 

Coite  V.  Soc.  for  Savings 

Colby  V.  Equitable  Tr.  Co 

Cole  V.  N.  E.  Tr.  Co 

• V.  Ryan 


105  N.  Y.  398 

195  Mo.  262 
150  Ala.  132 
117  Mass.  83 
91  N.  Y.  20 
105  111.  470 
94  N.  Y.  176 
6  Q.  B.  930  . 
83  Kan.  522 
181  S.  W.  44 
51  N.  H.  116 
1  Gray  382 
157  U.  S.  286 
62  Ark.  216 
1  B.  &  C.  902,  17  E.  Cr.  L.  R.  487 
488,  558 

19  N.  Y.  37 

20  Johns.  637 
157  Ind.  243 
5  Dowl.  &  R.  289 
55  Mich.  379 
167  Ala.  408 
46  Mo.  140  . 
10  Ind.  277  . 
1  Comst.  113  370,  474,  476,  477, 

480 
78  Conn.  75   .  .   708,  II.  33, 
52,  73,  212  a,  216  d,  233,  242, 
250  A,  253 


414,  n.  21,  482 

320,  480,  487 
.  .  186  a 
...  611 
...  495 
...  446 
.  160,  624 
...  185 
...  169 
.  .  632  A 

158,  167,  169 

.   655,  687 

II.  234 

324,  701 


13 
.  599 

128,  668 
.  637 
.  595 
101  a 
II.  244 
.  313 


59  N.  H.  43 

2  Sm.  &  Mar.  227 

3  Q.  B.  D.  371   . 
32  Conn.  173  .  . 
124  App.  Div.  262 
200  Mass.  594 
52  Barb.  168  .  . 


.  421,  617,  757 
9  a,  n.  19 
398 
617 
770 
309 
673,  674 


TABLE   OF    CASES 


XXX IX 


Coleman  v.  First  Nat.  Bank  . 

V.  Parker       .... 

V.  White 


Coles  V.  Bank  of  England       .... 

Collier  v.  Neville 

Collins  V.  Central  Bank 

V.  Chicago 

V.  Emett 

V.  Gilbert 

Colmary  v.  Fanning 

Colonial  Bank  of  Austraha  v.  Marshall 
Colorado  Sav.  Bank  v.  Evans     .     .     . 

Colt  V.  Ives 

V.  Lasnier 

V.  Noble        

Columbia  Banking  Co.  v.  Bowen 
Columbia    Banking    etc.    Co.    v. 

Surety  Co 

V.  U.  S.  Fidelity  etc.  Co.     . 

Columbia  Finance  Co.  v.  First  Nat 


So. 


94  Tex.  605  . 
114  Mass.  30  . 
14  Wis.  700  . 
10  Ad.  &  El.  449 

3  Dev.  31  .  . 
1  Kelly  43.5       . 

4  Biss.  472  .  . 
1  H.  Bl.  313  . 
94  U.  S.  757  . 
124  Md.  548  . 
(1908)  A.  C.  559 
12  Colo.  App.  334 
31  Conn.  25   . 

9  Cow.  320 

5  Mass.  167  . 
134  Wis.  218     . 

35  Okla.  401  . 
33  Okla.  535     . 


317 
611 
693 
480 

49 
639 
II.  241 
370 
565 
609 
479 
3,  017 
496 
317 
232 

45 

13 
13 


Bank 116  Ky.  364 


.     .     .     317,  435, 
436,  439,  494,  532 


Columbia-Knickerbocker    Tr.    Co.    v. 

Miller 

Columbia  Mills  Co.  v.  Nat.  Bank  of 

Com 

Columbia  Nat.  Bank  v.  German  Nat. 

Bank 

V.  MacKnight 

Columbian  Bank's  Estate      .... 

Combs  V.  Scott 

Comer  v.  Dufour 

Commerce  Milling  Co.  v.  Morris  .  . 
Commerce  Tr.  Co.  v.  Bank  of  Willow 

Springs 

Commercial  &  Farmers'  Nat.  Bank  of 

Bait.  V.  First  Nat.  Bank  of  Bait.  . 
Commercial  Bank  v.  Armstrong      .     . 

V.  Benedict 

V.  Bonner 


156  App.  Div.  810     .   349,  351  A 
52  IMinn.  224    ...     .     532  A 


56  Neb 
29  App 


804      .... 
Cas.  (D.  C.)  583 


329 
458, 

459 
147  Pa.  St.  422      ...     .     716 

12  Allen  493 101 

95  Ga.  378  ..  .  421  d,  422 
27  Tex.  Civ.  App.  553    .     .     225 


101  Mo.  App.  431. 


V.  Chilberg    .     . 
V.  Cunningham 
V.  French 
V.  Hardy        .     , 
V.  Hughes     .     , 


30Md.  11  .  .  . 
148  U.  S.  50  .  . 
18  B.  Monr.  307  . 
13  Sm.  &  Mar.  649 


14  Wash.  247 
24  Pick.  270 
21  Pick.  486 
97  Miss.  755 
17  Wend.  100 


n.  23, 
'  108, 


.     289, 
355,  414 


V.  Jones    .     .     . 
V.  Kortright 

V.  Marine  Bank 
V.  Rhind  .     .     . 
V.  Simmons  . 
V.  Slocomb    .     . 


IS  Tex.  811 
22  Wend.   348 


.     .  98, 
165,  171 

3  Keyes,  337 

1  Maeq.  H.  L.  Cas.  643      . 
10  Alb.  Law  Jour.  155        II 
14  Pet.  60 


248 

463 
248 
650 
98, 
141 
493 
136 

95 
423 
324. 
56S 
317 
163, 
713 
599 
291 
257 

46 


xl 


TABLE   OF   CASES 


Commercial  Bank  v.  State 

V.  Thompson     . 

V.  Union  Bank  .     . 


Commercial  Banking  etc.  Co.  v.  Citi- 
zens' Tr.  Co 

Commercial  Exch.  Nat.  Bank  v.  Nat. 

Bank  of  Rep 

Commercial  Loan  etc.  Co.  v.  Malters 
Commercial   Mut.    Mar.    Ins.    Co.    v. 

Union  Mat.  Ins.  Co 

Commercial  Nat.  Bank  v.  Brinton 
V.  First  Nat.  Bank     .... 


6  Sm.  &  Mar.  599,  622    761,  764 

7  Sm.  &  Mar.  443       ..     .     637 
19  Barb.  391,  1  Kern.  203      246, 

252,  278,  299 

153  Ky.  566     48,  54,  56,  63,  160, 
289  o,  309,  714,  746 


9  Phila.  133 
242  111.  50    , 


V.  Henninger      .     .     .     . 

V.  Latham 

V.  Lincoln  County 

V.  Proctor 

V.  Weinhard       .     .     .     . 

Commercial   Press   v.    Crescent 
Nat.  Bank 


19  How.  318  .  . 
145  Pa.  St.  42  .  . 
158  Ky.  392      .     . 

97  Tex.  536      .     . 
143,  145,  214,  II 

105  Pa.  St.  496,  500 
29  Okla.  88  .     . 
67  111.  App.  166 

98  111.  558    .     . 
192  U.  S.  243   . 


City 


Commissioners  v.  Bolles 

Commonwealth  v.  Alleghany  Co.    .     . 

V.  Amer.  Tr.  Co 

V.  Barry 

V.  Cain 

V.  Chestnut  Street  Nat.  Bank 

V.  Citizens'  Nat.  Bank    .     .     , 

V.  Cochituate  Bank    .     .     .     . 

V.  Commercial  Bank  .     .     .     . 

V.  Cullen 

•  V.  Essex  Co 

V.  Felton 

V.  Fisher 

Grossman 

Ky.  Distilleries  etc.  Co.  .     . 

Ketner 

Loving 

McAUister 

Manufac.  &  Mech.  Bank      . 
V.  Reliance  Safe  Deposit  Co. 

V.  Sav.  Bank 

V.  Scituate  Sav.  Bank     .     .     . 
V.  Stone 


744 


V.  Tenney 

V.  Tradesmen's  Tr.  Co.  .     .     . 

V.  Wathen 

V.  Worcester 

Commonwealth  &  Sav.  Bank  v.  Jenks 

Lumber  Co 

Commonwealth  Nat.  Bank  v.    First 

Nat.  Bank 


26  La.  Ann. 

4  Otto  104  .  . 
20  Pa.  St.  185  . 

241  Pa.  St.  153 

116  Mass.  1   . 

5  Serg.  &  R.  510 
189  Pa.  St.  606 

117  Kv.  946 

3  Allen  42  . 

28  Pa.  St.  383 
13  Pa.  St.  133 
13  Gray  253 
101  Mass.  204 
17  Mass.  46 
248  Pa.  St.  11 
132  Ky.  521 
92  Pa.  St.  372 

29  Ky.  Law  Rep. 
28  Pa.  St.  480 

2  Pearson  (Pa.) 

242  Pa.  St.  177 
98  Mass.  12  . 
137  Mass.  301 

4  Met.  43  .  . 

236  Pa.  St.  35  . 
97  Mass.  50   . 

237  Pa.  St.  316 
126  Ky.  573   . 

3  Pick.  462  .  . 


194  Fed.  732 
158  Ky.  392 


II 


175 


.  466 
622  A 


98,  n.  13 
.  .  329 

246,  287 

2,  48,  65, 

8,  208,  228 

188,  562 
.  .  458 
.  .  391 

329,  561 
212  b,  238 

.  391 
.  758 
.  760 
632  A^ 
II.  259 
.  43 
II.  252 
II.  241  g 
677,  678 
.  761 
.  758 
.  766 
II.  259 
.  298 
.  13 
.  494 
II.  259 
.  776 
.  604 
,  II.  241s 
760  a,  761 
.  .  650 
.  .  604 
.  .  662 
289  a,  568 
.  II.  259 
.  .  622 
.  .  324 
.  .   43 


386 


629  A 


568  i 


TABLE   OF    CASES 


Comp  V.  Carlisle  Deposit  Bank  ...  94  Pa.  St.  409  . 

Compton  V.  Oilman 19  W.  Va.  316  . 

Comstoek  v.  Willoughby Hill  &  Den.  271 

Conant  i'.  Schuyler 1  Paige  31G 

V.  Seneca  Co.  Bank    ....  1  Ohio  St.  298  . 


Xli 

203,  209 
.  .  42rj 
.  .  77 
.  .  550 
.  .  128. 
099,  717,  761 

Concord  v.  Concord  Bank 16  N.  H.  26     159,  289,  295,  355 

Condon  v.  Pearce 43  Md.  83 565 

Conklin  r.  Second  Nat.  Bank     .     .     .     53  Barb.  512     .     .698A,  II.  212 

Connecticut  &  Passumpsic  River  R.  R. 

Co.  t;.  Bailey 24  Vt.  465 669 

Connelly  v.  McKean 64  Pa.  St.  113  . 

Conner  v.  Henderson 15  Mass.  320     . 

Connors  v.  Old  Forgo  etc.  Bank.     .     .     245  Pa.  St.  97  . 

Conroy  v.  Warren 3  Johns.  Cas.  259 


409 

103 

487 

393, 

421,  n.  9,  425 

Consolidated  Nat.  Bank  v.  First  Nat. 

Bank 129  App.  Div.  538     ..     .       45 

V.  Kirkland 99  App.  Div.  121  ...     .     603 

Continental  Bank  v.  Elliott  Bank  .     .     7  Fed.  373 711 

Continental  etc.  Bank  v.  Chicago  etc. 

Tr  Co 199  Fed.  704 183, 

325,  567,  567  a 
Continental  Nat.  Bank  v.  Buford   .     .     191  U.  S.  119     II.  70,  83  A,  257 

V.  Cornhauser 37  111.  App.  475     414  b,  414  A-,  415 

■ V.  First  Nat.  Bank     ....     84  Miss.   103    .     295,  295  a,  591 

V.  Metropolitan  Nat.  Bank      .     107  111.  App.  455    414  g,  479,  481 

?;.  Nat.  Bank  of  Commonwealth     50  N.  Y.  575 478 

„  173  N.  Y.  272  .     .     .  414  h,  454 

Tradesmen's  Nat.  Bank  .     .     36  App.  Div.  112        .       454,  480 


Continental  Tr.  Co.  v.  Brown,    .     .     .     179  S.  W.  939 777 

Converse  v.  Norwich,  etc.  R.  R.  Co.    .     33  Conn.  166 56 

Conway  v.  Halsey 44  N.  J.  L.  462      .     .     .     .     717 

V.  Owensboro  Sav.  Bank     .     .  165  Fed.  822     675,  687,  693,  696 

„. 185  Fed.  950 675 

Conwell  t;.  Hill 14  Ind.  131 644 

Conyngham's  Appeal 57  Pa.  St.  474  .     .     .       125,  173 

Cook  V.  Amer.  Tubing  etc.  Co.  .     .     .     28  R.  I.  41 146  d 

V.  Lewis 172  m.  App.  518  ....     400 

V.  Moffat 5  How.  295  ....      12,  n.  18 

—  V.  State 13  Ind.  154 27 

V.  State  Nat.  Bank     .     .     .     .  52  N.  Y.  96,  50  Barb.  339  .      46, 

98,  155,  414,  II.  206,  257 

V  TuUis 18  Wall.  332     ..     .      326.  590 

V.  Wagster 1  Sm.  &  G.  296     ....     606 

Cooke  V.  Seely 2  Exch.  749 439 

v.V.S 91  U.  S.  389 489 

Cookendorfer  ?;.  Preston 4  How.  317 9,113 

Coolidgc  V.  Knight 194  Mass.  546        ....     610 

Cooper  t;.  Burr 45  Barb.  9 611 

V.  Curtis 30  Me.  488  .     .     .     98,  158,  176 

V.  Frederick 9  Ala.  738 43 

V.  Kane 19  Wend.  386   .     .     .     .9,  n.  12 

V.  Mowry 16  Mass.  7 322 

Coote  V.  Bank 3  Cranch  C.  C.  50     .     .     .     439 


Xlii                                                    TABLE   OF  CASES 

Coots  V.  McConnell 39  Mich.  742 589 

Cope  V.  Dodd 13  Pa.  St.  33     .     .     .     .     9,  n.  5 

V.  Westbay 188  Mo.  638 358 

Coppell  V.  HaU 7  Wall.  558 747 

Corbet  v.  Bank  of  Smyrna     ....  2  Harr.  235       289,  312,  637,  662 

Corbett  v.V.S 215  U.  S.  233   .     .     .     .    II.  259 

V.  Woodward 5  Sawyer  403 124 

Corbin  Banking  Co.  v.  Bryant   ...  151  Ky.  194      ...   290,  322  a 

V.  Mitchell 141  Ky.  172     684,  697,  701,  702 

Corcoran  v.  Hotaling 164  N.  Y.  App.  Div.  75      .     609 

V.  Snow  Cattle  Co 151  Mass.  74 146  A; 

Cordell  v.  First  Nat.  Bank  of  Kansas 

City 64  Mo.  600 307 

Corgan  v.  Frew 39  lU.  31 366 

Cork  V.  Bacon 45  Wis.  192 367 

Corlett  V.  Conway 5  M.  &  W.  655      ....     418 

Corn  V.  Skillern 75  Ark.  148       .     .   623,  683,  708 

Corn  Exch.  Bank  v.  Blye 2  N.  Y.  112 217 

V.  Blye 101  N.  Y.  303  .     .     .     .II.  252 

V.  Nassau  Bank 91  N.  Y.  74 476 

Corn  Exch.  Nat.  Bank  v.  Kaiser     .     .  160  Wis.  199     .      59,  77,  II.  228 

V.  Locher 151  Fed.  764 337 

V.  Nat.  Bank  of  Republic    .     .  78  Pa.  St.  233  .     .     .      466,  489 

Corporation  Commission  v.  Bank  of 

Jonesboro 164  N.  C.  357 106 

V.  Merchants'  etc.  Bank      .     .     137  N.  C.  697 248  a 

Corser  v.  Craig 1  Wash.  C.  C.  424     493,  494,  538 

V.  Paul 41  N.  H.  24 158 

Corydon  Deposit  Bank  v.  McClure     .  141  Ky.  481.     .     .     43,  698,  716 

CoStello  V.  Citizens'  State  Bank.     .     .  140  Wis.  275     ...     .       159  b 

Cotter  V.  Doty 5  Ohio  395 43 

Cottondale    State    Bank    v.    Oskamp 

Nolting  Co 64  Fla.  36 48,  65 

Coulter  V.  Robertson 24  Miss.  278 706 

County  Commiss.  of  Frederick  Co.  v. 

Farm.  &  Meeh.  Nat.  Bank     ...  48  Md.  117  .     .     .     .     II.  241  n 

County  of  Des  Moines  v.  Hinkley  .     .  62  Iowa  637      ...      495,  541 

CoveU  V.  Fowler 144  Fed.  535     ...     .    622  A, 

668,  687,  690,  693 

Covert  V.  Rhodes 48  Ohio  St.  66 493 

Covey  V.  Cannon 104  Ark.  550       205,  289  a,  590  c 

Covington  v.  First  Nat.  Bank    ...  198  U.  S.  100    .     .     .    II.  241  a, 

241  b,  241  g,  241  x 
Covington  City  Nat.  Bank  v.  City  of 

Covington 21  Fed.  484 

Cowell  V.  Simpson 16  Ves.  Jr.  278 

Cowing  V.  Altman 71  N.  Y.  435     . 

Cowles  V.  Cromwell 25  Barb.  413     . 

V.  Gridley 24  Barb.  301      . 


Cowperthwaite  v.  Sheffield     ....  3  Comstock  243 

Cox  V.  Bank 119  N.  C.  305  . 

V.  Boone 8  W.  Va.  500     . 

V.  Buck 83  Fed.  269       . 

V.  Citizens'  State  Bank  ...  73  Kan.  789.     . 

V.  Elmendorf 97  Tenn.  526    . 


II.  241  V 
.  .  330 
.  .  442 
.  .  673 
.  .  669 
493,  502 
.  .  714 
.  .  423 
II.  230  n 
421  a,  421  / 
,     .     .     679 


TABLE   OF   CASES 


XllU 


Cox  V.  First  Nat.  Bank 

V.  Hill       .     .  . 

V.  Montague.  . 

Coxey  V.  State  Bank 
Cragie  v.  Hadley       .  . 
Craig  V.  Libbett  .     .  . 
V.  Missouri    .  . 


126  La.  88  . 
0  Md.  274  . 
78  Fed.  845 

3  Halst.  172 
99  N.  Y.  i:« 
15  Pa.  St.  238 

4  Pet.  410,  432 


Crain  v.  First  Nat.  Bank  of  Jackson- 
ville     

Crandall  v.  Schroeppel 

Craughwell  v.  Monsan  River  Tr.  Co. 

Crawford  v.  Royal  Bank 

V.  Roney 

V.  West  Side  Bank      .... 

Crease  v.  Babcock 


Credit  Co.  v.  Howe  Co 

Creditors'  Claim  etc.  Co.  v.  Northwest 

etc.  Co 

Creed  v.  Commercial  Bank    .... 
Crescent  City  Nat.  Bank  v.  Case    .     . 

Creswell  v.  Lanahan 

Creveling  v.  Bloomsburg  Nat.  Bank 

Crews  V.  Farmers'  Bank 

Cripper,    LawTenee   &   Co.  v.  Amer. 

Nat.  Bank 

Crissley  v.  Interstate  Loan  etc.  Co. 
Critten  v.  Chemical  Nat.  Bank  .     .     . 
Crocker  v.  First  Nat.  Bank  of  Chetopa 

• ■  V.  Higgins 

V.  Marine  Nat.  Bank      .     .     . 

V.  Scott 

V.  Whitney 

Croeker-Woolworth     Nat.     Bank     v. 


114  111.  51G  . 
1  Hun  557    . 
95  Atl.  221   . 
Ross,  Lead.  Cas. 
126  Ga.  763 
100  N.  Y.  50 
10  Met.  525 
23  Pick.  334 
54  Conn.  357 


81  Wash.  247 
11  Ohio  489 
99  U.  S.  628 
101  U.  S.  347 
46  N.  J.  L.  255 
31  Gratt.  384    . 


229 


51  Mo.  App.  508 
59  Kan.  561 
171  N.  Y.  219. 
11  Am.  Law  Rev. 
7  Conn.  347      . 
101  Mass.  240  . 
149  Cal.  575     . 
71  N.  Y.  101     . 


Nevada  Bank 139  Cal.  564 


Crocket  V.  Young 

Cromwell  v.  Lovett 

Cronhoim  v.  Postal  Telegraph  Cable 

Co 

Cronin  v.  Chelsea  Sav.  Bank      .     .     . 

Crosskill  v.  Bower 

Crossly  v.  Ham 

Crout  V.  De  Wolf 

Crow  V.  Mechanics  &  Traders'  Bank 
Crowder  State  Bank  v.  .^tna  Powder 

Co 

Cruger  v.  Armstrong 

Crumb  v.  Treiber 

Crutchfield  v.  Plunter 

Crystal  Plate  Glass  Co.  v.  First  Nat. 

Bank 

Cuff  V.  Cuff 

CuUen  V.  Thompson 


1  Sm.  &  Mar.  241 
1  Hall  (N.  Y.),56 


10  Ga.  App.  716 
201  Mass.  140  . 
32  Beav.  86  . 
13  East  498  . 
1  R.  I.  383  .  . 
12  La.  Ann.  692 


337 

615 
683 


...  637 

109,  574,  589 

225 

51,  298,  665 


.  .  160 
,  .  248 
.  .  778 
,  .  652 

671,  716 
,  .  456 

689,  693 
,  .  138 

167,  745 

65,  740 
.  50 
.  683 
.  773 
493,  525 
.  230 


169 


41  Okla.  394     . 
3  Johns.  Cas.  5 


4  Bull.  616  . 
138  N.  C.  54 


6  Mont.  303   . 
120  App.  Div.  225 
9  Jur.  N.  s.  85  . 


.  474 

.  772 

314,  472 

II.  230 

.  499 

II.  257 

II.  141  X 

75,  II.  228 


349,  350, 

351,  454,  479 

...  158 

421,  425,  544 

217,  577,  589 

...  612 

289,  309,  568 

565,  n.  10 

.  .  468 

.  .  246 


421, 


65,  750 

393.  402, 

n.  10,  442 

.  .  342 

629  b 

.  .  170 
.  .  610 
. 102,  132 


xliv 


TABLE   OF   CASES 


Cullinan  v.  Union  Security  etc.  Co.     .     79  App.  Div.  409       .     .       414  e 
Culpeper  Nat.  Bank  v.  Walter  ...     114  Va.  522       ...        80,  360 

Culver  i;.  Marks 122  Ind.  554      .     .     .367  c,  421^ 

Cumming  v.  Shand 29  L.  J.  Ex.  129    .     .     .     9,  n.  1 

Cummings  v.  Boyd 83  Pa.  St.  372  .     .     .    565,  n.  15 

V.  Winn 89  Mo.  51 628 

Cummins  v.  Heald 24  Kan.  600 267 

Cundy  v.  Marriott 1  Barn.  &  Ad.  696     ..     .     743 

Cunningham  v.  Bank  of  Nampa      .     .     13  Idaho  167     ....       604  a 

V.  Davenport 147  N.  Y.  43 610 

V.  SheUman 164  Ky.  584 128 

Curcier  v.  Pennoek 14  Serg.  &  R.  51    .     .     .     .     113 

Curkett  v.  Steinhoff 130  Wis.  146 247 

Curran  v.  State  of  Arkansas  ....     15  How.  304 718 

V.  Whittier 66  Wis.  16 298 

V.  Witter 31  N.  W.  705 302 

Currie  v.  Misa L.  R.  10  Exch.  163    ..     .     546 

Currier  v.  Davis Ill  Mass.  480        ....     425 

Curry  i;.  Powers 70  N.  Y.  212     .....     615 

V.  Scott 54  Pa.  St.  270 707 

Curtice  v.  Crawford  Co.  Bank    .     .     .     118  Fed.  390     ..     .    146  e,  697 

V.  London  City  etc.  Bank   .     .     (1908)  1  K.  B.  293    ..     .     398 

Curtis  V.  Davidson 164  App.  Div.  597     ..     .     338 

V.  Leavitt 15  N.  Y.  19      .     .     .    13, 51, 63, 

77,  98,  n.  36,  137,  232,  289,  297, 
298,  568,  743 
...  289  a 
.  .  611,  612 
406  .  .  74 
....  388 


V.  Parker 136  Ala.  217   . 

V.  Portland  Sav.  Bank  ...  77  Me.  151  .  . 

V.  Swartwout 1  N.  Y.  Leg.  Obs. 

Cushing  V.  Gore 15  Mass.  69 

Custer  V.  Tomkins  Co.  Bank      ...  9  Barr  27 134 

Cutting  V.  Oilman 41  N.  H.  147 608 

V.  Marlor 78  N.  Y.  454 212 

Cutts  V.  Perkins 12  Mass.  206    ..     .       400,  549 


D 


Da  Silva  v.  Fuller Chitty  on  Bills  180 

Dabney  v.  Stevens 40  How.  (N.  Y.)  341 

Dacy  V.  N.  Y.  Chemical  Mfg.  Co.       .  2  Hall  550    .     .     . 

Daggett  V.  Whiting 35  Conn.  372    .     . 

Dale  V.  Sollet 4  Burr.  2133      .     . 

Daly  V.  Butchers  &  Drovers'  Bank  of 

St.  Louis 56  Mo.  94     .     .     .  214,  274,  287 

Daly  Bank  &  Tr.  Co.  v.  Board  of  Com- 
missioners      33  Mont.  101    .     . 

Dana  v.  Bank  of  U.  S 5  Watts  &  S.  223  . 

V.  Nat.  Bank 132  Mass.  156  .     . 

V.  Third  Nat.  Bank    ....  13  Allen  445      .     . 

Daniel  v.  Smith 75  Cal.  548  .     .     . 

Daniels  v.  Empire  State  Bank    ...  92  Hun  450       .     . 

V.  Kyle 1  Kelley  (Ga.)  304 

Dann  v.  City  of  London  Brewery  Co.  L.  R.  8  Eq.  155     . 


.     389 
.       43 

434,  440 
.     565 

.     328 


II.  241  e 

.     .     120 

290,  472 

446,  493 

611,  614 

.     .     480 

.     .    381, 

421  d,  425 

9,  n.  11 


TABLE   OF   CASES 


xlv 


Danvers  Bank  v.  Salem  Bank     .     . 

Darling  v.  Stanwood 

Darrington  v.  Bank  of  State  of  Ala. 
Daugherty  v.  Poundstoue       .     .     . 

Davenport  v.  City  Bank  of  Buffalo 

V.  Xat.  Bank 

V.  Palmer 

V.  Prentice 


V.  State  Banking  Co.       .     .     . 

. V.  Stone 

V.  Walker 

Davenport  Bank  v.  Board  of  Equaliza- 
tion      

Davey  v.  Jones 

V.  State 

Davidge  v.  Guardian  Tr.  Co.      .     .     . 

Davies  v.  Dodd 

V.  Watson 

Daviess  Co.  Sav.  Ass'n  v.  Sailor      ,     . 

Davis  V.  Adae 

V.  Bangor 


151  Mass.  280  .     .     .     . 
14  Allen  504      ..     . 

13  How.  12 

120  Mo.  App.  300      . 

128, 

9  Paige  12 

127  App.  Div.  391      .     , 

152  xVpp.  Div.  701      .    4 
12G  App.  Div.  451      . 

143,  148  A, 
126  Ga.  136  289,  324, 
104  Mich.  521  .  . 
132  App.  Div.  96 


123  U.  S.  83 
42  N.  J.  L.  30 
99  Ark.  547 . 
203  N.  Y.  331 


1  Wils 

2  Nev. 

03  Mo 

4  BuU. 
42  Me 


V.  Bartlett 

V.  Benton 

V.  Bowsher 

V.  Burns 

V.  Butters  Lumber  Co.    .     . 

V.  Cook 

V.  ElmiraBank;     .... 
V.  First  Baptist  Soe.  of  Essex 
V.  Industrial  Mfg.  Co.     .     . 

V.  Knapp 

V.  Lenawee  Co.  Sav.  Bank  . 

V.  Meeker 

V.  Ney 

V.  Randall 


V.  Smith  . 
V.  Stevens 
V.  West     . 


Ex.  110 

&  M.  709 

24 

(Cin.)  295 

522 

12  Ohio  St.  537 
2  West.  L.  Mo. 
5  T.  R.  488  . 
173  S.  W.  476 
132  N.  C.  233 
9  Xev.  134  . 
161  U.  S.  275 
44  Conn.  582 

114  N.  C.  334 
92  II un  297 
53  Mich.  163 
5  -lohns.  354 
125  Mass.  590 

115  Mass.  547 


Davison  v.  City  Bank  .  . 
Davis  Tr.  Co.  v.  Smith.  . 
Dawson  v.  Laws  .... 
V.  Real  Estate  Bank 


Day  V. 


Richards  . 
Thompson 


Dayton  v.  Brost 

Dayton  Nat.  Bank  v.  Merchants'  Nat. 

Bank 

De  Barnales  v.  Fuller 

De  Feriet  v.  Bank  of  America  .  ,  . 
De  Haven  v.  Kensington  Nat.  Bank 
V.  Pratt ■ 


29  Minn.  201 
17  Blatchf.  259 
127  Ga.  407 
57  N.  Y.  82 
226  Fed.  410 
Kav  280 
5  Ark.  299  . 

190,  192, 
197  Mass.  86 
65  Ala.  2G9 
7  Bosw.  115 

37  Ohio  St.  208 
14  East.  590   . 
23  La.  Ann.  310 
81  Pa.  St.  95  . 
223  Pa.  St.  633 


466  d 

274,  286 

.  664 

116,  118, 

172,  706 

.  663 

,  .  352 

14  b,  415 

.  .  128, 

152,  157 

563,  568 

158  e 

.       169  a 


423 


324 


II.  241  y 

252,  265 

,  .  628 

,  .  777 

,  .  649 

,  .  487 

,  .  169 

.  .  542 

.  .  102 

.  .  565 

.  .  424 

324,  325,  567 

668,  690 

.   629  a 

II.  257 

.  .  178 

II.  212  b 

.  .  338 

.  .  338 

290,  619 

.  .  103 

.  .  612 

144,  n.  18, 

II.  230  c 

.  .  289 

.  .  683 

2 

'.     .  546 

.  .  777 

.  .   33 

183,  186, 

326,  562,  568 

.  .  611 

.  .  546 

.  .  674 

.  .  714 
.  .  564 
.  .  469 
.  .  194 
675,  770 


xlvi 


TABLE   OF   CASES 


De  Haven  v.  Williams 

De  la  Chaumette  v.  Bank  of  England 

De  Mayre  v.  State  Nat.  Bank    .     .     . 

De  Peau  v.  Humphreys 

De  Witt  Co.  Nat.  Bank  v.  Mukleberry 

Dean  v.  Allen 

Dearborn  v.  Union  Nat.  Bank    .     .     . 

Debolt  V.  Ohio  Life  Ins.  &  Tr.  Co.       . 

Decatur  Nat.  Bank  v.  Murphy  .     .     . 

Dedham  Bank  v.  Chickering       .     .     . 

Deener  v.  Brown 

Deitrieh  v.  Rothenberger 

Delafield  v.  Kinney 

Delano  v.  Butler 

V.  Case 

Delahunty  v.  Central  Nat.  Bank    .     . 

Delaware  &  Hudson  Canal  Co.  v.  Pa. 
Coal  Co 

V.  Westchester  Co.  Bank     .     . 

Delaware,  L.,  &  W.  R.  R.  Co.  v.  Ox- 
ford Iron  Co 

Delmotte  v.  Taylor 

Delvin  v.  Moore 

Demarest  v.  Holdeman 

Denini  v.  IMechanics  Sav.  Bank       .     . 

Denmon  v.  Boylston  Bank     .     .     .     . 

Dent  V.  Matteson 

V.  People's  Sav.  Bank     .     .     . 

Denton  v.  State 

Dern  v.  Kellogg 


Descombes  v.  Wood 

Desha  v.  Holland 

Des  Moines  Nat.  Bank  v.  Chisholm    . 

V.  Des  Moines 

Desmond  v.  Merchants'  Nat.  Bank     . 

Deters  v.  Harriot 

Detroit  Motor  Co.  v.  Third  Nat.  Bank 
Detroit  Nat.  Bank  v.  Union  Tr.  Co.  . 
Detroit  Sav.  Bank  v.  Ziegler .... 

Devaynes  v.  Noble 

Devendorf  v.  W.  Va.  Oil  &  Land  Co.  . 

Devol  V.  Mcintosh 

Dewar  v.  Bank 

Dewey  v.  St.  Albans  Tr.  Co.  .  .  . 
Dexter  Horton  Nat.  Bank  v.  Hawkins 

V.  McKenzie 

Dick  V.  Leverick 

Dickerson  v.  Wason 

Dickey  v.  Adler 

Dickey  &  Company  v.  Leonard  .  . 
Dickinson  v.  Central  Nat.  Bank  .  . 

V.  Coates 

V.  First  Nat.  Bank  .... 

u.  U.  S 

V.  Valpy 


80  Pa.  St.  480 438 

9  Barn.  &  Cr.  208  ...  652 
8  Neb.  104 454 

20  Mart.  (La.)  1  .  .  12,  n.  15 
244  111.  77 74  c 

8  Johns.  390 335 

58  Me.  273 59,  211 

1  Ohio  St.  563 6 

9  111.  App.  112   ....  587 

3  Pick.  335 20,  27 

1  MacArthur  350  .  .  421,  n.  15 
25  Ky.  Law  Rep.  338  .  .  767 
24  Wend.  345  .  .  .  144,  n.  19 
118  U.  S.  634  .  .  .  .  II.  223 
12  N.  E.  676 130 

63  App.  Div.  177   ...  329 

21  Pa.  St.  132 98 

4  Den.  97 499 

38  N.  J.  Eq.  340  .  .  .  II.  235 
1  Redf.  417  (N.  Y.)  .  .  .  611 

64  Or.  433  .  128,  128  /,  132  h 
34  Ind.  App.  685  .  .  .  .  168  / 
85  Conn.  225  .  620,  620  h,  620  c 

5  Cush.  194 336 

70  Minn.  519 686 

175  S.  W.  1154   .  .  .  .  143  6 

66  Fla.  87 394 

54  Neb.  560 219 

91  Mo.  196 120 

12  Ala.  513 9,  n.  6 

33  N.  W.  234 600 

135  Iowa  336  .  .  II.  241  c,  d 
33  m.  App.  95   ....  208 

1  Show.  164 443 

111  Mich.  407 212 

145  Mich.  656 413 

49  Mich.  157 26 

I  Mer.  541  .  289,  291,  355,  568 

17  W.  Va.  135 425 

23  Ind.  529 499 

115  111.  22 471 

56  Vt.  476 627 

193  Fed.  363  ...  .  II.  50 
69  Wash.  314  ..  .   II.  241  s 

II  La.  573 476 

47  N.  Y.  439 599 

143  Mo.  App.  326   ...  298 

77  Ga.  154 028  h 

129  Mass.  279 710 

79  Mo.  250  .  .  .  .  493,  522 
64  App.  Div.  2.54  .  .  .  317  a 
159  Fed.  801  ...  .  II.  259 
10  B.  &  C.  140   ....  131 


TABLE   OF  CASES                                                  xlvii 

Dickinson  v.  White 25  N.  D.  523 5S6 

Dickson  v.  Evans 6  T.  R.  57 640 

Dill  V.  Ebey 27  Okla.  584     .     .     .       693,  696 

V.  Wareham 7  Met.  438 161 

Dille  V.  White 132  Iowa  327 543 

DiUingham  v.  Parks 30  lad.  App.  61     ...     .     557 

Dingley  v.  McDonald 124  Cal.  682 159  d 

Dinley  v.  McCuUagh 29  Hun  454 551 

Dirnfield  v.  Fourteenth  St.  Nat.  Bank  37  App.  Cas.  (D.  C.)  11     .    568, 

582 
Dispatch  Printing  Co.  v.  Nat.  Bank  of 

Commonwealtli 109  Minn.  440 

Ditty  V.  Dominion  Nat.  Bank    ...  75  Fed.  769 

Diven  t;.  Lee 36  N.  Y.  302 

V.  Phelps 34  Barb.  224 

Divine  v.  Unaka  Nat.  Bank  ....  125  Tenn.  98 

Dixon  V.  Dunham 14  III.  324    . 

V.  Jackson  Exch.  Bank   ...  149  Mo.  App.  583 

V.  NuttaU 1  C.  M.  &  R.  307 


.  532  A 
.  . 146  c 
. 686, 693 
.  .  641 
.  .  306 
.  9,  n.7 
289  a,  433 
.     .     380 

V.  Ranldn 1  Am.  R.  R.  Cas.  569     .     .     102 

Dixon's  Case 2  Lemn  Cr.  Cas.  178     .     .     435 

Dobinson  v.  Emmons   .     .     .     .     .     .     158  Mass.  592 611 

Doctor  V.  Riedel 96  Wis.  158 559 

Dodd  V.  Wilkinson 9  Atl.  685 130 

Dodge  V.  Lunt 181  Mass.  320 609 

V.  Mastin 5  McCrary  404      .     .       622,  628 

V.  Nat.  Exch.  Bank    ....     20  Ohio  St.  234     .     .     403,  474, 

494,511,  534 

V. 30  Ohio  St.  1 457 

V.  Perkins 9  Pick.  368 309 

V.  State  Nat.  Bank     ....     96  Ark.  65 185 


DodweU  V.  Oxford 2  Vent.  34 43 

Doherty  v.  First  Nat.  Bank  ....     161  Ky.  202 125 

Dole  V.  Lincoln 31  Me.  422 608 

Dollar  V.  International  BaTiking  Co.    .  13  Cal.  App.  331  ....     300 

DoUey  v.  Abilene  Nat.  Bank      ...  179  Fed.  461     .     .     .     .    II.  200 

Dolph  V.  Cross 153  Iowa  289    ..     .       190,  325 

Dominion  Tr.  Co.  v.  Hildner      ...  243  Pa.  St.  253      .     .   106,  146  k 

Donlan  v.  Provident  Institution      .     .     127  Mass.  183 620 

Donnell  v.  Lewis  Co.  Sav.  Bank      .     .     80  Mo.  165 63 

Donogh  V.  Gilhspie 21  Ont.  App.  299  .     .     .     .     247 

Doranr.  Doran 99  Cal.  311 611 

Dorchester   &   Milton   Bank   v.  New 

England  Bank 1  Cush.  177       .     .      9,  n.  5,  217, 

221,   222,  231,  274,  286 

Dorsey  t".  Abrahams 5  Rep.  53  (Penn.)      .     .155,413 

Doty  V.  Wilson 47  N.  Y.  580 612 

Doughertv  v.  Hunter 54  Pa.  St.  380  .     .     .      98,  n.  26 

V.  Reilly 71  Md.  248 615  c 

V.  Western  Bank 13  Ga.  287 644 

Dow  V.  Sperry 29  Mo.  390 468 

t'.  U.  S 82  Fed.  904       ....    II.  259 

Down  i;.  HaUing 4  Barn.  &  Cr.  330     380,441,442 

Downer  v.  Madison  City  Bank  ...  6  Hill  648     ..     .    250.  2()5,  278 

Downes  t;.  Phoenix  Bank 6  HiU  297    289,311,322,458,568 


xlviii 


TABLE   OF    CASES 


Downey  v.  Nat.  Exch.  Bank       .     .     . 

Drake  v.  Markle 

Draper  v.  Blaekwell 

Drennen  v.  Jenkins 

Dresser  v.  Dresser 

V.  Norwood 

Drew  V.  Hagerty 

Dreyfuss  v.  Adae 

Driesbach   v.    Second   Nat.    Bank   of 

Wilkesbarre 

Drinkall  v.  Movius  State  Bank  .     .     . 

Driscoll  V.  West  Bradley 

Drovers'  Nat.  Bank  v.  Anglo-American 

P.  &  P.  Co 

V.  Blue 

V.  O'Hare 

Druid's  Case 

Drumrn-Flato    Com.    Co.    v.    Gerlack 

Bank 

Dry  V.  Davey 

Ducat  V.  Chicago 

Duckett  V.  Nat.  Mechanics'  Bank  .     . 

Dufaur  v.  Oxenden 

Duff  V.  East  India  Co 

Duffy  V.  Byrne 

Dunbar  v.  Dunbar 

Duncan  v.  Berlin 

•  V.  Brennan 

•    V.    First    Nat.    Bank   of  Mt. 

Pleasant       

V.  Jaudon 

V.  Magette 

Dundee  Nat.  Bank  v.  Huntington  . 

Dundon  v.  McDonald 

Dunham  v.  Gould 

Dunkle  v.  Rennick 

Dunlap  V.  Smith 

Dunn  V.  State 

Dunston  v.  Imperial  Gas  Co. 

Durham  v.  Bischoff 

Durkin  v.  Exch.  Bank 

Dutcher  v.  Importers  &  Traders'  Nat. 

Bank 

Dutton  V.  Nat.  Bank 

Dutton  V.  Pool 

Duval  V.  Farmers'  Bank 

Dycus  V.  Traders'  Bank 

Dyer  v.  Walker 

Dykers  v.  Leather  Mfg.  Co 

Dykman  v.  Northbridge 


52  Ind.  App.  672 
21  Ind.  433  .  . 
138  Ala.  182  . 
180  Ala.  261  . 
46  Me.  48  .  . 
17  C.  B.  N.  s.  466 
81  Me.  231  .  . 
4  BuU.  671   .     . 


104  U.  S.  52 
11  N.  D.  10 
59  N.  Y.  96 


117  111.  100  .  . 
110  Mich.  31  . 
10  N.  E.  360  (111.) 
1  Wm.  Rob.  405 

107  Mo.  App.  426 
10  Ad.  &  El.  30 
48  111.  172  .  . 
86  Md.  400  .  . 
1  M.  &  Rob.  90 
15  Ves.  Jr.  198 
7  Mo.  App.  417 
80  Md.  152  .  . 
60  N.  Y.  151  . 
83  N.  Y.  487  . 


573 

299 

77 

668 

611 

109,  134,  166 

.   611,  612 

...  542 


11  Bank.  Mag.  787' 

15  WaU.  165 
25  Tex.  245 
20  Hun  104 
146  Calif.  585 

16  Johns.  367 
6  Ohio  St.  534 

12  m.  399  . 

13  Ga.  App.  314 
3  B.  &  Ad.  125 
47  Ind.  211  .  . 
2  Patt.  &  H.  277 

59  N.  Y.  5  .  . 
53  Kan.  440   . 

I  Vent.  318  .  . 
9  GiU  &  J.  31  . 
52  Tex.  Civ.  App. 
40  Pa.  St.  157  . 

II  Paige  612   388 
80  Hun  258 


II.  230  k 
398,  399 
43 


236 
596 
9  G,  208 
102 


342 
29 
46 

317  a 
418 
439 
628 

615  d 
346 
325 


II.  230 

166,  317 

248 

144  i 

125 

9,  50 

73 

637 

2,  6 

140 

490 

30,  176 

452,  625 
II.  241  X 
.  .  499 
.  9,  n.  5 
169,  169a 
.  .  763 
,  398,  414,  450 
...  599 


175 


E 

Eades  v.  Muhlenberg  Co.  Sav.  Bank  .     157  Ky.  416 
Eagle  V.  O'MaUey 219  U.  S.  128 


170,  562 
.     .     568 


TABLE   OF    CASES 


xlix 


Eagle  Bank  v.  Chapin 

V.  Hathaway 

V.  Smith 

Eans  V.  Exch.  Bank  of  Jefferson  City 
Earl  of  Strathraore  v.  Vane    .... 
Earle  v.  Amer.  Sugar  Refining  Co. 
V.  Carson 


.       464 
320,  II 


Coyle    . 
Munich 


3  Pick.  180  . 
5  Met.  212  . 
5  Conn.  71    . 
79  Mo.  182 
33  Ch.  D.  580 
74  N.  J.  Eq.  751 
188U.  S.  42  112  a,  G79, 

II.  212  a,  231, 
95  Fed.  99    . 


East  Iladdam  Bank  v.  Seovill     .     .     . 
East  River  Nat.  Bank  v.  Govo  .     .     . 

Eastern  Bank  v.  Capron 

Eastern   Milhng  etc.    Co.   v.   Eastern 

Milling  etc.  Co 

Eastern  Railroad  v.  Benedict      .     .     . 
Eastman  v.  Commonwealth  .... 

V.  Coos  Bank 

Easton  v.  Iowa 


V.  Pratchett 


Eaton  V.  Pacific  Bank 

Eaves  v.  People's  Sav.  Bank  .     .     .     . 
Ecker  v.  First  Nat.  Bank  of  N.  Wind- 
sor        

Edgerly  v.  Emerson 

Edie  V.  East  India  Co 

Edmondson  v.  Thomasson      .     .     .     . 

Edmunds  v.  Digges 

Edson  V.  Angell 

Edwards  v.  Jones 

V.  Morris 

V.  Thomas 

• V.  Union  Bank  of  Florida    .     . 

Edwards  Bottling  Works  v.  Jarnagln  . 

Egbert  v.  Payne 

Egerton  v.  Fulton  Bank 

Egg  V.  Barnett 

Ehlerman  v.  St.  Louis  Nat.  Bank   .     . 

Eichelberger  v.  Finley 

Eichner  v.  Bowery  Bank 

Eidman  v.  Bowman 

Elder  v.  First  Nat.  Bank  of  Ottawa 

Elgin  V.  Gross-Kelly 

Ellerbe  v.  Nat.  Exch.  Bank    .     .     .     . 

Ellicott  V.  Barnes 

Elliott  V.  Abbott 

V.  Capital  City  State  Bank 


133  P\'d.  1008 
12  Conn.  303 
57  N.  Y.  597 
22  Conn.  639 

146  Fed.  761 
5  Gray  561 
4  Gray  416 
1  N.  H.  23   . 
188  U.  S.  220 


1  C.  M.  &  R.  808 
144  Mass.  260  . 
27  Conn.  234    . 


.   132, 
249,  265,  274 
98,  n.  18, 


232 
233 
659 
243 
324 
47 
683, 
252 
679 
360 
287 
179 
641 


98 


59  :Md.  291  .  . 
3  Fost.  555  .  . 

2  Burr.  1216  . 
112  Va.  326  . 
1  Gratt.  359  . 
58  Mich.  336  . 
1  Mv.  &  Cr.  233 
1  Ham.  524  . 
66  Mo.  486  .  .  565, 

I  Fla.  136  .  . 

II  Ga.  App.  162 
99  Pa.  St.  239  . 
43  How.  Pr.  216 

3  Esp.  196  .  . 
14  Mo.  App.  591 
7  Har.  &  J.  381 
24  App.  Div.  63 
58  111.  444  .  . 
12  Kan.  238  . 
150  Pae.  922  . 
109  Mo.  445  . 
31  Kan.  170  . 
12  N.  H.  549  . 
128  Iowa  275  . 


337,  493 

.   95 

,  .  635 


,  n.  22,  159 

628,  II.  5, 

8,  200,  254 

551 

II.  213 

.  620 


101 
124 
593 
338 
662 
596 
611 
639 
12  and  13 
102,  n.  10 
.  .  546 


V.  

II.  Crutchley 

V.  Farmers'  Bank 

V. . 


V.  First  Nat.  Bank 


149  Iowa  309 
(1903)  2  K.  B. 
61  W.  Va.  641 
61  W.  Va.  287 

105  Tex.  547 


.  .  604 
.  .  186 
.  .  552 
.  .  559 
.  .  357 
.  .  458 

127,  707 
750,  II.  229 

400,  494 
.  .  161 
.  .  567 
124,  158 
178,  289  a, 
298,  302  b 
.  300,  302  b,  302  c 
476  ..  .  398 
.  .  .  693,  717 
.  .  .  125,  12.5  c, 

128,  130 
.  .  185,  406,  414 


TABLE   OF  CASES 


Elliott  V.  Peet 192  Fed.  699 

V.  Worcester  Tr.  Co 189  Mass.  542 

Ellis  V.  Amazon 

V.  Exch.  Bank 

V.  First  Nat.  Bank     .     .     . 


2  Dev.  Eq.  273 
38  Tex.  Civ.  App. 
22  R.  I.  565      . 


.  .  150,  242, 
243,  451,  II.  31 
.  .  320 
.  .  576 
.  .  185 
116,  161, 


V.  First  Nat.  Bank  of  Olney     . 

V.  Little 

■ — ■  V.  Mercantile  Co 

V.  Ohio  Life  Ins.  &  Trust  Co.  . 

V.  Secor 

V.  State 

V.  Turner 

V.  Wheeler 

&  Morton  v.  Ohio  Life  Ins.  & 

Trust  Co 

V.  Western  Nat.  Bank     .     .     . 

Elmira  Bank  v.  Davis        


11  111.  App.  275 
27  Kan.  707. 
103  Miss.  560 
4  Ohio  St.  628 
31  Mich.  185 
138  Wis.  503 
8  T.  R.  531 
3  Pick.  18     . 


169,  313,  329,  330 


Elson  V.  Wright  .  . 
Elting  V.  Brinkerhoff 
Elwell  V.  Dodge   .     . 


Elzy  V.  IMorrison 

Emerado    Farmers'    Elevator    Co. 

Farmers'  Bank 

Emerson  v.  Gaither 

Emery  v.  Hobson 

Emigh  V.  Earling 


4  Ohio  St.  628 
136  Ky.  360 
142  N.  Y.  590 
73  Hun  357  . 
134  Iowa  634     675 
2  Hall  459    .     . 
33  Barb.  336     . 

180  lU.  App.  711 


619 


116, 


II.  130  I 

II.  150  c 

125,  128 

9,  n.  9 

.     611 

622,  628 

.     275 

.     393 


.     466 
440  b 
.     178 
.     178 
,  682,  687,  693 
.     .     425 
98,  n.  26, 
158,  165 
.     .     329 


Emly  V.  Lye 

Empire  State  Surety  Co.  v.  Carroll  Co. 
Empire  Tr.  Co.  v.  Coleman  .... 
Employers'   Liability  Assur.   Corp.  v. 

Stanley  Deposit  Bank 

Engel  V.  O'MaUey 

Ennis  v.  Reynolds 

Equitable    Nat.    Bank    v.    G.    &    S. 

Company 

Equitable  Tr.  Co.  v.  Nat.  Bank  .  . 
Erisman  v.  Delaware  Co.  Bank  .     .     . 

Ernst  V.  NichoUs 

Erwin  v.  Branch  Bank  at  Mobile    .     . 

V.  Downs 

Eshbach  v.  Byers 

Eshleman  v.  Bolenius 

Espy  V.  Bank  of  Cincinnati  .... 


20  N.  D.  270  ..  .  166,  317 
103  Md.  564  .  .  128,  II.  153 
62  Me.  578  .  .  .  .  391,  425 
134  Wis.  565  .  78,  326  /,  355, 
590  c,  II.  250  c,  252 

15  East  7 436 

150  A  a 
.  777 


194  Fed.  593  629 
147  N.  Y.  S.  740 

149  Ky.  735.  . 
219  U.  S.  128  . 
127  Ga.  112   . 


Essex  Co.  Nat. 
Montreal 


Bank  v.    Bank  of 


113  Cal.  692 546 

211  Fed.  688 750 

1  Pa.  St.  144  ...  .  604  a 
6  H.  L.  Cas.  401  ....  440 

14  Ala.  307 170 

15  N.  Y.  575 565 

164  lU.  App.  449  .  .  207,  325 
144  Pa.  St.  269  ..  .  289  a 
18  Wall.  604  .  103,  155,  167, 

367,  378,  408,  414,  n.  16,  482 


b,  II. 


38,  38  A,  42 
13,  289 
.  159  c 


Estate  of  Davis  v.  Watkins    .     . 
Estes  V.  Lovering  Shoe  Company 
Eubank  v.  Bryan  Co.  State  Bank 


7  Biss.  193  . 

56  Neb.  288 
59  Minn.  504 
216  Fed.  833 


.  .  247,  414, 
n.  23,  415,  493 
II.  112  b,  150  d 
....  442 
.  .   697,  709 


TABLE   OF   CASES 


11 


Eureka  Co.  Bank  Cases 

Evans  v.  Anderson 

V.  Hallam 

Evansvillo  Bank  v.  German  Nat.  Bank 
Evansville  Nat.  Bank  v.  Metropolitan 

Nat.  Bank 

Everett  v.  Collins 

y.  U.  S 

Everly  v.  Rice 

Ewing  V.  Citizens'  Nat.  Bank     .     .     . 

Ex  parte  Barratt 

Bennett 

Berger 

Bignold 

Blagden   

Bond 

Brown 

Buckley 

Burn 

Clutton 

Collins 

De  Baun 

Eyre 

Faust 

Flint 

Frowde 

Hornby 

Howard  Nat.  Bank    .... 

Hunter 

Johnson   

Kingston 

Marquis  of  Abercorn      .     .     • 

McKenna 

Nichols 

Overend,  Gurney,  &  Co.     .     . 

Pease 

Pitman 

Pye 

Randleson 

Rickey 

Rigby • 

Robinson 

Roney      

Rowton 

Sargeant  

Sav.  Bank 

SchoUenberger 

Smith 

Smith  Banking  Commissioner 

South  

Stevens    

Stockman 

Thompson 


469 


35  Nev.  80 
78  III.  558    .     . 
6  L.  R.  Q.  B.  713 
155  U.  S.  556    . 

6  Amer.  Law  Rev 
2  Camp.  515 
6  Port.  166  . 

8  Harris  297 
162  Kv.  551 
1  Gl.  &  J.  327 
18  Beav.  339 
81  S.  C.  244 
1  Deac.  735 
17  Ves.  Jr.  466 

1  M.  D.  &  DeG. 

2  Story  503 
14  M.  &  W. 
2  Rose  55 

1  Fond.  166 

2  Cox  427 

4  Mon.  L.  R.  Q 
1  Phil.  227  . 
96  S.  C.  411 

1  Swanst.  30 

9  W.  R.  328 
DeGex  69  . 

2  Low  487  . 

2  Rose  363  . 
6  L.  R.  Ch.  212 
6  L.  R.  Ch.  632 
31  L.  J.  bh.  828 

3  L.  J.  Bank.  20 

5  Jur.  N.  s.  205 
L.  R.  4  Ch.  460 

1  Rose  232  .  . 
19  Ves.  25  .  . 
31  Nev.  43  .  . 

18  Ves.  Jr.  140 

2  Deac.  &  C.  534 
31  Nev.  82  .  . 

19  Ves.  Jr.  463 

2  DeG.  M.  &  G. 
33  L.  J.  Ch.  731 
1  Rose  15 

I  Rose  153  . 
73  S.  C.  393 
96  U.  S.  369 
33  Nev.  466 
160  Ky.  83  . 

3  Swanst.  392 

II  Ves.  Jr.  24 
70  S.  C.  31  . 
100  Tex.  107 
1  Mont.  &  MacA 


10 


289 

;.  145 
102,  : 


574 


102, 


143 


517 


102 


.  13,  628 

12,  n.  13 

400  A 

.  217 

II.  112 
.  544 
158,  171 
.  562 
.  407 
.  337 
.  125 
629  b 
.     390 
.  329 
n.  27 
.  380 
.  439 
.  337 
589,  629 
.  437 
.  485 
.  25,  325 
625  C 
.  329 
.  132 
.  337 
.  337 
.  437 
102,  n.  26 
.  327 
.  138 
.  326 
.  132 
.  103 
.  324 
.  593 
13.  628 
.  610 
.  327 
568,  628 
.  438 
.  125 
.  138 
.  583 
.  583 
.632/ 
.   46 
144  b,  628 
622  A 
.  407 
.  329 
.  309 
632  Ae 
.  583 


lii 


TABLE   OF   CASES 


Ex  parte  Wakefield  Bank      .... 

Waring 

Exchange    Bank    v.    Bank   of   North 

America 

V.  Farmers'  Bank 

V.  Gardner 

V.  Knox 

V.  La  Banque 

V.  Quebec  Bank 

V.  Rice 

V.  Sutton  Bank 

V.  Third  Nat.  Bank    .... 

V.  Tiddy 

Exchange  Nat.  Bank  v.  Miller   .     .     . 

Exeter  Bank  v.  Rogers 

Exeter  Nat.  Bank  v.  Orchard     .     .     . 

Exton  V.  Scott 

Eyerman  v.  Second  Nat.  Bank  .     .     . 

Eyrieh  v.  Capital  State  Bank     .     .     . 


1  Rose  243,  19  Ves.  Jr.  25   .     324 
36  L.  J.  Ch.  151    .     .      289,  568 


132  Mass.  150 557 

19  Gratt.  738 641 

104  Iowa  176 172 

19  Gratt.  746 637 

3  Mon.  L.  R.  Q.  B.  232      .  408  c 
6  Mon.  L.  R.  S.  C.  10    .     .  457  c 

107  Mass.  37 499 

.  214,  428 
.  252,  272 
...  637 
.  II.  241  X 
.  16,  27,  42 
.  II.  230  k 
...  610 
13  Mo.  App.  289,  84  Mo.  408 

604 
.  317,  317  a, 
326,  334 


78  Md.  577  . 
112  U.  S.  290 
67  N.  C.  169 
19  Fed.  373 
7N.H.  21  . 
39  Neb.  485 
6  Sm.  31 .  . 


67  Miss.  60 


Fabens  v.  Mercantile  Bank    .... 

Fairfield  v.  Southport  Nat.  Bank    .     . 
Fairfield  Sav.  Bank  v.  Chase      .     .     . 

Fairlie  v.  Hastings 

Falklend  v.  St.  Nicholas  Nat.  Bank     . 
Falls  City  State  Bank  v.  WehrU      .     . 

Falls  City  Woolen  Works  v.  Louisville 
Nat.  Banldng  Co 

Fancet  v.  Garden  City  Bank      .     .     . 

Fargo  V.  MeVickar 

Farley  v.  Turner 

Farley  Nat.  Bank  v.  Pollock       .     .     . 

Farmer  v.  Bank 

V.  Manhattan  Sav.  Institution 

V.  Russell 

Farmers  &  Mechanics'  Bank  v.  Bakhvin 
Farmers'  Bank  v.  St.  Louis  etc.  R.  Co. 
Farmers  &  Mechanics'  Bank  v.  Butch- 
ers &  Drovers'  Bank 


V.   Champlain  Transportation 


23  Pick.  330 

80  Conn.  92 
72  Me.  226  . 

10  Ves.  123  . 
84  N.  Y.  145 
68  Neb.  75   . 


145  Ky.  64  .     . 

24  S.  D.  248     . 
38  How.  N.  Y.  1 
26  L.  J.  N.  s.  710 
145  Ala.  321 
100  Tenn.  187 
60  Hun  462 
1  B.  &  P.  296 
23  Minn.  201 
119  Mo.  App. 


1 


218,  232,  236, 

252,  274,  286 

101,  166,  202 

108,  109,  111, 

134 

...     167 

...     326 

171  /,  171  h, 

289,  458,  494 

.  221,  237, 
274,  287,  586 
.  214,  274 
...  46 
188,  327,  567 
.  236,  236  a 
...  474 
.  .  .  620  c 
...  499 
.  9,  n.  9,  73 
...       56 


Co. 


V.  Dearing  . 

V.  Franklin  Bank 

V.  King  .  .  . 


16  N.  Y.  125   98,  n.  17,  103,  155, 

167,  174,  413,  414,  n.  14,  418, 

745 

18  Vt.  131  ..  .  77,  113,  716 

23  Vt.  186 98 

91  U.  S.  29  .  .  755,  II.  200,  230 

31  Md.  38 346 

57  Pa.  St.  202  .  .  .  343,  346  A, 
433,  567 


TABLE   OF   CASES 


liii 


Farmers     &     Mechanics'     Bank     v. 

Planters'  Bank 

V.  Ryan 

V.  Smith 

V.  Sprague 

V.  Troy  City  Bank     .... 

Farmers  &  Merchants'  Bank  v.  Downy 

V.  Third  Nat.  Bank    .... 

V.  Wallace 

V.  Wasson 

Farmers  &  Traders'  Bank  v.  Harrison 
Farmers'   &   Traders'   Nat.    Bank    v. 

Hoffman 

Farmers'  Bank  v.  Burchard  .... 
V.  Duval 


V.  Inglehart 

V.  Johnson 

V.  McKee 

V.  Owen 

V.  Payne 

V.  Reynolds 

V.  St.  Louis  etc.  Ry.  Co.      .     . 

V.  Scott 

V.  Wabash  Ry.  Co 

V.  Vail 

Farmers'  Banking  &  Tr.  Co.  v.  New- 
land    

Farmers'  Deposit  Nat.  Bank  v.  Penn 
Bank 

V.  West  Pa.  Fuel  Co.       ... 

Farmers'  etc.  Bank  v.  Bank  of  Ruther- 
ford     

V.  Cherokee  Tr.  Co 

V.  Clancy 

V.  Fidelity  etc.  Co 

V.  Germania  Life  Ins.  Co.    .     . 

V.  Loyd 

Farmers'  etc.  Nat.  Bank  v.  111.  Nat. 
Bank 

Farmers'  Loan  Co.  v.  McKinney     .     . 

Farmers'  Loan  etc.  Co.  v.  Lake  St.  El. 
R.  Co 

Farmers'  Nat.  Bank  v.  Farmers'  & 
Traders'  Bank 

V.  McCoy 


V.  Suther 

Farmers'  State  Bank  v.  Empey  . 
Farmington  Sav.  Bank  o.  FaU    • 

Farrar  v.  Alston 

V.  Oilman 

Farrelly  v.  Emigrant  Sav.  Bank. 
Farwell  v.  Boston  &  W.  R.  R.  Co. 


10  Gill  &  J.  422  . 

.  .  .  322 

40  Pa.  St.  236  .  . 

.  .   346  A 

19  Johns.  115  .  . 

.  9,  n.  9,  43 

52  N.  Y.  005  .  . 

.  .  9,  n.  12 

1  Dougl.  457  .  . 

153,  156,  167 

53  Cal.  400   .  . 

...  125 

105  Pa.  St.  500   . 

...  425 

12  N.  E.  439  (Ohic 

))  .  .  II.  228 

48  Iowa  330   .  . 

...  697 

57  Mo.  503  .  .  . 

.  .  .  750 

93  Iowa  119   .  . 

.   II.  241  s 

33  Vt.  340  ..  . 

...  750 

7  Gill  &  J.  78  .  . 

.  223,  229, 

231,  232 

6  Gill,  50   .  . 

.   699,  701 

134  Ga.  486   . 

245,  373,  459 

2  Pa.  St.  318  . 

...  144 

5  Cranch  C.  C.  50 

4  ...  250 

25  Conn.  444  . 

...  136 

4  Rand.  186   . 

.   650,  651 

119  Mo.  App.  1 

...   77 

144  Ky.  575.  . 

...  696 

119  Mo.  App.  1 

...   56 

21  N.  Y.  485  . 

.  .   232,  454 

97  Ky.  473  .  . 

.  .  221,  231, 

236  ( 

:,  247,  494,  538 

123  Pa.  St.  283 

.  ...  337 

215  Pa.  St.  115 

.   55,  74,  74  c 

115  Tenn.  64  . 

.  .  .   466  d 

32  Okla.  700  . 

.  697,  701,  709 

163  Mich.  586  . 

.  .  159  e,  169 

108  Ky.  384.  . 

.  ...  317 

150  N.  Y.  770  . 

.  ...  433 

98  Mo.  App.  262 

.  ...  166 

146  111.  App.  136 

.  .  .  .   65 

6  McLean  1 

.  .  .  .   46 

173  m.  439  .  . 

.  .   768,  777 

159  Ky.  141.  . 

454,  466  d,  476 

42  Okla.  420  . 

II.  230,  230  d, 

230  h,  230  ft 

28  Okla.  806  . 

.  .  .  II.  242 

35  S.  D.  107  . 

.  .   690,  694 

71  Me.  49  .  . 

.  ...  750 

1  Dev.  69  .  . 

.  ...  359 

1  App.  440 165 

92  App.  Div.  529       ...     009 
4  Met.  49 102 


liv 


TABLE   OF  CASES 


Farwell  v.  Curtis 7  Biss.  160 428 

Fatman  v.  Lobaeh 1  Duer  354 713 

Faulkner  v.  Topeka  Bank      ....     77  Kan.  385      .     .  679,  697,  709 

Fawcett  v.  Laurie 1  Drew.  &  S.  192  ....     128 

■?;.  Mitchell  etc.  Co 133  Ky.  361.     ,     .      46,  46  e,  48 

Fay  V.  Noble 12  Cush.  1 158 

Fayette  Nat.  Bank  v.  Summers       .     .     105  Va.  689 585 

Featherston  v.  Norris 7  S.  C.  472 290 

Feekeimer    v.    Nat.    Exch,    Bank    of 

Norfolk 78  Va.  80     ...  755,  II.  212  a 

Feess  v.  Mechanics'  State  Bank      .     .     87  Kan.  313 143 

Fells  Point  Sav.  Inst.  v.  Weedon     .     .     18  Md.  528  ....       299,  302 

Felman  v.  Schiff 186  111.  App.  67     .     .     .       620  6 

Felton  V.  Dickinson 10  Mass.  287 409 

Fenner  v.  Meares 2  W.  Bl.  1269 499 

Fera  v.  Wickham 176  L.  R.  A.  456  .     .     .'     .'     329 

Fernandez  v.  Glynn 1  Camp.  426     .     .     .       352,  450 

Fiala  v.  Ainsworth 63  Neb.  1     .     .     .20,  24,  37,  38 

Fidelity  &  Deposit  Co.  v.  Colby     .     .     148  App.  Div.  20       ...     479 
FideUty  etc.  Co.  v.  Courtney      ...     186  U.  S.  342     .  21,  38,  38  a,  42, 

112  a,  134 

V.  First  State  Bank    ....     103  Miss.  91     ...     .       186  a 

V.  Nat.  Bank 48  Tex.  Civ.  App.  301      .     63,  65, 

155,  155  d,  413  a,  414,  414  a, 
746,  757 

V.  Rankin 33  Okla.  7 317 

V.  State  Bank 91  Kan.  740 208 

Fidelity  Sav.  Bank  v.  State   ....     103  Md.  206     ...      II.  241  2 

Field  V.  Holland 6  Cranch  8        562 

V.  Niekerson 13  Mass.  131 302 

Fifth  Ward  Sav.  Bank  v.  First  Nat. 

Bank 47  N.  J.  Eq.  357  .  .  .   144  d 

Figley  v.  McDonald 89  Pa.  St.  128  .  .  .  421,  n.  20 

Pinch  V.  Karste 97  Mich.  21 219 

Finkbone's  Appeal 86  Pa.  St.  368 322 

Finnucane  v.  SmaU 1  Esp.  315  .  .   102,  n.  22,  201 

First  Denton  Nat.  Bank  v.  Kenney  .  116  Md.  24  ...  .   134,  324, 

326  c,  568,  604 
First  Nat.  Bank  v.  Albright  .  .  .  .  13  N.  M.  514  ...  II.  241  r, 

241  s,  241  u,  241  v 

V- 208  U.  S.  548  .  .  .  II.  241  r, 

241  s,  241  u,  241  v 

V.  Alexander 84  N.  C.  30   ...  421,  n.  17 

V- 152  Ala.  585  .  144  ?,  159/,  169 

V.  Allen 100  Ala.  476 472 

V.  Amer.  Nat.  Bank  ....  173  Mo.  153  65,  746,  752,  II.  8, 

208,  228 
.  .  472 
.  .  727 
.  .  158 
.  II.  242 
II.  241  y 
.  .  342 
52,  101 
414  b,  466  d 


-  V. 100  Ala.  476 

-  V.  Anderson 172  U.  S.  573 

-V. 5  Ind.  T.  118 

-  t;.  Armstrong 110  S.  W,  108 

-  V.  Ayers 160  U.  S.  650 

-  V.  Bache 71  Pa.  St.  213 

-  V.  Bakken 17  N.  D.  224 

-  V.  Bank  of  Cottage  Grove  .     .  59  Or.  388    . 


TABLE   OF  CASES 


Iv 


First  Nat.  Bank  v.  Barger 


115  S.  W.  726 


Barnett 51  Neb.  397 


V.  Behan 91  Ky.  562  .     . 

V.  Bennington 16  Blatchf.  53  . 

V.  Bicklo l-'>4  Ky.  11  .     . 

V.  Bininger 26  N.  J.  Eq.  345 

V.  Born Indiana  MS. 

V.  Brewer 7  Ind.  App.  685 

V.  Buckhannon  Bank      ...  80  Md.  475  .     . 

V.  Burns 86  Ohio  St.  434 


421 


Butler 19  Wk.  R.  601 

Byrne 117  HI.  App.  473 

ChehaUs  Co 6  Wash.  64  .     . 


342 

415 

474  a 

c,  d,  i 

,      104,  109, 

146  i 

.    102,  n.  16 

.     .     .     550 

.     II.  241  g, 

241  /(,  241  V 

Childs       133  Mass.  248  .     II.  230  h,  230  g 

Christopher 40  N.  J.  L.  435      .     .     .     .     136 

City  174  U.  S.  438    ...      II.  241  u 

City  Nat.  Bank      ....     12  Tex.  Civ.  App.  318    .     .  236  5 

....     182  Mass.  130 454 

....     102  Mo.  App.  357     289    a,    290, 

324,  326  g,  360,  590  e,  597 

Clark 134  N.  Y.  368 493 

42  Hun  538       . 

161  Ala.  497      . 

Cleland 36  Tex.  Civ.  App 


II, 


.     .     494 
230,  230  c, 

230  fc 

.     .     249 

II.  228 

159  c 


Coates 3  McCrary  9 

Coleman H  Brad.  511 

Commercial  Nat.  Bank  .     .  99  Tex.  118 

Commercial  Sav.  Bank    .     .  74  Kan.  606 

Commonwealth       ....  143  Ky.  816. 

Converse 200  U.  S.  425 


792 


.   159.  300 
II.  230,  230  d 
478  .   324  c 
.  '  495,  539 
...  309 
...   65 
...  406 
.  .  II.  200 
59,  77,  78  h,  690, 
II.  208  a 
II.  241  a,   241  h 


Covington 129  Fed. 

Cra^vfo^d 2  Cin.  S.  C.  Rep.  125  .  .  o73 

Currie         ....  147  Mich.  72   155  i,  414,  414  h, 

414  e,   414  /,  414  g,   414  k 


D.  &  S.  Co 52  Iowa  378 

Davis 135  Ga.  687 

Denson 115  Ala.  650 

Devenish 15  Colo.  229 

Doherty 156  Ky.  386 

Douglas  Co 3  DiU.  298  . 

241  h, 

124  Wis.  15   .  . 

Drake 29  Kan.  311   .  . 

Dunbar 19  HI.  App.  558  . 

Ellis 27  Okla.  699  .  , 

Fancher 48  N.  Y.  524  .  , 

FideUty  etc.  Co 145  Ala.  335  .  . 

First  Nat.  Bank  ....  4  Ind.  App.  555 

55  Neb.  303   .  , 

58  Ohio  St.  207  . 

145  S.  W.  691  .  . 


495,  541 
.  II.  230  a,  230  d 
.  .  .   II.  230  g 

455 

125 

II.  241,  241  a, 

241  g,   241  o 

.       II.  241  s 


II. 
II. 


101,  n.  5 
.  .  322 
230  11 
241  a 
...  145 
.  .  466  e 
.  .  .  250 
...  463 
668,  697,  710 


Ivi 


TABLE   OF   CASES 


248, 
219, 


First  Nat.  Bank  v.  First  Nat.  Bank    .     127  Tenn.  205 


247  Pa.  St.  40 

76  Ind.  561 . 
10  N.  D.  281 

77  N.  Y.  323 
16  Hun  332 
56  Fed.  967 
31  Wash.  596 
172  111.  625  . 
22  Ohio  St.  492 
232  Pa.  St.  465 
112  Ky.  734 
107  Iowa  533 
72  Pa.  St.  13 
120  Minn.  362 
100  U.  S.  699 
79  Pa.  St.  108 
24  Tex.  Civ.  App.  645 


V.  First  Nat.  Bank  of  Richmond 

V.  Flath 

V.  Fourth  Nat.  Bank       .     .     . 

V. 

V. 

V.  Gaddis 

V.  Galton 

V.  GarUnghouse 

V.  Gerli 

V.  Germania  Safety  etc.  Co.     . 
V.  German  Nat.  Bank     .     .     . 

V.  Gish 

V.  Goodhue 

;'.  Graham 

V.  

i>.  Greenville  Oil  etc.  Co.     .     . 

V.  Gregg 

V.  Gruber 

V.  Guardian  Tr.  Co 

V.  Gunhus 

V.  Haire 

V.  Hanover  Nat.  Bank    .     .     . 

V.  Harris        

V.  Hawkins 

V.  Ilayslett 

V.  Henry 

V.  Hershire 

V.  Hock 

V.  Holderness 

V.  Hubbard 

V.  Hudson 

V.  Hunter 

V.  Jaggers 

V.  Johnson 

V.  Joseph  Fleming  etc.  Co.  .     . 

V.  Kidd 

V.  King 

V.  La  Due 

V.  Lamb 

V.  Lampasas 

•  V.  Langston 

V.  Lanz 

•  V.  Lasater 

•  V.  Latham 

•  V.  Leach 

•  V.  Lennon 

•  V.  Livermore 

•  V.  Lowther-Kaufman  Oil  Co.   . 


79  Pa.  St.  384  . 
87  Pa.  St.  468  . 
187  Mo.  494  . 
133  Iowa  409  . 
36  Iowa  443  . 
66  Fed.  34    .     . 

108  Mass.  514  . 
79  Fed.  51  .  . 
40  Iowa  659      . 

159  Ala.  367      . 
31  Iowa  18 
7  W.  N.  Cas.  298 

160  N.  C.  474  . 
49  Vt.  1  .  .  . 
166  App.  Div.  51 

109  Tenn.  91     . 


31  Md.  38  .  . 
133  Mich.  700  . 
226  Pa.  St.  416. 

20  Minn.  234  . 

21  Nev.  404  . 
39  Minn.  415  . 
5  N.  Y.  100  . 
33  Tex.  Civ.  App 


32  Okla.  795 
202  Fed.  117 
196  U.  S.  115 
37  Okla.  286 
52  N.  Y.  350 
86  S.  E.  715 
90  Kan.  395 
66  W.  Va.  505 


236,  409, 
411,  493 
.   48 
568,  693 
74  c,  75 
240,  247 
.  247 
236  h 
.     101 
324  c 
II.  230 
.  169 
324,  325 
.  265 
.  494 
.  750 
.   48 
.  191 
65,  152, 
171,  734 
...  602 
14,  II.  230  m 
.     .  777 
101,  159  / 
.  75,  754 
.  .  144 
.  72.  442 
579,  675 
.   346  A 
190,  734,  II.  8 
.   141  k 
.     .       77 
.  .  717 
.  II.  257 
.  .  173  c 
230,  230  g, 
230  h,  230  k 
.  .  346 
.  .  170 
.  .  440 
.  II.  202 
II.  241  y 
.    II.  257 
.  II.  230 
II.  241  s, 
241  V 
31,  230  n 
.  77,  II.  235 
.   II.  230  d 
.      II.  230  d 
414.  415,  451 
...  169 
...  169 
124,  136  d,   167, 
169 


II 


530 


IL 


TABLE   OF   CASES 


Ivii 


First  Nat.  Bank  v.  Lucas  .     . 

V.  Lucas  Co.  Treasurer 

V.  Lumber  Co.  Bank  . 

V.  Mason       .     . 

V.  McCarthy 

V.  McConnell     . 


V.  McGaughey 


V.  McManigle    . 
V.  McMichael    . 
V.  McNairy  .     . 
V.  Merchants'  Nat 
V.  Messner    . 
V.  Miller  .     .     . 
V.  Miltonberger 
V.  Munroe     . 
V.  Murray     .     . 


Bank 


V.  Muskogee  etc.  Co. 
V.  Nat.  Exeh.  Bank  of 


V.  Nat.  Park  Bank 
V.  Nelson  .  .  . 
V.  New  .... 
V.  Obyrne 


V.  Ocean  Nat.  Bank 


21  Neb.  281 1^7 

25  Fed.  749       ...       H.  241  «- 

30  Or.  290 421  j; 

95  Pa.  St.  113 342 

IS  S.  D.  218  ...  H.  230 
103  Minn.  340  395  A,  425,  493, 
494,  544 
38  Tex.  Civ.  App.  495  .  .  454 
48  Tex.  Civ.  App.  035    .     .     454 

09  Cal.  150        395 

100  Pa.  St.  400   .  409,  493,  520 
122  Minn.  215  .  .  .   594,  003 


7  W.  Va.  544 
25  N.  D.  203 
37  Neb.  500 
33  Neb.  847 
135  Ga.  014 
212  Fed.  140 


40  Okla.  603 


.  .  400,  408,  413 
75,  750,  II.  228 
.  .  .  422,  424 
...   II.  230  k 

65 

II.  200,  205,  208, 

253 

406 


Balti- 


39  Md.  000  .  . 
2  Otto  122  .  . 
51  How.  Pr.  320 
175  Fed.  881  . 
105  Ala.  180  . 
140  Ind.  411  . 
177  111.  App.  473 
00  N.  Y.  278  . 


77,  II. 


208  a 
.     .       77 
57,  59,  77 
143,  144 
.     .     594 
145m 
610,  Oil,  612 
48,  98,  191,  194, 


V.  Overman 
V.  Owen    . 
V.  Pease    . 
V.  Peck     . 


196,  197,  200,  289,  568, 
II.  200  a 

22  Neb.  46  ...     .      H-  230  h 

23  Iowa  185 229 

108  111.  40 474 

180  Ind.  049     171,    171    /,    172, 

291  e,  322  e 


V.  Pennig 

V.  Persall 

V.  Peterborough     .     .     . 

V.  Pettit 

V.  Pickens 

V.  Pierson 

V.  Ravensword  Bank 

■  V.  Reed 

■  V.  Reno  County  Bank     . 
•  V.  Rex 

■  V.  Richmond  Electric  Co. 
- 1'.  Ricker 

-  V.  Schmitz 

-  V.  School  District  .     .     . 

-  V.  Selden 


151  Pac.  1153 
110  Minn.  333 
50  N.  H.  38 
41  m.  492  . 
7  Ind.  T.  725 
24  Minn.  141 
141  Ky.  071 

30  Mich.  203 

1  McCrary  491 

89  Pa.  St.  308 
106  Va.  347 
71  111.  439  . 

90  Minn.  45. 

31  Olda.  139 
120  Fed.  212 


V.  Sherburne. 
V.  Shoemaker 
V.  Sidebottom 


14  111.  App.  500 
117  Pa.  St.  94  . 
147  Ky.  690.  . 


II.  242 
140  A-,  603 
.  II.  241 
.  .  512 
171  g,  178 
.  .  73 
.   414  h 

106,  147 

326,  593 
.  .  201 
.  .  472 
.  .  463 
.  .   14 

398,  493 
493,  494, 

II.  250  c 
.  .  72 
.  .  458 
.  .  455 


Ivui 


TABLE   OF   CASES 


First  Nat.  Bank  v.  Sing  Sing  Mfg.  Co. 
V.  Smith 


V.  Sprague  .  .  . 
V.  State  Bank  .  . 
V.  Stauffer  .  .  . 
V.  Steenson  .  .  . 
V.  Stewart  .  .  . 
V.  Stone  .... 
V.  Stopf  .... 
V.  Tappan  .  .  . 
V.  Taylor  .  .  . 
V.  Tevis  .... 
V.  Union  Tr.  Co.  . 
V.  U.  S.  Fidelity  Co. 
V.  Waters  .  .  . 
V.  Wheatley  .  .  . 
V.  Whitman  . 
V.  Whittier  .  .  . 
V.  WilHams  .  .  . 
V.  Wilmington 
V.  Zahm  .... 
V.  Zent      .... 


First  Parish  in  Sutton  v.  Cole 
First  State  Bank  v.  Braggs    . 

V.  Morton      .     .     ... 

V.  Vogeli 


120  App.  Div.  542 
65  111.  44      . 
36  Neb.  199 
34  Neb.  318 

15  N.  D.  594 
6  Week  Jur.  793 
25  N.  D.  629 
107  U.  S.  676 
106  Mich.  367 
165  Ind.  162 
6  Kan.  456  . 
142  Ala.  456 
29  Okla.  714 
158  Mich.  94 
150  Wis.  601 
19  Blatchf.  242 
92  Neb.  807 
94  U.  S.  346 
221  111.  319  . 
100  Pa.  St.  123 

77  Fed.  401 .     , 

16  W.  N.  Cas.  552 
39  Ohio  St.  105 
3  Pick.  237  .  . 
43  Okla.  342   . 
146  Ky.  287   . 

78  Kan.  264      . 


II. 
II. 


First  State  Bank's  Receiver  v.  Farmers' 

Bank 

Fish  V.  Olin 

Fisher  v.  Essex  Bank 

V.  Fisher 

V.  Knight 

V.  Ludwig 

V.  Willmoth 

FishkiU  Sav.  Inst.  v.  Bostwick    .     .     . 
Fishmongers'  Co.  v.  Robertson  .     .     . 

Fisse  V.  Dietrick 

Fitch  V.  Redding 

Fitzgerald  v.  State  Bank 

Fitzpatriek  v.  McGregor 

Flanders  v.  Maynard 

Fleckner  v.  Bank  of  U.  S 


159 
241  c 
230  ff 
...     274 
101,  160,  309 
.      II.  230  c 
.      11.214(7 
II.  259 
.     .        158  c 
298,  299,  313 
...     473 
.     .       615  c 
...     196 
155  i,  414  b,  419 
...       30 
.      II.  241  u 
.       447,  458 
290,  474,  493 
.     .       236  a 
...     145 
...     248 
...     562 
194,  198,  200 
.     .     55,  76 
.     .      622  A 
128  i,  143,  147 
.     365,  458, 
459,  480 


Fleig  V.  Sleet 

Fletcher  v.  Commonwealth  Ins.  Co. 

V.  Eagle 

V.  Fletcher 

V.  Manning 

V.  Pierson 

V.  Sharpe 


FHckinger  v.V.S 

Flint  V.  Board  of  Aldermen  of  Boston 


155  Ky.  693 1.56 

76  Vt.  120        696,  II.  212  b,  250 

5  Gray  373        710 

98  Mass.  303 600 

61  Fed.  491 326  / 

6  Cal.  App.  144     ...     .     400 

68  Ind.  449 499 

92  N.  Y.  564 180 

12  L.  J.  N.  s.  185  .     .     .     .       70 

3  Mo.  App.  584    ...     .     568 

4  Sand.  130       ...    421,  n.  14 

64  Minn.  469 325 

133  Ga.  332      .     .     77,  623,  716 

58  Ga.  56 579 

8  Wheat.  338    .     9,  n.  9,  50,  70, 

73,  89,  98,  116,  144,  n.  23,  156, 
158,  750,  761 

43  Ohio  St.  53 544 

.  .  21 
116,  130/ 
.  .  610 
.  .  553 
421,  n.  14 
.  .  629 
.  II.  259 
II.  241  ff 


18  Pick.  419  . 
74  Ark.  585  . 
4  Hare  67  .  . 
12  M.  &  W.  .571 
69  Ind.  281  .  . 
9  N.  E.  R.  142 
1.50  Fed.  1  .  . 
99  Mass.  141     . 


TABLE   OF  CASES 


lix 


Flint  V.  Rogers 

Florence  Mining  Co.  v.  Brown    .     .     . 
Flour  City  Nat.  Bank  v.  Garfield    .     . 

V.  Traders'  Nat.  Bank     .     .     . 

Flournoy  &  Epping  v.  First  Nat.  Bank 
Flynn  v.  Amer.  Banking  etc.  Co.    .     . 


Fogarties  v.  State  Bank     .     . 
Fogg  V.  Bank  of  Friar's  Point 

V.  Sawyer      .... 

Foley  V.  Hill 

Folger  V.  Chase 


28 


Follansbee  v.  Parker 

Foran  v.  Iloj^al  Bank 

Forbes  v.  Mohr 

Forbes's  Case 

V.  Omaha  Nat.  Bank 

Ford  V.  Mitchell        

V.  People's  Bank 

V.  Terrell 

V.  Thornton 

Forgarties  &  Stillman  r.  State  Bank    . 
Forrest  v.  Safety  Banking  etc.  Co. 
Forschirm  v.  jSIechanics  etc.  Bank .     . 

Forster  v.  ISIackreth 

Fort  V.  Bank  of  Cape  Fear     .     .     .     . 

V.  First  Nat.  Bank     .     .     .     . 

Fort  Dearborn  Nat.  Bank  v.  Blumen- 

zeverg 

V.  Security  Bank 


15  Me.  67  . 
124  U.  S.  385 
30  Hun  579 
35  Hun  241 
78  Ga.  229  . 
104  Me.  141 


12  Rich.  518 
80  Miss.  7.50 

9  N.  H.  365 

2  H.  L.  Cas 
18  Pick.  63  . 
70  111.  11  . 
141  App.  Div 
69  Kan.  42  . 
41  L.  J.  Ch.  467 

10  Neb.  338 
15  Wis.  304 
74  S.  C.  180 
9  Gray  401 

3  Leigh  695 
12  Rich.  518 
174  Fed.  345 
137  App.  Div 
L.  R.  2  E.xch 
1  Phill.  N.  C, 
82  S.  C.  427 


48 


149 
163 
417 


.  .  229 

.  .  493 

.  .  324 

414,  n.  22 

.  .  563 

678,  679,  689, 

693,  694,  696 

494,  499,  536 

186  a,  590  c 

...  662 

289,  309,  568 

.   158,  230 

.  290 

.  194 

.  130 

.  294 

.  233 

.  299 

466  d 

9,  n.  19 

.  324 

.  298 

299,  300 

.  309 

389,  439 

.  312 


298, 


Fortier  v.  New  Orleans  Nat.  Bank 

Foss  V.  Lowell 

Foster  v.  Bank  of  London 

V.  Bank  of  New  Orleans 

V.  Chase 

V.  Clements 

V.  Essex  Bank 


•  V.  Paulk  .... 

V.  Shattuek  .     . 

V.  Wilson 

Foulkcr  V.  Union  Baking  Co 
Fountaine  v.  Carmarthen  R.  R.  Co. 
Fourth  Nat.  Bank  v.  City  Nat.  Bank 
of  Grand  Rapids 

r.  Greenville 

('.  Stahlman 

Fowler  v.  Crouse 

V.  G  owing 

V.  Pickering 

t'.  Scully  . 

V.  Walsh  . 

Fox  V.  Bank  of  Kansas  City 
■ i'.  Davenport  Nat.  Bank 


185,  204,  290,  552 


46  111.  App.  297  ...  .  329 
87  Minn.  81  214,  219,  243,  272 

112  U.  S.  439 754 

111  Mass.  285  .  .  .  60S,  612 
3  F.  &  F.  214  .  .  .  294,  446 
21  La.  Ann.  338  .  .   192,  312 

75  Fed.  797 679 

2  Camp.  17  .  .  .  463,  558 
17  Mass.  479  48,  102,  n.  29,  144, 
n.  17,  191,  196,  201,  203,  205, 
232,  289,  568,  666,  717,  765 
41  Me.  428  .  .  379,  421,  n.  14 
2  N.  H.  446  ..  .  370,  474 
12  M.  &  W.  201  ...  .  637 
6  W.  N.  Cas.  109 .  .  .  .  572 
L.  R.  5  Eq.  316  ...  .  440 


68  lU.  398  . 
91  S.  C.  81  . 
178  S.  W.  942 
175  Fed.  646 
152  Fed.  801 
1 19  Mass.  33 

72  Pa.  St.  456 
119  App.  Div. 
30  Kan.  441 

73  Iowa  649 


679 


452 


329,  494,  530 
.   II.  242  s 

78  b 
,683,  II.  212  n 
II.  212  b,  263 
.  .  9,  n.  3 
747,  II.  228 
.  .  145  h 
...  603 


Ix 


TABLE    OF   CASES 


Fox  V.  Northern  Liberties  Bank      .     . 

V.  Onondaga  Savings  Bank 

Foxton  V.  Kucking 

Fraker  v.  Cullen 

France  Milling  Co.  v.  First  Nat.  Bank 

Francis  v.  Evans 

V.  Hazlett 

Franeistown  Bank  Case     .     .     .     .     . 
Frank  v.  Chemical  Nat.  Bank    .     .     . 

— V.  Edwards 

V.  Mercantile  Nat.  Bank     .     . 

V.  Wessels 

Frankfort  Bank  v.  Johnson    .... 

Franklin  v.  Caldwell 

V.  Vanderpoole 

Franklin  Bank  v.  Byram 

■ — ■ — —  V.  Commercial  Bank  .... 

V.  Cooper 

V.  Freeman 

V.  Stevens 

V.  Steward 

Franklin  Co.  v.  Lewiston  Inst,  for 
Savings 

Franklin  Co.  Bank  v.  Beal     .... 

Franklin  Sav.  Bank  v.  International 
Tr.  Co 

Frazee  v.  Phoenix  Nat.  Bank      .     .     . 

Frazier  v.  Erie  Bank 

V.  Warfield 

Freeholders  of  Middlesex  v.  State  Bank 

V.  Thomas 

Freeman  v.  Citizens'  Nat.  Bank      .     . 

V.  Jackson 

V.  Savannah  Bank      .... 

Freeman's  Bank  v.  Nat.  Tube  Works 

V.  Perldns 

Freese  v.  BrowneU 

Freiberg  v.  Cody 

Frelinghuysen  v.  Baldwin       .... 

Fremont  Co.  v.  Fremont  Co.  Bank 

French  v.  Eastern  Trust  Co.       .     .     . 

V.  Irwin 

V.  Raymond 

Frentz  v.  Schwarze 

Freund  v.  Importers  &  Traders'  Nat. 
Bank 

Fricano  v.  Columbia  Nat.  Bank      .     . 

Fridley  v.  Bowen 

Frontier  Bank  v.  Morse 

Frost  V.  Dominion  Sewing  Machine  Co. 

FruhUng  v.  Schroeder 

Fry  V.  Evans 


3  Watts  &  S.  103  . 

.   102,  n.  9 

3  Silverman  397  . 

.  .   620  c 

55  Me.  346  .  .  . 

...  605 

24  Kan.  679   .  . 

.   II.  130/ 

138  App.  Div.  645 

.  .  342,  459 

69  Wis.  115   .  . 

...  305 

192  Mass.  137  .  . 

...  688 

63  N.  H.  138  .  . 

.  .  .  617 

84  N.  Y.  209  .  . 

...  473 

10  Exeh.  81   .  . 

...   31 

100  App.  Div.  449 

.  .  329,  337 

64  N.  Y.  155  .  . 

...  299 

24  Me.  490  .  .  80,  98,  119,  127 

123  Ky.  528   .  128,  128  a,  133 

1  HaU  78   .  .   421,  n.  14,  425 

39  Me.  489  .  .  . 

...  360 

36  Ohio  St.  350  . 

...   59 

36  Me.  179  .  17,  < 

n,  21,  33,  103 

16  Pick.  535   .  . 

.   113,  388 

39  Me.  532  .  .  . 

...   21 

37  Me.  519  98,  n. 

11,  103,  157, 

167 

68  Ale  43    .  . 

.  .  .  749 

49  Fed.  606   .  . 

...  250 

215  Mass.  231  .  . 

.  .   317  a 

161  Ky.  175   .  . 

159  c 

8  Watts  &  S.  18  . 

...  343 

9  Sm.  &  Mar.  220 

.   12,  n.  17 

32  N.  J.  Eq.  467  . 

254,  544,  587 

20  N.  J.  Eq.  41   . 

...  544 

78  Iowa  150   .  . 

...  246 

227  Fed.  688  .  . 

.  .  II.  250 

88  Ga.  253  .  .  . 

...  474 

151  Mass  417  .  . 

...  217 

18  Me  292  .  .  . 

...  217 

35  N.  J.  L.  285   . 

.   12,  n.  13 

55  Mich.  108  .  . 

...  423 

16  Fed.  452   .  . 

...   38 

145  Iowa  8  .  .  . 

...  622 

91  Me.  485  .  .  . 

.  290,  291  h 

4  Baxter  401  .  . 

...  416 

39  Vt.  623  ..  . 

.   608,  612 

122  Md.  12  .  .  . 

...  608 

3  Hun  689,  12  Hun  537      .    399, 

411 

118  App.  Div.  567     .     .     289  a, 

314,  568 

87  lU.  151 75,  747 

22  Me.  88 662 

133  Mass.  563 159 

2  Bing.  N.  R.  77  .     .      398,  408 
8  Wend.  530 334 


TABLE   OF   CASES 


Frye  v.  Tucker 

Fryer  v.  Ranldn 

Fuller  V.  Beurut 

V.  Hooper 

V.  Hutchings 

V.  Uandall 

V.  Smith 

Fulton  V.  Nat.  Bank 

Fulton  Bank  v.  Benedict 

V.  N.  Y.  &  Sharon  Canal  Co. 

V.  Pha3nix  Bank 

Fulton  Nat.  Bank  v.  Gosline      .     .     . 

Fultz  V.  Walters 

Fulweiler  v.  Hughes 

Furber  v.  Dane 

Fusz  V.  Spannhorst 


24  111.  ISO 54 

11  Sim.  5.") 006 

2  Hare  402    109 

3  Gray  334 305 

10  Cal.  523 393 

1  Gray  608 346 

Ryan  &  M.  49   ....  465 

1  C.  &  P.  197 558 

26  Te.x.  Civ.  App.  115  .  59,  77 
1  Hall  480 134 

4  Paige  127.  .  .  89,  111,  133, 

134,  144,  n.  1(),  100,  440 

1  Hall  557 636 

168  Mass.  80 003 

2  Mont.  105 299 

17  Pa.  St.  440 393 

203  Mass.  108  .  324,  325,  337, 

421  a,  503,  029 
67  Mo.  257 130 


G 


Gaffney  v.  Colvill 

Gaffnoy's  Estate 

Gager  v.  Paul 

Gallatin  v.  Bradford      .... 

Gallot  y.  U.  S 

Galveston  R.  R.  Co.  v.  Cowdrey 

Gardiner  v.  Roger 

Gardner  v.  Merritt 

V.  Nat.  City  Bank      .     . 

V.  Post 

V.  Walsh 


Garfunkle  v.  Bank  of  Charleston 

Garmire  v.  State 

Garnet  v.  McKewan     .... 

Garrard  v.  Lewis 

Garrison  v.  Howe 

V.  Union  Tr.  Co.    .     .     . 


Miners'  etc. 


Garvey  v.  Clifford    . 
Gate  City  Nat.  Bank 

Bank 

Gathwright  v.  Callaway  County 

Gauch  V.  Harrison 

Gauley  v.  Troy  City  Nat.  Bank. 

Gaunt  V.  Taylor 

Gause  v.  Commonwealth  Tr.  Co. 


6  Hill  507     . 
140  Pa.  St.  49 
111  Wis.  039 

I  Bibb  209  .     . 
87  Fed.  440       . 

II  Wall.  459  . 
107  Cal.  238  . 
32  Md.  78  .  . 
39  Ohio  St.  000 
43  Pa.  St.  19  . 
32  Eng.  L.  &  Eq. 
79  S.  C.  404  . 
104  Ind.  444  . 
L.  R.  8  Exeh.  10 
10  Q.  B.  D.  30 
17  N.  Y.  458  . 
139  Mich.  392 

114  App.  Div.  193 


079,  086 


162 


Gausevort  Bank  v.  Carragan 

Geary  v.  Page 

Geiger  ii.  U.  S 

Gelpecke  v.  Dubuque    .     .     . 


259  Mo.  551  . 
10  Mo.  603  .  . 
12  111.  App.  457 
98  N.  Y.  487  . 
2  Hare  413  .  . 
124  App.  Div.  438 
196  N.  Y.  134  . 
69  N.  J.  L.  404 
9  Bosw.  290  . 
162  Fed.  844  . 
1  Wall.  176  .     . 


.  717 
.  010 

693, 717 
9,  n.  9 
II.  259 
.  46 
.  678 
.  610 

495,  540 
.  14  a 
.  485 

II.  230  c 

.  298 

.  327 

.  485 

.  691 

214,  324,  338, 

591,  592,  599 

...  010 


.  100 
,  .  19 
.  .  095 

204,  322 
,  .  438 

772,  773 
.  .  6,  48 
,  .604  « 
.  .  015 
.  II.  159 
.  .   10 


Ixii 


TABLE   OF   CASES 


George  v.  Wallace 


Georgia  Mfg.  &  Paper  Mill  Co.  v.  Amis 

Georgia  Nat.  Bank  v.  Henderson    .  . 

Georgia  Seed  Co.  v.  Talmage      .     .  . 

Geovanowieh  v.  Citizens'  Bank  .     .  . 

Gerald  Point  Storage  Co.,  v.  Roy   .  . 

Gerhardt  v.  Boatman's  Sav.  Inst.   .  . 
German-Amer.  Bank  v.  Schwinger 


German-Amer.    State   Bank   v.    Soap 

Lake  etc.  Co 

V.  Third  Nat.  Bank    .... 

German  Bank  v.  Himstedt  .... 
German  Exch.  Bank  v.  Commissioners 
German  Nat.  Bank  v.  Burns       .     .     . 

V.  Farmers'  &  Merchants'  Bank 

V.  Meadowcroft 

German  Sav.  Bank  v.  Des  Moines  Nat. 

Bank 

V.  Wulfekuhler 

German  Sav.  Inst.  v.  Adae     .... 
German  Security  Bank  v.  Jefferson 
Germania  Ins.  Co.  v.  R.  R.  Co. 
Germania  Nat.  Bank  v.  Case,  Rec. 
Germania   Safety   Vault   etc.    Co.    v. 

Driskell 

Germania  etc.  Tr.  Co.  v.  Loeb    .     .     . 

Gerner  v.  Yates 

Gerrish  v.  New  Bedford  Sav.  Inst. 

V.  Muskegon  Sav.  Bank       .     . 

Gerrity  v.  Wareham  Sav.  Bank       .     . 

GetcheU  v.  Chase 

Getman    v.    Second    Nat.    Bank    of 

Oswego 

Gianella  v.  Bigelow 

Gibbs  V.  Fremont 

Giblin  v.  McMullen 

Gibson  v.  Corner 

V.  Goldthwaite 

V.  Minet 

V.  Nat.  Park  Bank     .... 

V.  Peters 

Giddings  v.  Baker 

V.  Coleman         

Gifford  V.  Oneida  Sav.  Bank       .     .     . 

Gilchrist  v.  Leonard 

Giles  V.  Perkins 

Gill  V.  Cubitt 

Gillard  v.  Wise 

Gillespie  v.  Mather 

V.  Gaston  &  Thomas   .  .  . 


135  Fed.  286 

II. 

70,  83  A,  84, 
212  h,  242 

53  Ga.  228  . 

. 

...  672 

46  Ga.  487  . 

.  227,  255, 
367,  381,  383 

96  Ga.  256  . 

...  329 

26  La.  Ann.  15 

...  600 

93  Fed.  575 

...  589 

38  Mo.  60  . 

102 

n.  17,  265,  287 

75  App.  Div. 

393 

.  .  .   101  d 

178  N.  Y.  569 

.  101,  171  g 

77  Wash.  332 

...  106 

18  Alb.  L.  J.  252, 

2  Tex.  L.  J. 

150 

.   247,  568 

42  Ark.  64  . 

.   342,  434 

6  Alb.  N.  C.  394 

...  342 

12  Col.  539 

.  .   236  & 

54  Neb.  593 

.   687,  693 

1  N.  W.  759 

...  727 

122  Iowa  737 

101  d,  169  a 

19  Kan.  60  . 

.  128,  n.  13 

8  Fed.  106  . 

.   495,  541 

10  Bush  326 

...  700 

72  N.  Y.  91 

...   89 

96  U.  S.  628 

...  683 

23  Ky.  Law  Rep.  2050  773,  774 

188  Fed.  285 337 

61  Neb.  100  ...  II.  134 
128  Mass.  157  .  .  .   609,  610 

138  Mich.  46 202 

202  Mass.  214  .  .  75,  101,  617 
124  Mass.  366 545 

23  Hun  498 146 

96  Wis.  185 686 

20  Eng.  L.  &  Eq.  555   12,  n.  15 

2  L.  R.  P.  C.  317  102,  n.  20  and 

24,  199,  201 

3  Ga.  47 600 

7  Ala.  281 144 

2  Bing.  7,  9  Moore  31  .  .  398 

98  N.  Y.  87  ...  415,  417 
150  U.  S.  342  ..  .  II.  250 
80  Tex.  308  ....  147  d 
12  N.  H.  153 496 

99  App.  Div.  25  ....  342 

2  Bailey  135 355 

9  East  12     .     .     .  324,  329,  583 

3  Barn.  &  Cr.  466  .  565,  n.  1,  & 
5  Barn.  &  Cr.  134   ...  637 

10  Pa.  St.  28.  .  .  .  51,  299 
67  Tex.  599   ...   II.  241  s 


TABLE   OF  CASES 


Ixiii 


Gillett  V.  Campbell  .     . 

V.  Ivory    . 

V.  Phillips      .     . 

Gillis  V.  First  Nat.  Bank 

Gillman  v.  Peck  .     .     . 

Gilpin  V.  Gili)in    .     .     . 

Gindat  v.  IMechanics'  Bank 

Girard  Bank  y.Bank  of  Penn  Township 

Girard  Tr.  Co.  v.  McKinley-Lanning 

etc.  Co 

Gisli  Banking  Co.  v.  Leachman       .     . 

Gladstone  v.  Tempest 

Glazier  v.  Douglas 

Gleason  v.  Bank 

V.  Henry        

11.  Thayer 

Glen  V.  Noble 

Glennan  v.  Rochester  Tr.  etc.  Co.  .     . 
Globe  Sav.  Bank  v.  Nat.  Bank  .     .     . 

Gloucester  Bank  v.  Salem  Bank      .     . 

Gloucester  Ins.  Co.  v.  Younger       .     . 
Godair  v.  Ham  Nat.  Bank     .... 

Godbold  V.  Branch  Bank 

Goddard  v.  Merchants'  Bank 
Godin  V.  Bank  of  Commonwealth  .     . 
Goelz  V.  People's  Sav.  Bank  .... 
Goetz  V.  Bank  of  Kansas  City    .     .     . 

Goff  V.  Goff 

V.  Great  Northern  Ry.    .     .     . 

Gold  Mining  Co.  v.  Nat.  Bank  .     .     . 
Goldsbury  v.  Inhabitants  of  Warwick 
Goldsmid  v.  Lewis  Co.  Bank      .     .     . 
Goldwick  V.  Bristol  Co.  Sav.  Bank 
Gonger  v.  Williams 

Goodbar,  White  &  Co.  v.  Nat.  Bank  . 

Goodbody  v.  Foster 

Goodfellow  V.  First  Nat.  Bank  .     .     . 

Goodloo  V.  Godley 

Goodman  v.  Simonds 


1  Den.  520  .  .  .98,  n.  35,  165 
173  Mich.  444 320 

2  Kern.  114   ...   137,  158 

148  Pac.  994 109 

11  Vt.  510 002 

1  My.  &  K.  520  .  .  .  .  010 
7  Ala.  325  .  9,  n.  19,  9  D,  233 
39  Pa.  St.  91  .  .  .   155,  322, 

414,  n.  14,  418 


128 


318 


Goodrich's  Ex'r  v.  Rutland  Sav.  Bank 
Goodwin  v.  Amer.  Nat.  Bank  .  .  . 
Gordon  v.  Lansing  St.  Sav.  Bank   .     . 

V.  Kearney 

V.  Miichler 

Goshon  V.  Murray 


G32  A  c,  632  A  d 
435,  439 
.  .  554 
.  .  502 
.  583/ 
.  .  468 
214,  232 

.  .  ;]93 

. 398,  400 

317,  324, 

320  b,  320  / 

289,  404,  400  d, 

487,  058,  059 

.  .   10 

.  .  406 

n.  10,  140 

465,  488 

.  .  389 

.  .  609 

.  .  225 

.  .  777 

102,  n.  11 

752,  753 

II.  241  i 

.  .  052 

.  .  020 

248,  248  a, 

568,  574 

.  .  702 

.  .  309 

71  Wash.  554 474 

13  S.  &  M.  233  98,  n.  24  and  25 

20  How.  343  .  393,  565,  n.  13 

and  10 

81  Vt.  147 608 

48  Conn.  550  . 
133  Mich.  143  . 
17  Ohio  572  . 
34  La.  Ann.  604 
197  Fed.  407  . 


135  Fed.  180 
163  Ky.  720 
2  Curt.  650 
32  Conn.  393 
89  Wis.  .534 
71  111.  109  . 
87  Conn.  248 
1  Blatchf.  104 
209  N.  Y.  11 
64  Neb.  413 

17  Mass.  33 


2  Curt.  338 
225  111.  572 

11  Ala.  191 
4  N.  Y.  147 

6  Duer  76 
31  Ind.  App.  67 

7  Sup.  Ct.  Rep 
54  W.  Va.  364 
30  L.  J.  Q.  B.  148 
96  U.  S.  640 
112  Mass.  384 

12  Barb.  407 
123  Mass.  320 
168  Cal.  452 


78  Tex.  461 
Byles,  p.  25 


Goshorn  v.  People's  Nat.  Bank  . 

Gough  V.  Staats 

Gould  V.  Cayuga  Nat.  Bank  .  . 


.  .  317 

368,  370 

.  .  326 

.  .  557 

214,  248  a,  586, 

589 

200  Fed.  880 586 

32  Ind.  App.  428  .  .  .  -  171 
13  Wend.  549  .  .  244,  425,  442 
56  How.  Pr.  505  ...  .  103 


Ixiv 


TABLE   OF   CASES 


Goulding  v.  Harburj'- 

Goundie  v.  Northampton  Water  Co.   . 

Gourley  v.  Lisenbigler 

Governor  v.  Allen 

Governor  v.  Carter 

Gowling  V.  Amer.  Express  Co.  .  .  . 
Grafing  v.  Irving  Sav.  Bank  .... 
Graham  v.  Nat.  Bank  of  State  of  New 

York 

V.  Piatt 

Grammel  v.  Carmer 

Grand  Bank  v.  Blanchard       .... 
Grand  Gulf  Bank  v.  Archer   .... 
Grand  Lodge  v.  State  Bank  .... 
Grand  Rapids  Sav.  Bank's  Appeal 
Granitevile  Mfg.  Co.  v.  Roper    . 

Grant  v.  Cropsey 

■ — -  V.  Mechanics'  Bank  of  Phila.  . 

V.  Taylor 

V.  Vaughn 

V.  Walsh 


Gratiot  Co.  Supervisors  v.  Munson 
Graves  v.  Amer.  Exch.  Bank      .     . 

V.  Lebanon  Nat.  Bank    . 

Graves  Co.  v.  First  Nat.  Bank  .     . 

Gray  v.  Anderson 

•  V.  Franldiauser       .     .     .     . 

•  V.  Johnston 

V.  Portland  Bank  .... 

Gray's  Adm'r  v.  Bank  of  Ky.     .     . 

Grebe  v.  Swords 

Green  v.  Ashe 

V.  Bennett 

V.  Cole 

V.  Dennis 

V.  Farley 

V.  Farmer 

V.  Odd  Fellows'  Bank     .     . 

v.  PurceU  Nat.  Bank       .     . 

V.  Sizer 

V.  Tylec 

V.  Van  Busldrk       .     .     .     . 

V.  Walldll  Nat.  Bank 


Greenburg  Nat.  Bank  v.  Syer     .     .     . 

Greene  v.  Jackson  Bank 

Greeneaux  v.  Wheeler 

Greenfield  v.  Stout 

Greenfield  Bank  v.  Crafts       .... 
Greenhalge  Co.  v.  Farmers'  Nat.  Bank 

Greenleaf  v.  Mumford        

Greenville  Sav.  Bank  v.  Abercrombie 

Greenwald  v.  Ford 

Gregg  V.  Bank  of  Columbia   .... 
V.  George . 


85  Me.  227  . 

611 

7  Pa.  St.  233 

754 

51  Pa.  St.  345 

611 

8  Humph.  176 

19 

3  Hawks.  328 

637 

102  Mo.  App.  366 

247 

69  N.  Y.  App.  Div.  566 

609 

32  N.  J.  Eq.  804  .  .  .  IT.  228 

28  Colo.  421   .  .  683,  II.  212  b 

55  ^.lich.  201  ..  .   493,  521 

23  Pick.  505 231 

8  Sm.  &  Mar.  151   .  .  754,  763 

92  Kan.  876   ...   432,  472 

52  Mich.  557  ..  .   676,  688 

15  Rich.  L.  S.  C.  138  .  .  638 

8  Neb.  205 167 

15  Serg.  &  R.  140   .  .  702,  713 

35  N.  Y.  Sup.  Ct.  351  .  .  332 

3  Burr.  1525,  3  T.  R.  177  395  A, 

480 

81  Hun  449 573 

157  Mich.  505 

...  II.  236 

17  N.  Y.  208 

395,  474,  480 

10  Bush  23 . 

19,  20,21,32,33 

108  Ky.  194 

.  .   II.  241  u 

99  Iowa  342 

.  .  425 

58  Or.  423  . 

II.  212  e 

3  L.  R.  H.  Cas 

14 

.  .  317 

3  Mass.  364 

.  127,  707 

29  Pa.  St.  365 

.  .  393 

28  N.  D.  330 

.  .  166 

130  Tenn.  615 

.  .   77 

110  S.  W.  108 

II.  200,  242 

98  Miss.  67  . 

.  . 186  a 

6  Conn.  304 

.  .   76 

20  Ala.  322  . 

.  .  233 

4  Burr.  2214 

.  .  328 

65  Cal.  71 

320,  322 

1  Ind.  T.  220 

.  .  476 

40  Miss.  530 

192,  205 

39  Pa.  St.  361 

.  9,  n.  9 

7  Wall.  139 

.  12,  n.  9 

7  Hun  63   . 

II.  250  a 

113  Va.  53  . 

.  .  573 

18  R.  I.  779 

326 

6  Tex.  55   . 

600 

122  Ga.  303 

170 

4  Allen  447  . 

468 

226  Pa.  St.  184 

291 

50  Barb.  543 

346 

211  Mass.  252 

617 

21  S.  D.  28  . 

466  rf 

72  S.  C.  458 

225 

18  Kan.  546 

421 

TABLE   OF   CASES 


Ixv 


Gregg  V.  Union  Co.  Nat.  Bank  .  .  . 
Gregory  v.  Binghampton  Tr.  Co.    .     . 

Grenada  Bank  v.  Adams 

Gresham  v.  Island  City  Sav.  Bank 

Greves  v.  Shaw 

Grew  V.  Breed 

V.  Burditt 

Griffin  v.  Central  Bank 

V.  Ersldne 

V.  Heard 

V.  Kemp 

V.  Marlette  State  Bank  .     .     . 

V.  Riblet 

V.  Rice 

V.  Wabash  R.  Co 

Griffith  V.  Zipperwdck 

Grigby  v.  Oakes 

Grinnan  v.  Walker 

Grinnell  v.  Suydam 

Griswold  v.  Chandler 

Grivot  V.  La.  State  Bank 

Grocers'  Bank  v.  Kingman     .     .     .     . 

V.  Penfield 

Grocers'  Nat.  Bank  v.  Clark  .  .  . 
Grossman  v.  Lafaj'ette  Tr.  Co.  .  .  . 
Grout  V.  First  Nat.  Bank  .... 
Gruber  v.  First  Nat.  Bank  of  Clarion 

Grunther  v.  Bank  of  Munroe      .     .     . 

Grymes  v.  Howe 

Guaranty  State  Bank  etc.  Co.  v.  Okla. 
Coal  Co 

V.  Lively 


87  Ind.  23S 299,  303 

168  App.  Div.  805  .  .  .  77o 
87  Miss.  609  ...  .  128  c 
2  Tex.  Civ.  App.  52  .  .  .  622A 
173  ^Lass.  205  ...  IL  241  e 
10  Met.  569     655,  687,  689,  690, 

693 
.  .  .  334 
.  .  .  639 


9  Pick.  265  . 
3  Kellv  371 
131  Iowa  444  . 
78  Tex.  607  . 
46  Ind.  172  .  . 
150  Alich.  499  . 
6  N.  Y.  Leg.  Obs. 

1  Hilt.  184  .  . 
115  Mo.  App.  101 
28  Ohio  388   . 

2  Bos.  &  P.  520 
9  Iowa  426  .  . 

3  Sandf.  133  . 
5  N.  H.  497  . 
24  La.  Ann.  265 

16  Gray  473  . 

14  N.  Y.  281  . 

48  Barb.  26   . 
146  App.  Div.  309 
48  Colo.  557 


421 


Guarini  v.  Swiss  Amer.  Bank 
Guernsey  v.  Black  Diamond  Coal  and 

Mining  Co 

V.  Marks 

Guffanti  v.  Nat.  Surety  Co 

Guiman's  Appeal 

Gulf  etc.  Ry.  Co.  v.  North  Texas  Grain 

Co 

Gulick  V.  Nat.  Bank 

Gumbel  v.  Abrams 

Gund  V.  Ballard 


8  Weekly  Notes,  113  Pa, 

90  Neb.  280  . 
49  N.  Y.  17 

209  Fed.  350  . 
149  S.  W.  211  . 
162  Cal.  181  . 


143,  144 
II.  241  a 
.  421 
.  311 
.  421 
9,  557 
56 
.  200 
.  637 
9,  n.  9 
493,  205 
.  309 
.  318 
19,  32,  34,  42 
.  565,  n.  15 
.  .  IL  244 
...  574 
II.  242,  246 
,  .  II. 
230  m 
327,  494 
550,  611 


440 
454 
337 


99  Iowa  471 143 

55  Or.  323 559 

133  App.  Div.  610  ..  .  13 

70  Conn.  342 611 


Gunkle's  Appeal 
Gupton  V.  Carr  .  . 
Gurney  v.  Howe  . 
Guthrie  v.  Harkness 


32  Tex.  Civ.  App.  93 
56  Iowa  434  .  . 
20  La.  Ann.  568  . 
73  Neb.  547  .  . 
80  Neb.  385  .  . 
48  Pa.  St.  13  .  . 
147  I\Io.  App 
9  Grav  404 
199  U.  S.  148  294  a. 


105 


Reid 


Gwynn  v.  Godby 


107  Pa.  St.  251 
4  Taunt.  346;  . 


.  .  225 

274,  283 

193,  312 

.  .  143 

.  .  128 

128,  129 

.  . 289  a 

.     .     395 

70S  A,  II. 

54,  200 

II.  230  n 

.     .     309 


Ixvi 


TABLE   OF   CASES 


H 


Habegger  v.  First  Nat.  Bank  .  ,  . 
Hackett  v.  Reynolds,  Lamberton,  &  Co 
Hackettstown  Nat.  Bank  v.  Rea 
Haddock  v.  Citizens'  Nat.  Bank 
Hade,  Rec,  v.  McVay  .... 
Hagen  v.  Bowery  Nat.  Bank 
Hager  v.  Amer.  Nat.  Bank  .  . 
V.  Citizens'  Nat.  Bank    . 

V.  Union  Nat.  Bank  .     . 


Hagerstown  v.  Loudon  Sav.  Fund 
Society 

Hagerstown  Bank  v.  Adams  Express 
Co 

Haile  v.  Peirce 

Hale  V.  Rawallie 

V.  Richards 

V.  Walker 

Hales  V.  Seaman's  Bank 

Hall  V.  Baker 

V.  Bank 


V.  Bank  of  State    .     .     . 

V.  City  of  Buffalo  .     .     . 

V.  Fuller 

V.  Harris 

V.  Huse 

V.  Marston 

V.  New  Farmers'  Bank    . 

V.  Otes 

V.  Smith 

V.  Vt.  &  Mass.  R.  R.  Co. 

V.  Wilson 

Hallen  v.  Tillinghast  .... 
Hallenbeck  v.  Hallenbeck  .  . 
Hallett  V.  Fish 


V. 


V.  narrower 


Hallo  well  v.  Curry 

HaUowell,  etc.  Bank  v.  Howard 

Halsey  v.  Brown 

Ham  V.  Greve 

Hambright  v.  Cleveland  Nat.  Bank 

Hamilton  v.  Lumber  Co 

V.  Vought 


94  Minn.  445 

. 

337 

114Pa.  St.  328   . 

.  .  602 

64  Barb.  175  .  . 

11.230/ 

53  Iowa  542   .  . 

.  .  299 

31  Ohio  St.  231  . 

II.  230  m 

64  Barb.  197  .  . 

.  .  476 

159  Fed.  396  .  . 

II.  241  a 

127  Ky.  192  II.  241  h,   241  g, 

241  k 

63  Me.  509  699,  708,  II.  212, 

257  a 

3  Grant  135   .  . 

. 171,  755 

45  Pa.  St.  419  .  . 

.  .  648 

32  Md.  327   .  . 

.  .  154 

8  Kan.  136  .  .  . 

.  .  203 

80  Iowa  164   .  . 

.  .  146 i 

31  Iowa  344   .  . 

II.  250  d 

28  Hun  407   .  . 

.     .  620  c 

66  App.  Div.  131  . 

.  .  628 

30  Neb.  99  .  .  II.  230  c,  230  d, 

230  k,  230  n 

3  Rich.  366  .  .  . 

215,  252 

1  Keyes  193   .  . 

495,  541 

5  Barn.  &  Cr.  750 

.  .  480 

59  N.  H.  71   .  . 

566,  632 

10  Mass.  40   .  . 

.  .  468 

17  Mass.  575  .  . 

499 

98  Ky.  146  .  .  . 

334 

77  Me.  122  .  .  . 

355 

2  D.  &  R.  584  .  . 

439 

28  Vt.  401  ..  . 

140 

16  Barb.  584  .  . 

565 

19  Wash.  20   .  . 

248  a 

103  App.  Div.  107 

609 

120  Fed.  986  102  k 

629  b,   II. 

252 

123  Fed.  201  .  . 

II.  250  c 

33  Barb.  537 

.  .   13 

41  Pa.  St.  322 

.  .  252 

13  Mass.  235 

. 637,  640 

3  Day  346  . 

9  A,  9F 

34  Ind.  19  . 

.  .   17 

66  Tenn.  40 

II.  230  e 

95  Mich.  436 

.  .  .  421 

34  N.  J.  L.  187 

, 

)65 

.  n 

la  12 

Hamilton  Nat.  Bank  v.  Amer.  Loan  etc. 

Co 

V.  FrankUn 

V.  Nye 

Hamlin  v.  Simpson 

Hampten  v.  Foster 


66  Neb.  67  2,  675,  687,  693,  696 
140  111.  App.  608  .  .  459,  530 
37  Ind.  App.  464  .  .  .  .  474 
105  Iowa  125  .  421,  421  d,  425 
127  Fed.  468     ...     .    II.  263 


TABLE   OF   CASES 


Ixvii 


Hamtramck  v.  Bank 

Hamum  v.  Richardson 

Hanauer  v.  Doane 

Hancock  v.  Citizens'  Bank     .     .     .     . 

Handy  v.  Dibdin 

Hankowska  v.  Buffalo  Sav.  Bank  .  . 
Hanlon  Millinery  Co.  v.  Miss.  Tr.  Co. 
Hanna  v.  Drovers'  Nat.  Bank    .     .     . 

V.  Lyon 

V.  Mfg.  Tr.  Co 

V.  People's  Nat.  Bank     . 

Hannon  v.  Williams 

Hanover  Nat.  Bank  v.  Suddath  .  . 
Hansford  v.  Tifton  Nat.  Bank    .     .     . 

Harbeck  v.  Craft 

Hardy  v.  Blazer 

V.  Chesapeake  Bank  .     .     .     . 

V.  Veasey 

Hare  v.  Copland 

V.  Henty 

Hargroves  v.  Chambers 

Harker  v.  Anderson 

Harkness  v.  Guthrie 

Harlem  v.  Mercantile  Trust  Co.      .     . 

Harley  v.  Thornton 

Harmon  v.  Old  Detroit  Nat.  Bank 

Harmonson  v.  Bain 

Harper  v.  Calhoun 

V.  Carroll 

t;.  U.  S 

Harred  v.  Blackwell 

Harrington  v.  First  Nat.  Bank  .     .     . 

Harris  v.  Babbitt 

V.  Bradley 

V.  Clark 

V.  First  Parish  in  Dorchester  . 

V.  Lane 

v:  McFerren 

V.  Randolph  Co.  Bank    .     .     . 

V.  Runnels 

Harrisburg  Bank  v.  Commonwealth    . 

V.  Forster 

V.  Tyler     .         

Harrison  v.  Central  R.  R.  Co.    . 

V.  State  Sav.  Bank     .     .     .     . 

V.  Sterry 

Harrison,  Rec,  v.  Wright       .     .     .     . 

Harry  v.  Wood 

Hart  V.  Albany 

V.  Bank 

V.  Hanson 

V.  Northwestern  Tr.  etc.  Co.    . 

V.  The  F.  &  M.  Bank      .     .     . 


298, 


2  Miss.  169  .  . 
48  Vt.  508    .     . 

2  Wall.  342  .  . 
32  La.  Ann.  590 

12  Johns  220     . 
155  App.  Div.  694 
251  Mo.  553      . 
194  111.  252 
179  N.  Y.  107  . 
104  App.  Div.  90 
182  lU.  App.  528 
34  N.  J.  Eq.  255 
215  U.  S.  110    . 
10  Ga.  App.  270  ( 
4  Duer  122 

29  Ind.  226  .  . 
51  Md.  585  .     . 

3  L.  R.  Eq.  107 

13  Irish  C.  L.  426 
10  C.  B.  N.  s.  65 

30  Ga.  580  .  . 
21  Wend.  372  . 
27  Utah  248  . 
64  N.  Y.  494  . 

2  Hill,  S.  C.  509 
153  Mich.  73  474,  474  a,  474  c 
1  Hughes  188  ...  367,  376 
7  How.  Miss.  203  ...  165 
66  Minn.  487  675  h,   680,  693, 

694 
170  Fed.  385  ...  .  IL  259 
107  N.  C.  200 289  a 

1  Thomp.  &  C.  361  .  .  123, 

II.  208  d,  210 

4  Dillon  185 27 

7  Yerg.  310 476 

3  Comst.  93  493,  494,  533,  550 

23  Pick.  112 693 

16  Ga.  217  ..  .  687,  693,  694 

19  Brad.  172 557 

157  Ind.  120 63 

12  Flower  80 751 

26  (Pa.)  451 666 

8  Watts  12   173 

3  Watts  &  S.  373  .  .  .  167,  343 

2  Vroom  296  (N.  J.)   .  .  102 
127  Iowa  242 167 


760 

565 

565,  n.  12 

.  331 

.  637 

.620  c 

.  777 

.  458 

II.  253 

299,  300 

178,  460 

.  339 

325,  337 

102  c,  II.  201 

.   421,  n.  9 

...  499 

...  472 

...  294 

.   380,  476 

45,  238,  427 

128,  n.  15,  150 

.   381,  389 

294  a,  II.  54 

...  487 

...  662 


5  Cranch  298 
100  Ind.  515 
2  Miles  327 
9  Wend.  571 
33  Vt.  252  . 
14  N.  D.  570 


.  .  12,  n.  9 
493,  511,  517 
...  346 
...  43 
...  166 
.  130,  130  o 


191  111.  App.  396  ...  .  391 
33  Vt.  252 109,  134 


Ixviii 


TABLE   OF  CASES 


Harter  v.  Bank  of  Brunson  .  . 
Hartford  v.  All  Night  etc.  Bank 
Hartford  Bank  v.  Barry    .     .     . 

V.  Hart 

V.  Stedman 


89 


Hasel  V.  Long 

Haseltine  v.  Central  Nat.  Bank 
Haskell  v.  Columbia  Sav.  etc.  Co.  . 

Haskins  v.  Dougherty 

Hastings  v.  Barnd 

Hatch  V.  Atkinson 

V.  Johnson  Loan  &  Trust  Co. 

V.  Nat.  Bank 


Hathaway  v.  Fall  River  Nat.  Bank     . 

Hauser  v.  Tate 

Haux  V.  Dry  Dock  Sav.  Institution     . 
Havana  Central  Ry.  Co.  v.  Central  Tr. 

Co 

Haven's  Petition 

Havens  v.  Bank  of  Tarboro    .     .     .     . 

Hawes  v.  Blackwell 

Hawkins  v.  Fourth  Nat.  Bank   .     .     . 

Hawley  v.  Jetter 

Haxtum  v.  Bishop 

Hayden  v.  Brooklyn  Sav.  Bank       .     . 

V.  Chemical  Nat.  Bank  . 

V.  Citizens'  Nat.  Bank    .     .     . 

V.  Hayden 

V.  Thompson 

Hayes  v.  Beardsley 

V.  FideUty  Ins.  etc.  Co.  .     .     . 

V.  Shoemaker 

v.V.S 

V.  Western  R.  R 


92  S.  C.  440 
150  Pac.  356 
17  Mass.  94 
3  Day  493    . 
3  Conn.  489      . 
2  M.  &  S.  363  . 
183  U.  S.  132    . 
207  Fed.  322     . 
22  Tex.  Civ.  App 

55  Neb.  93  .     . 

56  Me.  324  .  . 
79  Fed.  828  . 
147  N.  Y.  184  . 
131  Mass.  14  . 
85  N.  C.  81 

2  App.  Div.  165 


252  d,  244,  272 

.     .     .     458 

158,  159,  165 

98,  n.  22,  103 

220,  233 

.       27 

230,  230  h 

774 


II. 


313 


493,  511 


Haynes  v.  Birks 

Hays  V.  Northwestern  Bank  .  . 
Hayward  v.  Nat.  Ins.  Co.  .  .  . 
Hazlett  V.  Commercial  Nat.  Bank  . 
V.  Woodhead 


Heane  v.  Rogers 

Heart  v.  Rhodes 

Heath  v.  New  Bedford  Safe  Dep.  Co. 

V.  Portsmouth  Sav.  Bank    .     . 

V.  Second  Nat.  Bank       .     .     . 

V.  Silverthorn  Lead  Mining  Co. 

Heavy  v.  Commercial  Nat.  Bank    .     . 

Hefner  v.  Dawson 

V.  Vandolah 


Heidelbach  v.  Nat.  Park  Bank  .     .     . 

Heim  v.  First  Nat.  Bank 

HelUngs  v.  Hamilton 

Helwege  v.  Hibernia  Nat.  Bank 

Heming  v.  Clutterbuek 

Hemmerich  v.  Union  Dime  Sav.  Inst. 
Hemphill  v.  Yerkes 


289  a, 


204  Fed.  546 

8  Bened.  309 
132  N.  C.  214 
107  N.  C.  200 
150  Ind.  117 
10  Or.  31   . 
3  Wend.  13  . 
15  Abb.  Pr.  n.  s.  297 
84  Fed.  874 
120  Md.  163 
142  Mass.  448 
71  Fed.  60  . 
136  N.  Y.  209 
105  Fed.  160 
39  Fed.  319 
169  Fed.  101 
3  Cush.  270 

3  Bos.  &  P.  599 

9  Gratt.  127 
52  Mo.  181 
132  Pa.  St.  118 
27  R.  I.  506 
9  Barn.  &  Cr.  577 
66  111.  351  . 
184  Mass.  481 
46  N.  H.  78 
70  Ind. 107 
39  Wis.  147 

27  Utah  222 
63  111.  403  . 
62  lU.  483  . 
87  Hun  117 
76  Neb.  831  . 

4  Watts  &  S.  462 

28  La.  Ann.  520 
1  BUgh,  N.  s.  479 

205  N.  Y.  366  . 
132  Pa.  St.  545 


178, 


451 
687 
611 
317 
590  e 
325 
138,  148 
.  610 

311,  440 

248,  631 
.102fc 

/,  511  k 
.  158  d 

234,  383 

641,  644 
.  620 
II.  252 
.  329 
.  610 
.  708 
.  623 
.  684 
.  679 
II.  259 
.  102 
.  232 
.   14 

109,  134 
.  247 

687,  693 
.  290 
.  546 

314,  4,33 
.  620 
.  78 
,  n.  15 
.474  c 
.  468 
.  468 

329,  567 
.  145  e 
.  662 

414,  482 
.  554 
.  610 

494,  604 


565 


TABLE   OF   CASES 


Ixix 


Hencke  v.  Twomey 

Henderson  Nat.   Bank  v.  Alves,   As- 
signee       

Hendley  v.  Globe  Refining  Co.  .     .     . 
Hendricks  v.  Jefferson  Co.  Sav.  Bank 

Henkle  v.  Carnegie  Tr.  Co 

Henman  v.  Dickinson 

Hennessy  Bros.  v.  Memphis  Xat.  Bank 
Henniker  v.  Wigg 

Henry  v.  Northern  Bank  of  Alabama 

Henshaw  v  Root 

V.  State  Bank 


58  Minn.  550 


693 


91  Kv.  14G  .     .  230,  230  h,  230  n 
lOG  Mo.  App.  20  .     .       573,  578 


153  Ala.  63G 
213  N.  Y.  185 
5  Bing.  183  . 
129  Fed.  557 
4Q.B 


Hentz  V.  Nat.  City  Bank  .... 
Hepburn  v.  School  Directors  .  . 
Hermon  v.  Old  Detroit  Nat.  Bank 

Herrick  v.  Whitney 

Herrin  v.  Scandinavian  Amcr.  Bank 

Herring  v.  Kesew 

Hershire  v.  First  Nat.  Bank.       .     . 

Hervey  v.  Lord 

Hessen  v.  McKinley 

Hewett  V.  Adams 

Hewison  v.  Guthrie 

Hewitt  V.  Kaye 

Heywood  v.  Pickering 

Hicks  V.  Steel 

Hier  v.  Miller 

Higby  V.  First  Nat.  Bank  of  Beverly 

Higgins  V.  Hayden 

Hilburn  v.  Mercantile  Nat.  Bank   . 

Hill  V.  Arnold 

V.  Escort 

V.  Gray 


V.  Miles 

V.  Nat.  Bank  of  Barre 

V.  Nat.  Tr.  Co.       .     . 

V.  Pine  River  Bank    . 

V.  Royds 

V.  Shilling      .... 

V.  Silvey 

V.  Stevenson      .     .     . 


Hillard  v.  Lyons 

Hillegass  y.  U.  S 

Hiller  v.  Bank  of  Columbia    . 

V.  Bank  of  Commerce 

Hillman  v.  Wilcox    .... 

Hills  V.  Daniels 

V.  Hills 

Hilsinger  v.  Trickett     .     .     . 


Hilton  V.  Jesup  Banking  Co. 
Himmelman  v.  Hotaling    .     . 
Ilindman  v.  First  Nat.  Bank 
Hinsdale  v.  Bank  of  Orange  . 


(Ad.  &  El.)  792     289,  327, 
355,  562,  568 

63  Ala.  527 145 

60  Ind.  220 421 

239  m.  515 314 

1.59  App.  Div.  743  .  424,  493 
23  WaU.  480  II.  241,  241  c,  241^ 
153  Mich.  73    ...     .       466  6 

15  Johns.  240 659 

65  Wash.  569 208 

So.  Law  Rev.  1872  .  .  .  383 
35  Iowa  272  II.  241,  241  6,  241  y 
11  Biss.  144  ....  II.  250 
155  App.  Div.  496   ..  .  610 

50  Me.  271 687,  696 

3  Scott  311   330 

37  L.  J.  Ch.  633  ...  .  5.50 

9  Q.  B.  428 236 

142  Mich.  292 128  r 

68  Kan.  258 169  a 

26  Ohio  St.  75  .  .  .  .  II.  230 

53  Neb.  61 629 

39  Colo.  189  ...  .  248,  309 
116  Ga.  45 186 

38  Tex.  Civ.  App.  487  .  400,  608 

1  Stark.  434 21 

83  Ark.  467 590  c 

56  Vt.  582  ...  .   II.  230  j 

108  Pa.  St.  1 413 

45  N.  H.  300 701 

L.  R.  8  Eq.  290  .  .  .512,564 

69  Neb.  152   ....  77,  679 

81  Ga.  508 671 

63  Mo.  364 608,  610 

180  Fed.  685  ...  . 166, 169 
183  Fed.  907  ...  .  II.  259 

96  S.  C.  74 334 

92  S.  C.  445   .    324,  334,  433 

30  Me.  170 103 

15  La.  Ann.  280  ....  200 
8M.  &W.  401  .  .  .611,612 
86  Ohio  St.  286  214,  218,  220. 

221,  236  o,  236  c,  247,  248,  289  a 

128  Ga.  30 458 

40Cal.  Ill   421 

112  Fed.  931  ...  102  c,  161 
6  Wend.  378  .  •  648,  649,  650 


232,  252 
.  632  A  9 
.  .  481 
. 357,  358 


Ixx 


TABLE   OF   CASES 


Hinsdale  v.  Lamed 

Hintermisher  v.  First  Nat.  Bank 

Hirshfleld  v.  Bopp 

V.  Fitzgerald      .... 


Hitchcock  V.  Galveston  .... 
Hobart  Nat.  Bank  v.  McMurrough 

Hobbs  V.  Boatright 

Hodges  V.  New  England  Screw  Co. 
Hodges,  Ex'r  v.  First  Nat.  Bank  . 
Hodgin  V.  People's  Nat.  Bank    .     . 

Hodgson  V.  Cleever 

Hoffman  v.  First  Nat.  Bank  .     .     . 

V.  Union  Dime  Sav.  Inst.    . 


16  Mass.  70 
64  N.  Y.  212 
39  Hun  613 
157  N.  Y.  166 
96  U.  S.  341 
24  Okla.  210 
195  Mo.  693 
1  R.  I.  312  . 
22  Gratt.  51 
124  N.  C.  540 
8  Mo.  App.  318 
46  N.  J.  L.  604 


. 643,  657 
.    II.  230 
. 677,  693 
.     .     693 
.     .     758 
252,  252  d,  573 
102  c 
.     .     128 
.  143,  145 
326  d,  334 
.     .     687 
569,  582,  583, 
586,  593 
95  App.  Div.  329  .     .     .     .  620  h 


Hoit  V.  Mclntire 

Holcomb  V.  Tiernay      .... 
Holden  v.  N.  Y.  Bank  .... 

V.  Phelps 

V.  Western  German  Bank 


Holland  v.  Heyman       .     .     .     . 

V.  Lewiston  Falls  Bank  . 

—  V.  Mutual  Fertiliser  Co. . 

Holley  V.  Adams 

Holhday  v.  Hammond  St.  Bank 
Hollister  v.  Hollister  Bank  .  . 
HoUowell  Sav.  Inst.  v.  Titcomb 

Holmes  v.  Boyd 

V.  Briggs 

V.  McDonald     .     .     .     . 

V.  Roe 


Holt  V.  Bacon 

Home  Nat.  Bank  v.  First  Nat.  Bank 
V.  Newton 


Home  Savings  Bank  v.  Case  . 

V.  Des  Moines  .... 

• V.  Otterback      .... 

V.  Peoria  Trotting  Society 

V.  Traube 


Home  State  Bank  v.  Vandolah  .     . 
Homer  v.  Nat.  Bank  of  Commerce 

Honig  V.  Pacific  Bank 

Honsom  v.  Rogers 

Hood  V.  Kensington  Nat.  Bank 

Hook  V.  Pratt 

Hooker  v.  Eagle  Bank 

Hooper  v.  Herring 

Hoover  v.  Wise 


50  Minn.  466 
79  Neb.  660 
72  N.  Y.  286 
135  Mass.  61 
132  Fed.  187 


136  Fed.  90 
60  Ga.  174 
52  Me.  564 
8  Ga.  App.  714 
16  Vt.  206 
116  La.  890 
2  Keyes  245 
96  Me.  62 

90  Ind.  332 
131  Pa.  St.  233 
226  111.  169  . 
62  Mich.  199 
25  Miss.  567 
133  S.  W.  935 

8  111.  App.  563 
18  Ont.  App.  489 

205  U.  S.  503  . 
135  Iowa  157  . 

206  lU.  9  .  . 
75  Mo.  199  .  . 
188  lU.  App.  123 
140  Mo.  225  . 
73  Cal.  464 
40  Pa.  St.  190  . 
230  Pa.  St.  508 
78  N.  Y.  371  . 
30  N.  Y.  83   . 

9  Ala.  App.  292 

91  U.  S.  308 


Hope  V.  Board  of  Liquidation 
Hopkinson  v.  Foster      .     . 
Hopper  V.  Moore      .... 

Home  V.  Green 

Horrigan  v.  First  Nat.  Bank 


. 389,  390 
625  O,  675,  687 
....  166 
....   97 
220,  221,  248  a, 
249 
220,  590  c 
.  139,  695 
.  .  150 
.  .  543 
550,  611 
.  .  459 
694,  706 
609,  610 
.  .   78 
.  .  543 
128,  130  a 
.421,425 
.  .  158 
.  .  406 
.  .  559 
. 679,  690 
II.  241  u 
.  .169  a 
.  .  134 
.  .   26 
.  .   56 
.  .  329 
314,  433 
.  .  641 
214,  248 
.  .  593 
98,  n.  22,  101 
.  .  .  458 
108,  249,  250,  267, 
285 

108  La.  315 59 

L.  R.  19  Eq.  74  .  493,  511,  516 

42  Iowa  563 320 

52  Miss.  4.52  ....  II.  241 
10  Leg.  News  112   ...  167 


TABLE   OF   CASES 


iXXl 


Hortsman  v.  Henshaw  .     .     . 
Hoskins  v.  Dougherty  .     .     . 

V.  Velasco  Nat.  Bank 

Hotchkin  v.  Third  Nat.  Bank 
Hotchkdss  V.  Artisans'  Bank  . 


V.  Mosher 


Hough  Ave.  Sav.  Bank  v.  Anderson 

Houghton  V.  Adams 

V.  First  Nat.  Bank 

Housatonic  Bank  v.  Martin   .     .r    . 

Houston  I'.  Thornton 

Houston  Bank  v.  Kickman    .     .     . 

Hovey  v.  Blanchard 

Howard  v.  Bank  of  MetropoHs  .     . 

V.  Deposit  Bank     .... 

V.  Ives 

V.  Roeben 

V.  Savannah 

V.  Sav.  Bank 


Howard  &  Co.  v.  Walker 

Howard  Nat.  Bank  of  Burlington  v. 

Loomis 

Howarth  v.  Angle 

Howe  V.  Hartness 

V.  Merrill 

Howell  V.  Adams 

V.  Village  of  Cassapolis  ,     .     . 

Howland  v.  Myer 

Hoyt  V.  Seeley 

V.  Sheldon 

V.  Thompson 


11  How.  177  .  .  .  470,477 
29  Tex.  Civ.  App.  318  178,  186 
48  Te.x.  Civ.  App.  240  .  .  289 
219  Mass.  234  59,  77,  7S  b,  730 
42  Barb.  517,  2  K(>yes  504  9, 

n.  9  and  18,  179 

48  N.  Y.  482 298 

78  Ohio  St.  341      .     .    020,  020  c 

18  Barb.  545 662 

20  Wis.  003       .     .     46,  158,  108 

1  Met.  294 136 

122  N.  C.  305 132 

150  Mo.  App.  309  ...  152 
13  N.  H.  145  .  .  .  . 110,  166 
95  App.  Div.  342  .     .     .  219,  232 

80  Ky.  490 316 

1  Hill  203 232 

33  Cal.  399 188 

T.  Charlt.  173 43 

40  Vt.  597 606 

8  Pickle  456      ;     .        248,  248  a 


Hubbard  v.  Board  of  Supervisors    .     . 

V.  Pettey 

Hubbell  V.  Houghton 

Hudspeth  v.  Denton 

Huffaker  v.  Nat.  Bank  of  Montieello 
Hughes  V.  Bank  of  Somerset       .     .     . 

V.  Lake 

V.  Neal  Loan  &  Building  Co.   . 

Hulitt  V.  Ohio  Valley  Nat.  Bank    .     . 

Hull  V.  Bank   .     .     ". 

ITuUz  V.  Commonwealth 

Hume  V.  Bollan 

V.  Commercial  Bank  of  Knox- 


ville 


V.  Miller 


Hummell  ;;.  First  Nat.  Bank       .     .     . 
Humphrey  v.  Co.  Nat.  Bank      .     .     . 

Humphries  v.  Bickness 

Hungerford  Nat.  Bank  v.  Van  Nos- 

trand 

Hunt  V.  Divine 


51  Vt.  349  ..  . 

II.  228 

39  App.  Div.  151  . 

...  693 

11  Ohio  St.  449  . 

299 

5  Cush.  83  .  .  . 

505 

68  N.  Y.  314  .  . 

303 

35  Mich.  471  .  . 

.   II 

241/ 

3  Comst.  290  .  . 

. 

165 

18  Conn.  353  .  . 

393,  494,  538 

3  Bosw.  207   .  . 

...   43 

19  N.  Y.  207  .  12, 

43,  144,  158, 

165 

1  Seld.  320  .  .  . 

.   98,  n.  26 

23  Iowa  130   .  . 

.  II.  241  TO 

37  Tex.  Civ.  App.  4 

53  .178,451 

80  Fed.  547   .  . 

...  679 

82  N.  J.  Eq.  281  . 

...  709 

12  Bush  287   .  . 

.   II.  206  a 

5  Litt.  45  .  .  . 

.  39,  42,  89 

03  Miss.  557  .  . 

...  629 

97  Ga.  383  .  .  . 

.  .   247  c 

137  Fed.  401  .  . 

.   679,  684 

Dudley  259   .  . 

.  455 

3  Grant  01  .  .  . 

...   19 

1  C.  &  M.  130  .  . 

...  290 

9  Lea  728  ..  . 

...  131 

75  Neb.  800   .  . 

.  .   022  A 

2  Colo.  App.  571  . 

.  .  .  208 

113  Pa.  St.  417   . 

...  322 

2  Litt.  299  ..  . 

...  393 

100  Mass.  559 

.   II.  206  a 

37  111.  137  ..  . 

.  .  13,  302 

Ixxii 


TABLE   OF   CASES 


Hunt  V.  Hauser  Melting  Co 95  Minn.  206    . 

V.  Hopley 120  Iowa  695    . 

V.  Hunt 119  Mass.  474  . 

V. 16  N.  Y.  Sup.  Ct. 

V.  Maybee 3  Seld.  266  .     . 


...  690 

...  289 

...  611 
622    .  12,  n.  13 

...  230 

...  613 

...  679 


V.  Poole 139  Mass.  224  .     . 

V.  Reardon 93  Minn.  375    .     . 

V.  Rosen 87  Minn.  68 675  c 

V.  Rousmanier 8  Wlieat.  204 100 

V.  Seager 91  Minn.  264    ..     .    675  c,  679 

V.  Van  Alstyne 25  Wend.  605   .     .     .    144,  n.  19 

V.  WheeweU 122  Wis.  33 690 

Hunter  v.  Wilson 19  L.  J.  Ex.  8 225 

V.  Wallace 57  Tex.  Civ.  App.  1  ...     208 

Huntington  v.  Sav.  Bank 96  U.  S.  388       .  3,  566,  617,  632 

Huntress  v.  Patten 20  Me.  28 113 


Hurlburt  v.  Arthur 140  Cal, 

Husband  v.  Davis 10  C.  B 

Hussey  v.  Manufacturers'  Bank      .     .  10  Pick. 

Hutchinson  v.  Nat.  Bank 145  Ala 


103 
640 
415 
196 


.  .  679,  680 
....  435 
....  709 
185,  188,  248  a, 
567  a,  568  d 
....     335 

Hutton  V.  Smith 74  App.  Div.  284  .     .     .     .     610 

Hyde  V.  First  Nat.  Bank 7  Biss.  156    .     .     .   249,  250,  272 

V.  Kitchen 69  Hun  280 610 

V.  Planters'  Bank 17  La.  560    .     236,  265,  274,  287 

Hyland  v.  Uoe Ill  Wis.  361      .     178,  628  b,  629 


Sturges Willes  621 


Ide  V.  Bank 73  Iowa  58 255 

V.  Pierce 134  Mass.  264 610 

Ide  County  Sav.  Bank  v.  Johnson  .     .  156  Iowa  234    .     .     .101,  144  b 

■ V.  Seidensticker 128  Iowa  54 27 

Ikin  V.  Bradley 5  Price  536 309 

Illinois  Nat.  Bank  v.  Kinsella     ...  201  111.  31     .     .     II.  241  v,  241  x 

Illinois  Tr.  &  Sav.  Bank  Case    ...  21  Blatehf.  275      ...     .     589 

Imperial  Bank  v.  Bank  of  Hamilton    .  (1903)  A.  C.  49     .     .       454,  479 

• V.  Commonwealth       ....     140  Ky.  210 625  0 

Importers'  &  Traders'  Nat.  Bank  v. 

Peters 123  N.  Y.  272 590  c 

Indian  Head  Nat.  Bank  v.  Clark    .     .     166  Mass.  27 166 

Indian    Trust    Co.    v.     International 

Building  etc.  Ass'n 165  Ind.  597     ...     .      326  c, 

326  /,  440  A 

Indiana  Nat.  Bank  v.  Hollselaw      .     .  98  Ind.  87    ...     .       395,  474 

Indig  V.  City  Bank 80  N.  Y.  100     236,  272,  557,  567 

Industrial  Bank  v.  Bowers     ....     165  111.  70 421  d 

Industrial  Tr.  &  Title  Co.  v.  Weakley  103  Ala.  463     252,  358,  373,  421, 

421  g 

Ingham  v.  Primrose 7  C.  B.  n.  s.  82     .     .     .     .     445 

Ingraham  v.  Maine  Bank 13  Mass.  208 27 

. V.  Speed 3  Miss.  410 74 


TABLE   OF   CASES  Ixxiii 


Ingram  v.  Merchants'  Nat.  Bank   .     .     153  Iowa  408 


II.  230  h 

.     .       38 

136,  14G  k 

.     .     435 

289,  508 
158  c,  505 
.  .  298 
.    II.  250 


Inhabitants  of  Farmington  v.  Stanley  00  Me.  472 

Innerarity  v.  Merchants'  Nat.  Bank   .  139  Mass.  332  . 

Innes  v.  Stephenson 1  M.  &  Rob.  145 

In  re  Agra  &  Mastcrman's  Bank    .     .  30  L.  J.  Ch.  151 

Assignment,  Bank  of  Oregon  .  32  Or.  84      .     . 

Baldwin 120  N.  Y.  150  . 

Bank 100  U.  S.  440    . 

Bank  of  Madison 5  Biss.  575   .     573,  589,  II.  250  c 

Barefield 82  App.  Div.  403        ...     010 

Beak's  Estate 13  L.  R.  Eq.  734  .     .     .     .     550 

Bell's  Estate 108  Cal.  255      ...     .  032  A  h 

Blough 185  Fed.  825     ....      025  A 

Bredgorf's  Will 200  N.  Y.  309 770 

Brown  2  Story  C.  C.  512    389,  459,  400, 

495 

Bulwinkle 107  App.  Div.  331      ...     010 

Carew 31  Beav.  39 134 

Carnegie  Tr.  Co 162  App.  Div.  70  .     .     .   032  A  i 

101  App.  Div.  280     032  A  i,  032  j 

City  Bank 180  Fed.  413 590  c 

Cook  80  App.  Div.  580  .     .  302  b,  300 


—  Cotton    Manufacturers'   Sales 


Co  209  Fed.  629 112  a 

Davis     119  Fed.  950 325 

119  App.  Div.  35  .  .  .  .  010 


Duryea 17  Nat.  Bank.  Reg.  495     II.  208/ 

East  of  England  Banking  Co.     4  L.  R.  Ch.  14 425 

Empire  City  Bank     ....  18  N.  Y.  199     675,070,079,691, 

693 

European  Bank 8  L.  R.  41 327 

Farnsworth,  Brown,  &  Co.       .5  Biss.  223 324 

First  Nat.  Bank  of  HiUsboro  .  25  N.  D.  635     ..     .      II.  241  s 

Franklin  Bank 1  Paige  249  .     .     .   186,  289,  574 

Gardner's  Estate 228  Pa.  St.  282      ....  302  c 

Gesas 140  Fed.  734 324 

Grant 7  Moore  P.  C.  141      ..     .     125 

Grive        151  Fed.  711 493 

Gross        0  L.  R.  Ch.  032     .     .     .     .     327 

Harris 221  U.  S.  274 134 

Hill  Co 130  Fed.  315 337 

■  Heaton 90  Atl.  21 77 

-  Hollister  Bank 27  N.  Y.  393     .     .     .     .093,094 

•  Holmes 79  App.  Div.  204 .     .     .     .     009 

-  Howe 1  Paige  214       ....     55,  76 

-  Indiahoma  Bank 17  Okla.  605     ...     .    II.  252 

-  Johnson 61  N.  W.  352 248 

.  King         8  Nat.  Bank  Reg.  (Ga.)  285   394 

-  Mandel 224  Fed.  642 13  A 

-  Manufacturers'  Nat.  Bank      .  5  Biss.  499   .     .     .      II.  243,  246 

-  McKinley-Lanning  L.  &  T.  Co.  1  Pa.  Dist.  551      ....     768 

-  Medewe 26  Beav.  588     ..     .       325,  342 

-  Mills 162  Fed.  42 697 

-Morse's  Est 170  Mich.  114 608 

-  Nichols 106  Fed.  603 ISO  o 


Ixxiv 


TABLE   OF   CASES 


In  re  North 

Northrup 

Norwich  Yarn  Co 

Nutter 

Oliver  Lee  &  Go's  Bank      .     . 

Powell's  Trusts 

Prudential  Tr.  Company's  As- 


signment 
Purl 


Reciprocity  Bank .... 

Rosette 

Salmon 

Samuel  Wilde's  Sons       .     . 

Sanford 

Silver 

Shrevesport  Nat.  Bank  .     . 

Tallassee  &  Co 

Taylor 

Totten 

Turley 

Union  Bank 

United  Serv-ice  Co.     ... 

U.  S.  Tr.  Co 

Wild 

WiUiams 

Wisner 

Insurance  Co.  v.  Connor    .... 
International  Bank  v.  German  Bank 
V.  Jones 


Co.  V.  Amer.  Loan 


16  N.  B.  R.  (Mass.  Dist.)  420  337 

159  Fed.  686 337 

22  Beav.  143     . 
109  Me.  124      . 

21  N.  Y.  9    .     . 

I  Johns.  49,  5  Jur 

223  Pa.  St.  409 
147  Mo.  App.  105 

22  N.  Y.  9   . 

203  Fed.  67 
145  Fed.  649 
133  Fed.  562 
236  Mo.  665 
208  Fed.  797 

118  La.  664 
64  Ala.  595  . 
117  App.  Div. 
179  N.  Y.  112 
20  D.  C.  315 

204  N.  Y.  313 
6  L.  R.  Ch.  212 
117  App.  Div.  178 

II  Blatchf.  243 
3  Ir.  Eq.  346 
36  Mont.  298 

17  Pa.  St.  136 
3  Mo.  App.  367 
15  Brad.  594 

119  111.  407  . 


348 


International  Tr. 

etc.  Co 

V.  Weeks 

Interstate  Nat.  Bank  v.  Claxton     .     . 

V.  Ringo 

Interstate  Security  Co.  v.  Third  Nat. 

Bank .     . 

Interstate  Tr.  etc.  Co.  v.  Reynolds 
Iowa  Nat.  Bank  v.  Sherman  .     .     .     . 
Iowa  State  Bank  v.  Cereal  Refund  etc. 

Co 

Irish  V.  Citizens'  Tr.  Co 

Irish  V.  Nutting 

Iron   City   Nat.   Bank  v.   Fifth  Nat. 

Bank 

V.  McCord 

Irons  V.  Manufacturers'  Nat.  Bank 


62  Minn.  501 
203  U.  S.  364 
97  Tex.  569 
72  Kan.  116 


.  .  440  B 
.  .  .632i 
...  676 

^.  s.  331  606 

.  .  .  289  a 
...  2 
656,  679,  687 
.  .  13,  623 
186  a,  289  a 
.  II.  230  i 
.294  a. 
.  029  a 
II.  242 
.  324 
708  A 
.  610 
.  769 
.  13  A 
102,  n.  26 
.  610 
II.  230 
.  324 
.  628 
.  43 
51,  374 
.  445- 
.  334 


.  770 
II.  257 
317,  317  a,  439 
243,  407,  419,  569 


231  Pa.  St.  422  ..  .  772,  773 
127  La.  193  ...  53,  56,  747 
17  S.  D.  396  .  135,  166,  174  a 

132  Iowa  248 454 

163  Fed.  880  ...  . 329,  337 
47  Barb.  370 611 


31  Tex.  Civ.  App. 
139  Pa.  St.  52  . 
6  Biss.  301  .  . 
21  Fed.  197   . 


308 


Irons  V.  Manufacturers'  Nat.  Bank  of 

Chicago 

Irvine  v.  Lowry 

Irving  Bank  v.  Wetherald       .... 
Irwin  V.  Lumberman's  Bank 
Island  City  Sav.  Bank  v.  Sachtleben  . 
Israel  v.  Bowery  Sav.  Bank  .... 


,     . 169  a 

.     374 

II.  246 

n.  212  & 


17  Fed.  308 .     .     .     .      U.  212  b 

14  Pet.  293 46 

36  N.  Y.  335     .     .    155,  413,  419 
2  Watts  &  S.  190  .     .     .     .     113 

67  Tex.  420 320- 

9  Daly  507 620 


TABLE   OF   CASES  .  IxXV 

Israel  v.  State  Nat.  Bank       ....     124  La.  855 472 

Ivory  V.  Bank  of  State  of  Mo,    ...     36  Mo.  475  ....       252,  3S3 


Jacks  V.  Darrin 3  E.  D.  Smith,  557    .     .     .     398 

V.  Moyer 187  Pa.  St.  87 300 

Jackson  t;.  Bank  of  U.  S 10  Pa.  St.  61     .     .     .     .113,343 

V.  Brown 5  Wend.  590 74 

V.  Union  Bank 6  liar.  &  J.  146     .   270,  274,  287 

Jackson  Ins.  Co.  v.  Cross 9  Heisk.  283 181 

Jackson  Marine  Ins.  Co.  Matter     .     .  4  Sandf.  Ch.  550  ....     7G0 
Jackson  Paper  Mfg.  Co.  v.  Commercial 

Nat.  Bank 199  111.  151  !     .     .     .   314,  414  h 

Jacob  V.  First  Nat.  Bank Ham.  Co.  Dist.  Ct., 

3  BuU.  274     ...     .     511 

Jacobs  V.  Jolley 29  Ind.  App.  25     ...     .     608 

Jacobsohn  v.  Belmont 7  Bosw.  14 242 

Jacobson  v.  Bank 66  111.  App.  470     ..     .  450,  494 

V.  Berry 135  111.  App.  415  .     .     .    II.  250 

Jacobus  V.  Jamestown  Mantel  Co.       .     211  N.  Y.  154 774 

Jagger  v.  Nat.  German-Amer.  Bank    .     53  Minn.  386 219 

James  v.  James 81  Tex.  373 710  a 

Jameson  v.  Swinton 2  Taunt.  225 45 

James  River  Nat.  Bank  v.  Weber  .     .  19  N.  D.  702    ..     .       454,  455 

Janin  v.  Bank 92  Cal.  18 472 

Jar\is  V.  Rogers 15  Mass.  389 567 

JaselU  V.  Riggs  Nat.  Bank     ....  36  App.  Cas.  (D.  C.)  159   .    178, 

322  a,  342,  458,  459 

Jassoy  V.  Horn 64  lU.  379 309 

Jefferson  v.  Holland 1  Del.  Ch.  116       ....     662 

Jefferson  Bank  v.  Merchants'  Refrig- 
erating Co 236  Mo.  407 573 

Jefferson  Co.  v.  First  Nat.  Bank     .     .  38  Wash.  255    .     II.  241  h,  241  s 

Jefferson  Co.  Bank  v.  Chapman      .     .  12  Johns.  322    .     .   640,  641,  644 

?;.  Commercial  Nat.  Bank   .     .  98  Tenn.  337     .     .     .     .221,223 

Jefferson  Co.  Sav.  Bank  v.  Hendricks  147  Ala.  670     .  217,  232,  236  a, 

252 

Jefferson  Sav.  Bank  v.  Irving      .     .     .     145  Iowa  48 360 

Jeffries  v.  Bacastow 90  Kan.  495      ....      625  O 

Jenkins  v.  Baker 77  App.  Div.  509  .     .     .     .     610 

V.  Fowler 63  N.  H.  244 606 

V.  Neff 186  U.  S.  230 777 

y.  Nat.  Village  Bank  .     .     .     .     58  Me.  275 211 

Jennison  v.  Citizens'  Sav.  Bank       .     .     122  N.  Y.  135 730 

Jensen  v.  Wilstef 36  Nev.  37 298 

Jenys  v.  Fowler 2  Str.  946 463 

Jernberg  t;.  Mix 100  111.  App.  264  .     .     .     .  628  b 

Jerome  ?;.  Cogswell 204  U.  S.  1  .     .     .     .      II.  213  (/ 

V. 78  Conn.  75      .     .     .      II.  213  (i 

Jessop  V.  Miller 1  Keyes  32 599 

Jeune  v.  Ward 2  Stark.  326 409 

Jewett  V.  Yardley 81  Fed.  920 289 

Jimmerman  v.  Carpenter 84  Fed.  748 686 

John  V.  City  Nat.  Bank  of  Selma   .     .     57  Ala.  96 233 


Ixxvi  TABLE   OF  CASES 

John  M.  C.  Marble  Co.  v.  Merchants' 

Nat.  Bank 15  Cal.  App.  347  ...     .     493 

Johns  V.  Mason 9  Hare  29 395  A 

Johnson  v.  Bank  of  Pasco      ....     78  Wash.  59 157 

V.  Buffalo  Central  Bank       .     .     134  Iowa  731 170 

V  CatUn 27  Vt.  89,  1  WiUiams  87     95,  170 

V.  Farmers'  Bank 1  Harr.  117  .     .     .113,  295,  322 

V.  First  Nat.  Bank     ....     6  Hun  124 248 

V.  Frankfort  Bank      ....     23  Me.  322 27 

V.  Harth 1  BaU.  485  (S.  C.)      ...     228 

1;.  Henderson 76  N.  C.  227 299 

V  Hume 138  Ala.  564 709 

V  Laflin 103  U.  S.  800  17  Alb.  Law 

Jour.  145  .     .     .      713,  II.  212 

V.  Nat.  Bank  of  GloverviUe     .  74  N.  Y.  329     ..     .      II.  230  c 

V.  Payne  Bank 56  Mo.  App.  257  .     .     .     .     317 

V.  Robarts L.  R.  10  Ch.  App.  505   .     .     598 

V   Shuey 40  Wash.  22 311 

V.  TuUy 60  Ga.  540 643 

V.  Way 27  Ohio  St.  374     ...     .     565 

V.  Windle 3  Bing.  New  R.  225  .     .     .     480 

Johnson  Brinkman  Co.  y.  Central  Bank    116  Mo.  558 543 

Johnson  Co.  v.  Chamberlain  Banking 

House 80  Neb.  96 161 

Johnson  Co.  Sav.  Bank  v.  Renfro  .     .  57  Tex.  Civ.  App.  160   .  324,  329 

Johnston  v.  FranHort  Bank  ....     23  Me.  322 27 

V.  Southwestern  R.  R.  Bank    .  3  Strobh.  Eq.  263      .     .  669,  692 

Johnston  Bros.  v.  Charlottesville  Nat. 

Bank 3  Hughes,  657        .       47,  65,  749 

Jones  V.  Beaver  Nat.  Bank    ....  150  App.  Div.  145  .     II.  12,  212  a 

j;.  Brown 34  N.  H.  439 611 

V.  Carnes 17  Okla.  470     ...     .  74,  74  c 

V.  Coventry (1909)  2  K.  B.  1029  .     .     .  583  d 

V.  Fales 4  Mass.  262       9,  n.  19,  9  A,  220 

V.  Goldtree 142  Cal.  383 678 

V.  Hawkins 17  Ind.  550 744 

V.  Heiliger 36  Wis.  149 421 

V.  Killneth 49  Ohio  St.  401      ...     .  248  a 

V.  Locke L.  R.  1  Ch.  App.  25  .     .     .     551 

V.  Manufacturers'  Bank      .     .  10  Wk.  No.  Cas.  102      .     .     329 

V.  MiUiken 41  Pa.  St.  251 602 

V.  Miners  etc.  Bank   ....  144  Mo.  App.  428      ...     463 

V.  Nicholay 2  Robt.  288 554 

V.  Peppercorne 5  Jur.  n.  s.  140      ....     324 

V.  Ryde 5  Taunt.  488     .     .   289,  476,  480 

V.  Weakley 99  Ala.  441 612 

V.  Wiltberger 42  Ga.  575 687,  693 

Jones,  Assignee  v.  Johnson     ....     86  Ky.  545 671 

Jones  Nat.  Bank  v.  Yates      ....  93  Neb.  121      .     .  132  b,  II.  253 

Jordan  v.  Harlock 84  Pa.  St.  366 388 

V.  Nat.  Shoe  &  Leather  Bank  74  N.  Y.  473     .     .     .     .  329,  561 

Jordan  Marsh  Co.  v.  Nat.  Shawmut 

Bank 201  Mass.  397     290,  473,  474,  604 

Jose  V.  Hewett 50  Me.  248 21 

Jourdaine  v.  Lefevre 1  Esp.  N.  P.  66     .     .     .     •     324 


TABLE   OF   CASES 


Lxx\'ii 


Joy  V.  Campbell 1  Sch.  &  Lef.  346 

Judy  V.  Farmers  &  Traders'  Bank  .     .81  Mo.  404  . 

Junction  City  v.  Central  Nat.  Bank    .  90  Kan.  407 

Jung  V.  Second  Ward  Sav.  Bank     .     .  55  Wis.  364 

Juniper  v.  Bank 39  S.  C.  29G 

Just  V.  State  Sav.  Bank 132  Mich.  600 

Justh  V.  Nat.  Bank 56  N.  Y.  478 


.  .  324,  326 
186,  208,  325 
.  II.  208  b 
.  .  .  395 
.  . 143,  179 
.  698,  699  d 
493,  524,  567 


E 


Kahnweiler  v.  Anderson 

Kalbaeh  v.  Clark 

Kansas  Lumber  Co.  o.  Central  Bank  . 
Kansas  Valley  Nat.  Bank  of  Topeka  v. 

Rowell 

Kapitegalla  Rubber  Est.  v.  Nat.  Bank 

Kassler  v.  Kyle 

Kaufman  v.  State  Sav.  Bank      .     .     . 
Kavanaugh  v.  Amer.  Bank    .... 

V.  Commonwealth  Tr.  Co.  .     . 

V.  Gould 


Kean  v.  Johnson 
Keane  v.  Roberts 
Kearney  v.  King  . 
Keen  v.  Davis 
Keene  v.  Beard    . 

V.  Collier 


Kekewich  v.  Manning 

Keliher  v.  United  States 

Kelley  v.  Newburyport  Horse  R.  R.    . 

V.  Chenango  Valley  Sav.  Bank 

V.  Snow 

KelUng  V.  Edwards 

Kellogg  V.  Citizens  Bank 


Kelly  V.  Albany  Tr.  Co.     . 

V.  Brown 

V.  Buffalo  Sav.  Bank 


—  V.  Home  Sav.  Bank 

—  V.  Roberts     .     .     . 


78  N.  C.  133 506 

132  Iowa  215 717 

34  Kan.  635 454 

2  Dillon  C.  C.  371  .  .  II.  228 
(1909)  2  K.  B.  1010  .  .  .  291  e 
28  Colo.  374  ..  .  59,  706  A 

151  Mich.  65 435 

239  111.  404   297,  298,  299,  300 

118  N.  Y.  S.  758   771,  773,  775 

147  App.  Div.  281  ..  .  116, 

125,  128,  772,  775,  777 

1  Stockt.  401 721 

4  Mass.  332,  357  .  .  .  .  317 

2  Barn.  &  Aid.  301  ..  .  366 

21  N.  J.  L.  683  ....  365 
8  C.  B.  N.  s.  372  378,  380,  391, 

393,  414,  495,  529 

1  Met.  417  (Ky.)  .  .   183,  190, 

567,  574 

1  DeG.  M.  &  G.  176   .  610,  615 

193  Fed.  8 II.  259 

141  Mass.  496 101 

22  Hun  202 180 

185  Mass.  288 610 

116  Minn.  484 413 

176  Mo.  App.  288      .     39S,  493, 

494,  522 
99       .     .     .     609 

388 

.     .      620  b,  620  c 

374       620  b,  620  c 

141       .        609,613 

.     346 


Kelly  &  Co.  v.  Phelan 

Kelsey  v.  Nat.  Bank  of  Crawford   .     . 
Kelty  V.  Second  Nat.  Bank    .     .     .     . 

Kerable  v.  Mills 

V.  National  Bank 

V.  Rondout  Nat.  Bank    .     .     . 

Kendriek  State   Bank   v.   First   Nat. 


124  App.  Div. 
5  Gray  108 
180  N.  Y.  171 
88  App.  Div. 
103  App.  Div 
40  N.  Y.  432     . 
5  Dill.  228    .     . 
69  Pa.  St.  426  . 
52  Barb.  328     . 
1  M.  &  G.  757 
94  App.  Div.  544 
183  N.  Y.  545  . 


Bank 


213  Fed.  610 
206  Fed.  940 


.  337 
11.  244 
421,  544 
.  380 
.  291  c 
.291  c 


334 
101 


Ixxviii 


TABLE   OF   CASES 


Keuistons  v.  Sceva 

Kennebec,  etc.  R.  Co.  v.  Kendall 
Kennedy  v.  Gibson 


V.  Jones 

V.  Otoe  Co.  Nat.  Bank 
V.  Sav.  Bank      .     .     . 


Kenneth  Investment  Co.  v.  Nat.  Bank 


Kent  V.  Dawson  Bank 

Kentucky  Flour  Co.'s  Assignee  v.  Mer- 
chants' Nat.  Bank 

Kenyon  v.  Fowler 

V.  Stanton 


54  N.  H.  37      .     .    549,  611,  612 

31  Me.  470 43 

8  WaU.  505  .  II.  212  b,  250,  256, 

257 
140  Ga.  302  .  .  421  a,  421  b 
7  Neb.  65     .     .     .    103,  145,  168 

101  Cal.  495 750 

103  Mo.  App.  613     289  a,  290, 

291  e,  365,  463,  472,  473 

13  Blatchf.  237      .     .      272,  280 


Kephart  v.  Buddecke 

Kepitigalla  Rubber  Est.  v.  Nat.  Bank 

Kerbaugh  v.  Nugent 

Kermeyer  v.  Newby 

Kern's  Estate 

Kerr  v.  People's  Bank 

Kerfoot  v.  Farmers'  etc.  Bank    .     .     . 

Kettenbach  t;.  U.  S 

Key  V.  Knott 

Keyser  v.  Hitz 


Kibhnger  v.  Sand  Bank 

Kiggins  V.  Munday  .  . 

Kilgore  v.  Bulkey      .  . 

Kilsby  V.  Williams    .  . 
Kimbal  v.  Cleveland 

• V.  Leland       .  . 

V.  Norton      .  . 


Kimball  v.  Dunn 

■ V.  Farmers'  etc.  Bank     .     .     . 

V.  Marine  Nat.  Bank      .     .     . 

Kimbo  V.  Bank  of  Fulton       .... 
Kjmins  v.  Boston  Five  Cents  Sav.  Bank 

Kimmel  v.  Dickson 

Kimmell  v.  Bean 

Kimrarid  v.  Webster 

King  V.  Birmingham 

V.  Bowling  Green  Tr.  Co.    .     . 

V.  Dedham  Bank 

V.  Elliott 

V.  Gillaland 

V.  Miller 

V.  Pomeroy 


Kingman  v.  Perkins       .     .     . 
Kingsley  v.  Clark      .... 

V.  Whitman  Sav.  Bank 

Kinney  &  Co.  v.  Paine       .     . 

Kipp  V.  MiUer 

Kirk  V.  Blurton 

Kirkham  v.  Bank  of  America 


90  Ky.  229  .  .  . 
155  Fed.  107  .  . 
44  Wis.  479  .  . 
20  Colo.  App.  546 
(1909)  2  K.  B.  1010 

48  Ind.  App.  43 
14  Kan.  164  . 
171  Pa.  St.  55  . 
158  Pa.  St.  305 
218  U.  S.  281  74 
202  Fed.  377     . 

9  Gill  &  J.  342 
2  Mackey  513  (D 
133  U.  S.  138 
131  Wis.  595 
19  Wash.  233 

14  Conn.  362 
5  Barn.  &  Aid.  815 

4  Mich.  606 
110  Mass.  325 

59  N.  H.  1    . 
89  Fed.  782 
50  Wash.  610 
112  Minn.  450 

49  Ga.  419   . 
141  Mass.  33 

5  S.  D.  226  . 
68  Kan.  598 

10  Ch.  D.  139 
8  Barn.  &  Cr.  29 
145  App.  Div.  398 

15  Mass.  447  . 
5  Sm.  &  Mar.  447 

60  Tex.  271 
53  Or.  53   . 
121  Fed.  287 


105  Mass.  Ill 
57  Colo.  352 
182  ISlass.  252 
68  Miss.  258 
47  Colo.  598 
9  Mees.  &  Wels 
26  Hun  110       . 


75,  II 


.  .  329 
. 678,  679 
421,  n.  11 
.  .   17 
289  a,  469 
557 
544 
551 
314 
208  & 
II.  259 
636 
14 
679 
224 
.   696  A 
.  51,  298 
409,  572 
.  .  158 
.  .  612 
. 609,  620 
.  II.  254 
.  .171^ 
II.  208  d 
643 
620 
567  b 
590  d 
180 
754 
574 
644 
672 
324  c 
52,  53 
678,  687  II.  84, 
212  b,  246,  253 
506,  612 
.  678 
020  b 
.  421  i 
.     694 
.  439 
.252  a 


284 


TABLE   OF  CASES                                                  Ixxix 

Kirkland  Land  &  Imp.  Co.  v.  Jones    .     18  Wash.  407 5G4 

Kirkpatrick  v.  McCullough    ....     3  Humph.  171 299 

Kirkwood  v.  First  Nat.  Bank     ...     40  Xeb.  485 297 

Kirtland  f.  Moore 40  N.  J.  Eq.  106   .     .     .     .     511 

Kitchens  v.  Teasdale  Com.  Co.  .     .     .  105  Mo.  App.  463      ...  109  a 

Klauber  v.  Biggerstaff 47  Wis.  551 299 

Kleekamp  v.  Meyer 5  Mo.  App.  444     ...     .     424 

Kleopfer  v.  First  Nat.  Bank  ....     65  Kan.  774 458 

Klopp  V.  Lebanon  Bank 46  Pa.  St.  88     ...     .  699,  703 

KnafHe  v.  Knoxville  Banking  Co.   .     .     128  Tenn.  181 338 

Knapp  V.  Cowell 77  Iowa  528 324 

V.  First  Nat.  Bank     ....  173  111.  331  .     .    II.  241  a,  241  x 

V.  Saunders 15  S.  D.  464      ....    52,  152 


KnatchbuU  v.  Hallett 13  Ch.  D.  696  .     .   326,  355,  589 

Knecht  v.  U.  S.  Sav.  Inst 2  Mo.  App.  563     ....     329 

Knight  V.  Old  Nat.  Bank 4  Am.  Law  Times  Rep.  240     II. 

212 

Knights  V.  Wiffin Law  Rep.  5  Q.  B.  660    .     .     478 

Knobeloch  v.  Germania  Sav.  Bank      .     50  S.  C.  259 146  d 

Knowles  v.  Beatty 1  McLean  41 71 

Knox  i'.  Clifford 38  Wis.  651       .     .         565,  n.  15 

Knoxville  Water  Co.   v.   East  Tenn. 

Nat.  Bank 128  Tenn.  364  .     .   152,  474,  604 

Kobbi  V.  Underbill 3  Sandf.  Ch.  277  ....     544 

Koehler  v.  Adler 91  N.  Y.  657 547 

Koelzer  v.  First  Nat.  Bank    ....  125  Wis.  595     ..     .   302,  322  a 

Kohler  v.  Black  River  Falls  Iron  Co.       2  Black  721 125 

Kost  V.  Bender 25  Mich.  516 565 

Krafft  V.  Citizens'  Bank 139  App.  Div.  645     ..     .  252  e 

Krebs  v.  Blatz 134  Ky.  505 298 

Krishkan  v.  New  York  Sav.  Bank  .     .  156  N.  Y.  S.  298  .     .     .     .  620  c 

Kroll  V.  Union  Tr.  Co 133  Mich.  638 334 

Kuder  v.  Green 72  Ark.  504 248 

Kuehne  v.  Union  Trust  Co 133  Mich.  602 623 

Kuhn  V.  Frank 10  Rec.  622,  Hamilton  Co. 

Dist.  Ct.  (Ohio)     ...     457 

Kuhnes  v.  Cahill 128  Iowa  594    ..     .   289  a,  494 


Kuhns  V.  Westmoreland  Bank    ...  2  Watts  136 

Kushner  v.  Abbott 156  Iowa  598 

Kux  I'.  Savings  Bank 93  Mich.  511 

Kyle  V.  The  Mayor,  etc 75  N.  C.  445 


. 562,  703 
298,  299 

.  .  619 
II.  241  a 


Kymer  v.  Laurie 18  L.  J.  Q.  B.  218      .     .  459,  550 


Labandy  v.  Carnegie  Tr.  Co.      ...  154  N.  Y.  S.  900  .     .     .  632  A  g 

La  Banquo  D'Espargues  v.  La  Banque  2  Mon.  L.  R.  (C.  B.)  64     .\7\g 

La  Banque  de  Peuple  v.  La  Banque    .  1  Mon.  L.  R.  (S.  C.)  231    .  408  c 

Lacy  V.  MeCofferty 215  Fed.  352     .     II.  241  b,  241  x 

Ladd  V.  Androscoggin  Co.  Bank      .     .  96  Me.  520  .     .      617,  620,  620  c 

V.  Augusta  Sav.  Bank     ...  96  Me.  510  .     .  620,  620  b,  ()2()  c 

t;.  Gilson 26  Wash.  79      .     .     .      II.  241  /i 

La  Dow  t;.  Bank 51  Ohio  St.  234      .     .     .    11.230 

La  Due  v.  First  Nat.  Bank  of  Kasson  31  Minn.  33 441 


IxXX  TABLE   OF   CASES 

Lackey  v.  Miller Phill.  N.  C.  L.  26       ...     642 

Laclede  Bank  v.  Schuler 120  U.  S.  511    .     .  493,  511,  514 

Lafayette  Bank  v.  State  Bank    ...  4  McLean  208       ....     156 

Lafayette  Tr.  Co.  v.  Higginbotham     .  136  App.  Div.  749      13  A,  622  A, 

II.  250  A 

Lahey  v.  City  Nat.  Bank 15  Colo.  339 457 

Laidlow  v.  Pacific  Bank 137  Cal.  392 63 

Lake  Benton  First  Nat.  Bank  v.  Watt  184  U.  S.  151    ..     .      II.  230  d 

Lamar  v.  Taylor 141  Ga.  227 298 

Lamar  etc.   Drug  Co.   v.   First  Nat. 

Bank 127  Ga.  448    ...     289  o,  298, 

675  a,  687,  694,  696,  II.  250  A  a 

Lamb  z;.  Cecil 25W. Va.288,28Id.659.  158, 165 

Lamberton  v.  Merchants'  Nat.  Bank 

of  Winona 24  Minn.  281    ...     .      346  A 

Lamoille  Co.  Nat.  Bank  v.  Bingham  .  50  Vt.  105    ...     .      II.  230  / 

La  Montague  v.  Bank  of  N.  Y. .     .     .  183  N.  Y.  173  .     .     .     .       439  e 

Lamp  Co.  v.  Mfg.  Co 64  Mo.  App.  115  .     .     .     .     374 

Lamson  v.  Beard 94  Fed.  30    ...     .   144,  146  d 

Lancaster  Bank  v.  Smith 12  P.  F.  Smith  45      .     .191,  204 

V.  Woodward 18  Pa.  St.  357  .     .     .     .    9,  357, 

442,  443,  553 

Lancaster  Nat.  Bank  v.  Taylor  ...  100  Mass.  18    ...     .  482,  486 

Landa  v.  Traders'  Bank 118  Mo.  App.  356      .      221,  247 

248  b,  269,  274,  287,  291  b,  57& 
Land  Title  etc.  Co.  v.  Northwestern 

Nat.  Bank 211  Pa.  St.  211      ....     474 

Lane  v.  Bailey 47  Barb.  395 325 

V.  Bank  of  West  Tenn.    ...     9  Heisk.  419 231 

V.  Morris 10  N.  Y.  162     675,  687,  689,  696 

Lanfear  v.  Blossman 1  La.  Ann.  148      ....     225 

Langdale  v.  Citizens'  Bank    ....  121  Ga.  105      .     .     .     617,  620, 

620  b,  620  c 

y.  Whitfield 4K.&J.426,27L.J.Ch.795   606 

Langlois  v.  Gragnon 123  La.  453       .     .     .    169  a,  360 

Langton  v.  Lazarus 5  M.  &  W.  629      ....     481 

Lanigan  v.  North 69  Ark.  62 686 

Lankford  v.  Menefee 145  Pac.  375 675 

— V.  Okla.  Engraving  etc.  Co.      .     35  Okla.  404 13 

V.  Platte  Iron  Works  Co.     .     .     235  U.  S.  461 13 

V.  Schroeder 147  Pac.  1049 13 

Lanning  ?;.  Johnson 75  N.  J.  L.  259     104,  136/,  136  g 

Lapsley  v.  Merchants'  Bank  ....  105  Mo.  App.  98  ...     .     717 

Larabee  v.  Dolley 175  Fed.  365     ...     .    II.  200 

Larrabee  v.  Hascall 88  Me.  511 611 

Larsen  v.  Allen  Line  S.  S.  Co.     .     .     .     45  Wash.  406 545 

V.  Breen 12  Colo.  480      ...     .      547  A 

V.  Utah  Loan  etc.  Co.     .     .     .     23  Utah  449 208 

Lasater  v.  First  Nat.  Bank    ....  96  Tex.  345       ...       II.  230  g 

Lathan  v.  Spragins 162  N.  C.  404  .     573,  583  c,  586 

Lathrop  t).  Commercial  Bank  of  Scioto     8  Dana  119 46 

Latimer  v.  Bard 76  Fed.  536 679 

— ■  V.  Citizens'  State  Bank  ...     102  Iowa  162 679 

Lattern  v.  Van  Ness 107  App.  Div.  393      ..     .     610 

Laubach  v.  Leibert 87  Pa.  St.  55 511 


TABLE   OF   CASES 


Ixxxi 


Laughlin  v.  Marshall 

Lauterman  v.  Travous 

Law's  Estate 

Lawler  v.  Burt 

Lawrence  v.  Amer.  Nat.  Bank    . 

V.  Bank  of  Republic   .     .     .     . 

V.  P^ox 

V.  Gebhard 

V.  Nelson 

V.  Schmidt 

V.  Stoniugton  Bank    .     .     .     . 

Laws  V.  Rand 

Lawson  v.  Lawson 

Lazarus  v.  Sheatcr 

Lazear  v.  Nat.  Union  Bank  of  Mary- 
land     

Le  Rose  v.  Logansport 

Leach  v.  Buchanan 

V.  Halo 

V.  Hill 

u.  Lambeth 

V.  Perldns 


19  111.  390    .     , 
17-1  111.  459  .     , 
144  Pa.  St.  499 
7  Ohio  St.  340 
54  N.  Y.  435 
35  N.  Y.  320 

20  N.  Y.  268 
41  Barb.  575 

21  N.  Y.  158 
35  lU.  440    . 
G  Conn.  521      250 
3  C.  B.  N.  s.  442 

1  P.  Wms.  441 

2  Ala.  718    .     . 


Leaphart  v.  Bank 

Lear  y.  U.  S 

Leas  V.  Walls 

Leather  v.  Simpson 

Leather  Manufacturers'  Bank  v.  Mer- 
chants' Bank 

V.  Morgan 


52  Md.  78  . 
102  Ind.  332 
4  Esp.  226  . 
31  Iowa  69  . 
106  Iowa  171 
14  Ark.  66  . 
17  Me.  462  . 
45  S.  C.  563 
147  Fed.  349 
101  Pa.  St.  57 
L.  R.  11  Eq.  398 


Leather  Manufacturers'  Nat.  Bank  v. 

Treat 

Leavitt  v.  Beers 

V.  Fisher 

V.  Palmer 

V.  Yates 


Leavy  v.  Interstate  Nat.  Bank  .     .     . 

Leazure  v.  Hillegas 

Lebanon  Bank  v.  Morgan  .  .  .  . 
Lebanon  Nat.  Bank  v.  Karmany  .  . 
Le  Breton  v.  Stanley  Contracting  Co. 
Leehenger  v.  Merchants'  Nat.  Bank    . 

Ledgewood  v.  Deshiell 

Lee  V.  Marion  Nat.  Bank       .     .     .     . 

Leftley  v.  Mills 

Legard  v.  Hodges 

Leggett  V.  Bank  of  Sing  Sing      .     .     . 

V.  N.  J.  Mfg.  &  Banking  Co.  . 

Legro  V.  Staples 

Lehman  v.  Tallassee  Mfg.  Co.    .     .     . 

Lemmon  v.  Bo.x 

Lemon  v.  Sigourney  Sav.  Bank  .     .     . 

Lening  v.  Ralston 

Lenox  v.  Cook 

Leonard  v.  Leonard 


128  U.  S.  26 
117  U.  S.  96 


12S  Fed.  262  . 
Hill  &  D.  221  . 
4  Duer  1   .  . 

3  Comst.  19   . 

4  Edw.  Ch.  134 

26  Tex.  Civ.  App 
7  Serg.  &  R.  313 
28  Pa.  St.  452  . 
98  Pa.  St.  65  . 
15  Cal.  App.  429 
96  S.  W.  638  . 
177  S.  W.  1010 
94  Kv.  43  .  . 
4  T.  R.  175   . 
1  Vesey  477 
24  N.  Y.  283  . 
Saxt.  541   .  . 


v>52 


16  M( 
64  Ala.  567  . 
20  Tex.  429 
131  Iowa  79 
23  Pa.  St.  139 
8  Mass.  460 
181  Mass.  458 


51,  298,  299 

.   629  6 

.   289  a 

.  .  660 

.  .  464 

.  326,  346 

.  .  512 

98,  n.  27 

.  .  .-^39 

.  .  447 

274,  287,  601 

378,  421,  n.  9 

.  .  .  r>50 

...  365 


61,  II.  230  k 
...  36 
...  468 
196,  11.  208  b 
.  .  .  408  e 
.  .  .  326 
...  424 
.  .  .  298 
.  .  II.  259 
...  485 
...  225 


...  476 
.   290,  472 

.  IL  241  w 

...  149 

144,  n.  22,  713 

51,  298,  745 

.  .  63,  77, 

98,  n.  36,  690 

304  .  .  124 

.  .  754 

.  .  299 

II.  230,  n.  58 

.  .  493 

.  .  74  a 

. 152,  169 

317,  317  a 

.     .     450 

.  .  576 

698,  702 

. 115, 144 

.  .  496 

.  .  324 

.  .  408 

.  .  171 

12,  n.  18 

.  .  227 

.  .  610 


Ixxxii 


TABLE  OF  CASES 


Leonora  Nat.  Bank  v.  Rayland  .     .     . 

Leonhardt  v.  Small 

Lesassier  v.  Kennedy 

Lester  v.  Howard  Bank 

Lester  &  Co.  v.  Given,  Jones,  &  Co.    . 
Letcher's    Trustee    v.    German    Nat. 

Bank 

Lett  V.  Morris 

Levi  V.  Nat.  Bank 

Levin  v.  Commercial  etc.  Bank  . 
Levis  V.  Commercial  Nat.  Bank      .     . 
Levitan  v.  Houghton  Nat.  Bank     .     . 

Levy  V.  Bank 

V.  Bank  of  America    .... 

V.  Bank  of  Commerce     .     .     . 

V.  Bank  of  U.  S 

V.  Franklin  Sav.  Bank    .     .     . 

V.  Larson 

V.  Nat.  Bank 

V.  Peters 

V.  Pike 

V.  Pyne 

Lewis  V.  Eastern  Bank 

V.  International  Bank     .     .     . 

V.  Merritt 

V.  Park  Bank 

V.  Peck  &  Clark 

V.  Robertson 

— — ■ — •  V.  Switz    ........ 

Lewis  etc.  Co.  v.  Montgomery  Supply 

Co 

L'Herbette  v.  Pittsfield  Nat.  Bank 
Libby  v.  Hamilton  Bank 

V.  Hoppins 

V.  Union  Nat.  Bank   .... 

Lieber  v.  Fourth  Nat.  Bank  .... 

Liggett  V.  Union  Nat.  Bank  .... 
Liggett  Spring  &  Axle  Co.'s  Appeal    . 

Lilly  V.  Hays 

Lime  Rock  Bank  v.  Hewett  .... 

V.  Macomber 

V.  PHmpton 

Lincoln  v.  Morrison 

Lincoln  &  Kennebeck  Bank  v.  Page    . 

V.  Richardson 

Lindauer  v.  Fourth  Nat.  Bank  .     .     . 

Lindeman  v.  Desborough 

V.  Rusk 

Lindsay  v.  First  Nat.  Bank   .... 

V.  Lord  Downes 

V.  Nat.  Bank  of  Monticello 


128  Ky.  548  . 
117  Tenn.  153  . 

36  La.  Ann.  539 
33  Md.  558  .  . 
8  Bush  (Ky.)  357 

134  Ky.  24  .     . 

4  Sim.  607    .     . 

5  Dill.  104  .  . 
132  Lan.  492  . 

37  Tex.  Civ.  App. 
174  Mich.  566  . 
27  Neb.  557   . 

24  La.  Ann.  220 

38  S.  W.  886  . 
1  Binn.  27  .  . 

117  Mass.  448  . 
167  Fed.  110  . 
7  Cent.  L.  J.  249 
7  Serg.  &  R.  125 

25  La.  Ann.  630 
Car.  &  M.  453  . 
32  Me.  90  .  . 
13  Mo.  App.  207 
113  N.  Y.  386  . 
42  N.  Y.  463  . 
10  Ala.  142  .  . 
13  Sm.  &  Mar.  558 
74  Fed.  381 


59  W.  Va.  75 
162  Mass.  138 
178  Fed.  53 


104  U.  S.  307  . 
99  111.  622  .  . 
137  Mo.  App.  158 


.  .  295,  460 
.  .  56,  77 
...  681 
.  .  125,  751 
373,  494,  532 

.  43  a,  709 

.  . 495,  541 

247,  248,  568 

...  459 

241  .  .  422 

83  A,  II.  70 

.  476 

.  474 

.  224 

171,  463, 

466,  488,  569 

.  .  620 

289  a,  458 

9,  n.  9 

.  425 

.  200 

.  440 

119,  295 

.  400 

.  611 

440  A 

.  267 

668,  670 

.  679 


233  Mo.  590  . 
Ill  Pa.  St.  291 
5  Ad.  &  El.  548 
52  Me.  531  . 
29  Me.  564  . 
17  Pick.  161 
64  Neb.  822 
9  Mass.  155 


1  Greenl.  79 
55  Barb.  75 
8  Barn.  &  Cr.  586 
125  Wis.  210 
156  U.  S.  485 

2  Ir.  Eq.  307 
12  Bush  287 


9, 


.  421  h 
.   171  i 
106,  136  a, 
136  d,  136  g 
.  .  567 
.  .   95 
.  .  290, 
290  e,  473 
.  .  103  6 
.  .  333 
. 398,  408 
n.  19,  103,  167 
98,  n.  22,  101 
. 565,  566 
590  h,  629 
.  9,  n.  19, 
A,  9  B,  220 
.  765 
.  599 
.   21 
.  125  c 
IL  241  6 
.   41 
II.  206  a 


9 


TABLE   OF   CASE3 


Ixxxiii 


Lindsay  v.  McClelland 

Linton  v.  Childs 

Linville  v.  Welch 

Lionberger  v.  Rouse 

Lippitt  V.  Ashley 

V. 

V.  Thames  L.  &  T.  Co.   .     .     . 

Litchfield  Bank  v.  Church      .     .     .     . 

V.  Peek 

Little  t'.  O'Brien 

V.  Owensboro  Sav.  Bank     .     . 

Little's  Adm'r  v.  City  Nat.  Bank   .     . 
Livingstain  v.  Columbia  Banking  etc. 


18  Wis.  481 . 
105  Ga.  507 
29  Mo.  203  . 
9  Wall.  468  . 
89  Conn.  451 
94  Atl.  995  . 
88  Conn.  185 

G32 
29  Conn.  137 
29  Conn.  384 
9  Mass.  94   . 
150  Ky.  331 
115  Ky.  629 


Co. 


Ag 


51,  298,  299 
.  .  150  A 
...  421 
IL  241  b,  241  y 
...  617 
.  128,  130  a 
.  617,632  a, 
632  A  h,  777 
.  .  669,  670 
.  565,  n.  1  a 
...  752 
.  .  671  A 
...     329 


V.  PhoenLx  Bank 


Lloyd  V.  Osborne      .... 

V.  Sandilands     . 

V.  West  Branch  Bank 


81  S.  C.  244  ....  622,  624 
77  S.  C.  305  ...  494,  629  b 
2  Hill  (N.  Y.)  425  .  .  .  274, 
393,  421,  422 
92  Wis.  93 421 


Stonemetz  .     .     . 
Bank  v.  Farmers' 


Loan  Ass'n  v. 
Loan  &  Sav 

Bank 

Lobdell  V.  Baker 

Locke  V.  Prescott 

Loekwood  v.  American  Nat.  Bank 
V.  Loclnvood      .... 


etc. 


Lodge  V.  Phelps 

Loeb  V.  Weiss 

Logan  Co.  Nat.  Bank  v.  Townsend 
Lohman  v.  N.  Y.  &  Erie  R.  R.  Co.      . 

London  v.  Morrison 

London  Chartered  Bank  v.  White  .  . 
London  &  Co.  Banking  Co.  v.  RatcUffe 
London  &  Riv^er  Plate  Bank  v.  Han- 
over Nat.  Bank 
Long  V.  Long  .  . 
Long  V.  Strauss  . 
Longman  v.  Barry 
Lonier  v.  State  Sav.  Bank 
Loomis  V.  Eagle  Bank  . 

V.  Simpson    . 

Lord  V.  Hingham  Nat.  Bank 
Lorge  V.  Consolidated  Nat.  Bank 
Lorick  v.  Palmetto  Bank  . 

Loring  v.  Brodie 

Loucks  V.  Johnson    .... 

Loud  V.  Hall 

Louisiana  Bank  v.  Bank  of  U 
Louisiana  Ice  Co.  v.  State  Nat.  Bank 
Louisiana  Nat.  Bank  v.  Citizens'  Bank 
Louisiana  State  Bank  v.  Rowell  .  . 
V.  Senecal 


Gow,  13 

15  Pa.  St.  172  . 

102, 
29  Pa.  St.  534  . 

74  S.  C.  210  . 
1  Met.  193  .  . 
32  Beav.  261  . 
9  R.  I.  308  .  . 
68  S.  C.  328   . 

1  Johns.  Cas.  139 
64  Ind.  285  .  . 
139  U.  S.  67   . 

2  Sandf.  39  .  . 
64  Neb.  822  . 
4  App.  Cas.  413 
L.  R.  6  App.  Cas. 


391,  393,  552 

.  98,  n.  26, 

n.  29,  103,  191 

...  140 


398,  494,  536 

.  .  477 

.  .  326 

124,  II.  212 

.   186  a 

12,  n.  13 

499 

6,  II.  228  a 

98,  n.  26 

.   590  d 

.     .     324 

.  331 


722 


36  App.  Div.  487 
167  Mo.  App.  79  . 
107  Ind.  94  .  .  . 

6  Ir.  R.  C.  L.  457 
149  Mich.  483 
Disney  285  . 
13  Iowa  532 
186  Mass.  161 

105  App.  Div. 
74  S.  C.  185 
134  Mass.  453 
70  Hun  565 . 

106  Mass.  414 

7  Mart.  398 . 
1  McClain,  1S5 
28  La.  Ann.  189 
6  Mart.  506   . 
13  La.  525  .  . 


.   326  g 

.  .  169 

.  297,  298 

.  .  359 

289  (I,  493 

.  103,  134,  136 

....  275 

214,  224,  252  c 

409  708  A,  II.  40 

445,  458 

.  166 


.  611 
9,  n.  3 
.  652 
.  585 
414,  n.  20,  482 
.  233 
.  134 


Ixxxiv 


TABLE   OF   CASES 


Louisville  Banking  Co.  v.  Asher      .     . 
Louisville  Nat.  Bank  v.  Brannin,  Lor- 

ing,  &  Harvey 

Loux  V.  Fox 

Love  V.  Ardmore  Stock  Exch.     .     .     . 

Lovell  V.  Hammond  Co 

Lovett  V.  Cornwell 

V.  Steam  Saw  Mill  Ass'n     .     . 

Loving  V.  Brodie 

Lowe  V.  Lehman 

V.  Reddan 

Lowman  v.  Blain  Co.  Bank    .... 
Lowndes  v.  City  Nat.  Bank  .... 

Lowry  v.  Murrell 

Lowry  Nat.  Bank  v.  Seymour     .     .     . 

Loyd  V.  Freshfield 

V.  Lynchburg  Nat.  Bank     .     . 

V.  McCaffrey 

Lucas  V.  Coe 

V.  Dorrien 

V.   Governor's  Nat.    Bank  of 

Pottsville 

Lucas  Co.  V.  Jamison 

Lucks  V.  Northwestern  Sav.  Bank  .     . 

Luff  V.  Pope 

Lumbard  v.  Aldrie 

Lumley  v.  Palmer 

Lund  V.  Seamen's  Bank 

Lundsborg  v.  Ober  &  Hagerman      .     . 
Lunt  V.  Bank  of  North  America      .     . 
Lusk  V.  Stoughton  State  Bank   . 
Luthersville  Banking  Co.  v.  Hopkins  . 
Lyman  v.  Belfast  Nat.  Bank       .     .     . 

V.  State  Bank 

■  V.  U.  S.  Bank 

Lynch  v.  Goldsmith 

V.  Nat.  Bank  of  W.  Va.       .     . 

Lyndeboro'  Glass  Co.  v.  Mass.  Glass 

Co 

Lynn  Nat.  Bank  v.  Smith      .... 

Lyon  V.  Jerome 

■  V.  McKeefrey 

Lyons  v.  Corder 

V.  Culbertson 

V.  Lyons  Nat.  Bank    .... 


112  Ky.  138 

82  Ky.  370  . 
171  Pa.  St.  68 
5  Ind.  T.      . 
60  Conn.  500 

5  Wend.  369 

6  Paige  54  . 
134  Mass.  469 
15  Ohio  St.  179 
123  Wis.  90 
40  Okla.  519 
82  Conn.  8  . 

166,  171  g 
2  Port.  (Ala.)  286 
91  S.  C.  305  . 
2  Car.  &  P.  325 
86  Va.  694  .  . 
46  Pa.  St.  410  . 
86  Fed.  972   . 

7  Taunt.  278,  1  Moore 


219,  252  c 


104, 


128,  n.  21 

424 

493 

395  A 

398 

165 

317 

n.  19 

562 

604 

133,  155  j, 

312,  317  a 

.     662 

.   45 

.  294 

.  325 

493,  526 

.  679 

29  .  324 


78  Pa.  St.  228  .  .  .  .  IL  230 

170  Fed.  338  .  .  604/,  IL  252 
148  Mo.  App.  376   .  .  290,  291 

5  Hill  413 493,  502 

8  N.  H.  34 46 

Strange  1000 408 

37  Barb.  129 317 

31  Kan.  599 421  d 

49  Barb.  221 493 

135  Wis.  311  .  .  .  .53,  302 
12  Ga.  App.  488  ..  .  337,  568 

98  Me.  448 325,  337 

81  App.  Div.  367  .  .  698  A,  701 

12  How.  225 137 

64  Ga.  42 299 

22  W.  Va.  554  .  .  .   II.  230  g 

111  Mass.  315 101 

132  Mass.  227 217 

26  Wend.  485 117 

171  Fed.  384  .  625  O,  632  A  a 
253  Mo.  539  ..  .   116,  123, 

.  124,  128,  128  p 

83  111.  33 9,  n.  12 

19  Blatchf.  279      ...    II.  228 


M 

Maas  V.  German  Sav.  Bank  ....  73  App.  Div.  524 

M.  A.  Ass'n  V.  Jacobs 13  111.  App.  340     .     . 

Mabey  v.  Adams 3  Bosw.  346      .     .     . 

Mabie  v.  Bailey 95  N.  Y.  206     .     .     . 

V.  Johnson 15  N.  Y.  Sup.  Ct.  309 


620  A 
.  183 
.  132 
.  610 
.     565 


TABLE   OF  CASES                                                 IxXXV 

Macartney  v.  Graham 2  Sim.  285 649 

Macbean  v.  Irvine 4  Bil)l)  17 144 

MacGregor  v.  Rhodes 6  El.  &  B.  2GG 477 

Mack  V.  jSIeehanics  &  Farmers'  Sav. 

Bank .50  Hun  477 008 

Maekersy  v.  Ramsay 9  Clark  &  F.  818  .  249,  272,  277 

Maekcy  ?;.  Craig 144  I nd.  203 370 

Mackintosh  v.  Eliot  Nat.  Bank       .     .     123  Mass.  393 470 

Maclaren  v.  Stanton IG  Beav.  279 4G 

Macomber  v.  Doane 2  Allen  541 .506 

Macungie  Sav.  Bank  v.  Hottenstein    .  89  Pa.  St.  328  .     .     .     .II.  230  I 

Maey  v.  Williams 83  Hun  243 GIG 

Madderom  v.  Do  Young 35  111.  App.  588    .     .     .     .  421  d 

Madison  &  Indianapolis  R.  R.  Co.  v. 

Norwich  Sav.  Soe 24  Ind.  457  .     .     .     89,  98,  n.  36 

Madison  Bank  v.  Price 79  Kan.  289      ....  697,  709 

Madison  Trust  Co.  v.  Carnegie  Tr.  Co.  167  App.  Div.  4    .     632  A  g,  777 

Magee  v.  Carmack 13  111.  289 489 

Magruder  v.  Colston 44  Md.  349  ....      II.  250  d 

Maguire  v.  Dollar  Sav.  Bank      .     .     .  131  Pa.  St.  362      ....     493 

Magvvood  V.  Southwestern  R.  R.  Bank     5  Rich.  L.  379 714 

Mahaiwe  Bank  r.  Douglas     ....  31  Conn.  170   .     .     9,  n.  9,  221, 

480,  484,  485,  486 

Maher  v.  Brown 2  La.  492 496 

Mahon  v.  Dime  Sav.  Bank    ....  92  App.  Div.  506  ....     612 

t;.  Germania-Amer.  Nat.  Bank     111  Minn.  313 314 

V.  South  Brooklyn  Sav.  Inst.   .  175  N.  Y.  69     .     .      620  b,  620  c 

Mahony  v.  East  Ilolj^ord  ]\Iining  Co.  33  Law  T.  383       ....     440 

Maimi  v.  Shutts 59  Fla.  462 183,  186 

Main  v.  Second  Nat.  Bank    ....     6  Biss.  26 II.  257 

Maine  Bank  v.  Butts 9  Mass.  49 309 

Maine  Tr.  etc.  Co.  v.  So.  L.  &  T.  Co.     92  Me.  443 770 

Maine  Tr.  &  Banking  Co.  v.  So.  Loan 

&  Tr.  Co 92  Me.  444 690 

Maitland  v.  Citizens'  Nat.  Bank     .     .     40  Md.  540 565,  600 

Malcolm  v.  Scott 5  E.xch.  601 .     .     .   398,  408,  605 

Mallett  V.  Simpson 94  N.  C.  37 56 

Man  V.  Boykdn 79  S.  C.  1 675,  679 

683,  690,  694 

Manchester  Bank  v.  Fellows       .     .     .     28  N.  H.  302 223 

Mandeville  v.  Union  Bank     ....     9  Cranch  9 557,  558 

V.  Welch 5  Wheat.  286    ..     .     493,  494, 

502,  528,  550 

Manhattan  Co.  v.  Eversz 171  111.  App.  449  ....       74 

V.  Lydig 4  Johns.  377      ..     .     98,  n.  20, 

179,  291,  295 
Manhattan  Life  Ins.  Co.  v.  First  Nat. 

Bank 20  Colo.  App.  529      ...     218 

Manitou  v.  First  Nat.  Bank  ....  37  Colo.  344      ..     .   289  a,  324 

Mann  v.  Mann 1  Johns.  Ch.  231   ...     .     GOG 

V.  Pentz 2  Sandf.  Ch.  259  .     .     .     .     G71 

V.  Second  Nat.  Bank  of  Spring- 
field      30  Kan.  412,  34  id.  746   .  135,  603 

z;.  Shrine Ill  App.  Div.  452      .     .     .     609 

Manning  v.  McClure 36  111.  489 565 


IxXXvi  TABLE   OF  CASES 

Manning  v.  Maytubby 42  Okla.  414 295 

V.  Purcell 1  Sm.  &  G.  284     ....     606 

V.  Westerne 2  Vern.  606 327 

Manningford  v.  Toleman 1  Coll.  670 326 

Manny  v.  Spokane  State  Bank  ...  78  Wash.  230    ...     .       144  d 
Manufacturers  &  Mechanics'  Bank  v. 

Gore 15  Mass.  75 544 

Manxifaeturers'  Bank  v.  Con.  Bank     .     148  Mass.  553 217 

V.  Perry 144  Mass.  313 454 

Manufacturers'  Nat.  Bank  v.  Baack   .  8  Blatchf.  149  .     .     .     .    II.  257 

V.  Barnes 65  111.  69      .     .     .   291,  463,  467 

V.  Thompson 129  Mass.  438 351 

Mapes  V.  Scott 88  lU.  352 II.  228 

V.  Second  Nat.  Bank  of  Titus- 

viUe 80  Pa.  St.  163 103 

Marine  Bank  v.  Biays 4  Har.  &  J.  338     .     .     .     .     716 

V.  Biruey 28  111.  90 312 

V.  Chandler 27  111.  525 191,  312 

V.  Clements 3  Bos.  600 158 

V.  Fulton  Bank 2  WaU.  252 247,  248 

289,  493,  567,  568 

V.  Ogden 29  111.  248 312,  447 

V.  Rushmore 28  111.  463    ..     .  248,  312,  568 

V.  Smith 18  Me.  99 231 

?;.  Stirling 115Md.  90.     .     .     .       290,335 

Marine  Nat.  Bank  v.  City  Nat.  Bank  59  N.  Y.  71       ...    414,  n.  16 

and  17,  480,  482 

Marion  Nat.  Bank  v.  Thompson     .     .  101  Ky.  277      ...      II.  230  b 

Maritime  Bank  v.  Union  Bank  ...  4  Mon.  L.  R.  (S.  C.)  244    .     406 

Market  v.  Hartshorne 3  Keyes  137 569 

Market  Street  Bank  v.  Stumpe       .     .  2  Mo.  App.  545     ....       37 

Markle  v.  Hatfield 2  Johns.  455      .     .  289,  659,  662 

Marlborough  Mfg.  Co.  v.  Smith      .     .     2  Conn.  544 712 

Marr  v.  Bank  of  West  Tenn.      .     .     .  4  Lea  578     .     671,  672,  673,  691 

Marrett  v.  Brackett 60  Me.  527 424,  544 

Marsh  v.  First  State  Bank     ....  185  111.  App.  29     ....     208 

V.  Fulton  Co 10  Wall.  676 43 

V.  Keogh 82   App.  Div.  503      ...     610 

V.  Oneida  Central  Bank       .     .  34  Barb.  298     ..     .     289,  324, 

559,  560,  568 

V.  Wheeler 77  Conn.  449 HI 

Marshall  v.  Amer.  Express  Co.  ...     7  Wis.  1 45 

V.  Farmers'  Bank 85  Va.  676 128 

V.  Sherman 84  Hun  186 693 

V.  Treeman 52  lU.  App.  42       ....  421  d 

Marston  v.  Marston 21  N.  H.  491 608 

Martin  v.  Bank  of  U.  S 4  Wash.  C.  C.  253     649,  650,  651 

V.  Funk 75  N.  Y.  134     .     .     .     .  610,  615 

V.  Hibernia  Bank 127  La.  301       ...       249,  272 

V.  Home  Bank 30  App.  Div.  498     ..     .     238 

V.  Kansas  Nat.  Bank      ...  66  Kan.  655      ...    342,  590  d 

V.  KunzmuUer 37  N.  Y.  396 329 

V.  McCullough 136  Ind.  331 610 

V.  Mechanics'  Bank   ....     6  Har.  &  J.  235     .     .     .     .     562 

V.  Morgan 3  Moore  635     ...     .  389,  449 


TABLE   OF   CASE8 


IxxxA'ii 


Martin  v.  Munroe    .... 

V.  St.  Aloysius  Church 

■ V.  Webb 

V.  Wilson       .... 

Marvin  v.  Ellewood       .     .     . 
Marvine  v.  Hymers 
Maryland  Tr.  Co.  t 
Bank  .... 


Nat.  Mechanics 


Marymount  v.  Nevada  State  Banking 

Board 

Marzetti  v.  Williams 


12  Md.  679  . 
95  Atl.  768  . 
110  U.  S.  7  . 
120  Fed.  202 
1 1  Paige  365 
2  Kern.  223 . 

102  Md.  608 

102  Md.  629 


Mason  v.  Dousay 

V.  Hunt    . 

V.  Moore  . 


V.  Stevens 

Mason   Benefit   Ass'n   v.  First  State 

Bank 

Masonic  Sav.  Bank  v.  Bangs      .     .     . 
Massachusetts  Nat.  Bank  v.  Bullock  . 

Master  v.  Miller 

Mathew  v.  Sherwell 

Mathews  v.  Massachusetts  Nat.  Bank 

V.  Skinner 

Mathias  v.  Fowler 


33  Nev.  333   .  . 
1  Barn.  &  Ad.  415 

35  111.  424  .  . 
1  Dougl.  297  . 
73  Ohio  St.  275 

128/ 
16  S.  D.  320  . 


99  Miss.  610 
84  Kv.  140  . 
120  Mass.  86 
4  T.  R.  320  . 


Matter  of  Bolin 

Matter  of  Crawford  .... 
Matter  of  McElheny  .... 
Matthews  v.  Brooldyn  Sav.  Bank. 

— V.  Columbia  Nat.  Bank  . 

Mauran  v.  Lamb 

Maury  v.  Coyle 

V.  Ingraham       .... 

May  V.  Jones 

V.  McQuillan     .... 

i;.  Le  Claire 

V.  Ulich 


458 


Mayall  v.  Boston  &  Maine  R.  R.  Co. 
Mayer  v.  Chattahoochee  Nat.  Bank    . 

V.  Ilartranft 

;.'.  JSIode 

Mayhew  v.  Eames 

Maynard  v.  Bank 

V.  Maynard 

I'.  Newman 

Mayor  v.  Johnson 

V.  Thomas 

Mayor  of  Colchester  v.  Lowten  .     .     . 

Mayor  of  Macon  v.  First  Nat.  Bank  of 

Macon 

Mayor  of  N.  Y.  v.  Tenth  Nat.  Bank  . 


2  Taunt.  439  . 

I  Holmes  396  . 
62  ISIo.  329  .  . 
124  ISId.  655  . 
136  N.  Y.  177  . 
113  N.  Y.  560  . 
91  App.  Div.  131 
151  App.  Div.  527 
77  Fed.  372  . 
7  Cow.  174  .  . 
34  Md.  235  .  . 
28  Miss.  171  . 
88  Ga.  311  .  . 
129  Mich.  392  . 

II  Wall.  217  . 
132  Mich.  6  . 
19  N.  H.  122  . 
51  Ga.  325  .  . 
28  Fed.  358 .  . 
14  Hun  155.  . 

3  Barn.  &  Cr.  601 
1  Brewster  483 
49  Vt.  299  .  . 

1  Nev.  271  .  . 
3  Camp.  324  . 
5  Cold.  600  .  . 

2  Kent  Com.  280 
226 .  .  . 


59  Ga.  648  . 
Ill  N.  Y.  446 


.604  a 
3 
133, 171 
.  688 
.  342 
.  156 

77,  675  c, 
7,  II.  229 
.  .  134 


13 
311, 
,  459,  507 
12,  n.  13 
.  .  225 
125.  128, 
2  6,  II.  253 
.  .   14 


322  c,  473 
.  325 
346  A 
.  481 
400  A 
.  159 

,  II.  228 
.  609 
.  613 

608,  615 
324,  326  g 
.  610 
.  670 
.  393 
.  203 

652,  761 
.  265 
.  683 

565,  n.  1 
.  689 
.   98 

185,  605 
.  489 
.  389 
.  104 
II.  244 
.  21 
.  192 
.  650 
II.  24H 
Ves.  &  B. 

.  .   62 


II.  241  0 

.     .     136 


IxXXviii  TABLE   OF   CASES 

McAllister  v.  Commonwealth     ...     30  Pa.  St.  536 590 

V.  Oberne 42  111.  App.  287     ...     .     494 

McAnderson  v.  Security  State  Bank   .     25  S.  D.  590 458 

McBee  v.  Purcell 1  Ind.  T.  288    .     .     .     .     289  a, 

311,  568 

McBoyle  v.  Union  Nat.  Bank     ...  162  Cal.  277     .     .    48,  152,  157, 

158,  159  g,  II.  208  a 

McBride  v.  111.  Nat.  Bank     ....  138  App.  Div.  339     ..     .     219 

V. 128  App.  Div.  503     .     .      II.  52 

V. 163  App.  Div.  417      .     .  272,  278 

McBrides  v.  Farmers'  Bank  ....     26  N.  Y.  450 599 

McCagg  V.  Woodman 28  lU.  84      ....       559,  560 

McCall  V.  Byram  Mfg.  Co 6  Conn.  420 46 

McCalmont   v.  banning 154  Fed.  353 136  / 

McCartee  v.  Orphan  Asylum  Society  .     9  Cow.  437 55 

McCartney  v.  Earle 115  Fed.  462     ...     .     II.  57, 

82,  83  A,  250 

McCarthy  v.  First  Nat.  Bank    ...  223  U.  S.  493    ..     .  II.  230  b, 

230  /,  230  g, 

y. 23  S.  D.  267      ....    II.  230 

y.  Kepreta 24  N.  D.  395     .     .   104,  137,  166 

McCarty  v.  Roots 21  How.  432     ..     .       565,  600 

McCauley  v.  Rigewood  Tr.  Co. .     .     .     81  N.  J.  L.  86 777 

McCausland  v.  Roseville  Tr.  Co.    .     .     94  Atl.  591 777 

McCIain  v.  Lowther 35  W.  Va.  297 373, 

421  d,  421  /,  552 

V.  Rankin 197  U.  S.  154  .  .  .  675,  678, 

694,  II.  212  b 

V. 119  Fed.  110  ...  .  II.  250 

MeClellan  v.  Chipman 164  U.  S.  347    .     .  II.  208  /,  241 

McClendon  v.  Bank  of  Advance     .     .  188  Mo.  App.  417      ...     444 

MeCloskey  v.  Tierney 141  Cal.  101 608 

McCord  V:  Cahfornia  Nat.  Bank    .     .  96  Cal.  197  ......     317 

McCormick  v.  Trotter 10  Serg.  &  R.  94   .     .     .     .     299 

McCormick  Harvesting  Mach.  Co.  v. 

Yankton  Sav.  Bank 15  S.  D.  196 248 

McCrath !;.  Nat.  Mohawk  Valley  Bank     104  N.  Y.  414 78 

McCuUough  V.  AnnapoUs  R.  R.      .     .     4  Gill  58 43 

McCurdy's  Appeal 65  Pa.  St.  29 12 

McDaniel  v.  Harvey 51  Mo.  App.  198  ....     133 

McDonald  v.  Amer.  Nat.  Bank       .     .     25  Mont.  456 208 

V.  Chemical  Nat.  Bank  .     .     .     174  U.  S.  610 452 

V.  De  Fremery 168  Cal.  189      132  6,  II.  234,  253 

V.  Dewey 134  Fed.  528     ..     .       679,  683 

V. 202  U.  S.  510    .     .  683,  II.  212  a 

V.  Mosher 23  111.  App.  206     ...     .     421 

?;.  Thompson 184  U.  S.  71      ...     .675,678 

V.  WiUiams 174  U.  S.  397    .     .     .     .II.  238 

McDougal  V.  Bellamy 18  Ga.  411 45,  121, 

656,  690,  692,  758 

V.  Lane 18  Ga.  444   .     .     .   656,  669,  687 

McDowell  V.  Bank  of  Wilmington  .     .  1  Harr.  369  .     .    9,  324,  562,  698 

687,  II.  212  b,  250 

McEkoy  V.  Albany  Sav.  Bank  ...  8  App.  Div.  46      ....     609 

McEwen  y.  Davis 39  Ind.  11 313,342 


TABLE   OF   CASES 


Ixxxix 


McFadden  v.  Follrath 


V.  Jenkins 
V.  Wilson 


McGahan  v.  Lockett  . 
McGill  V.  Bank  of  U.  S. 
1).  Ott  .     .     .     . 


McGirr  v.  Aaron 

McGough  V.  Jamison  .... 
McGrade  v.  German  Sav.  Inst.  . 
McGratli  v.  Reynolds  .... 
INIcGraw  v.  Union  Tr.  Co.      .     . 

V.  Traders'  Nat.  Bank     . 

McGregor  v.  Battle 


114  Minn.  85    .     .     .  457  b,  494, 
532  A,  543,  544,  540 

1  Hare  458 (310 

9()  Ind.  253  . 
54  8.  C.  364 
12  Wheat.  511 
10  Lea  147  . 
1  Pa.  St.  49 
107  Pa.  St.  336 
4  Mo.  App.  330 
116  Mass.  566  . 
135  Mi  eh.  609  . 
64  W.  Va.  509  . 
128  Ga.  577 .     . 


.     .     50(i 

.     .     494 

.     .       33 

.     .     557 

.     .       76 

302,  322 

.     .     522 

.     .     615 

.     .     338 

.     .     290 

186,  205,  2S9, 

568,  624,  625  O,  629 


V.  Loomis 

V.  Third  Nat.  Bank 

V.  Witham     .     .     . 


McGuire  v.  Auburn  Sav.  Bank  . 

V.  Grant   .   ' 

V.  Murphy 


McHenry  v.  Old  Citizens'  Nat.  Bank 
McHugh  V.  Co.  of  Schuylkill  .  .  . 
Melndoe  v.  City  of  St.  Louis      .     .     . 

Mcintosh  V.  Lytle 

Mclver  v.  Robinson 

McKachan  v.  Bank  of  Columbus    .     . 

McKay  v.  Myers 

McKelroy  v.  So.  Bank  of  Ky.     .     .     . 

Mclvinney  v.  Ellsworth 

McKinnon  v.  Morse 

V.  Western  Development  Co.  . 

McKinster  v.  Bank  of  Utica  .... 

McKnight  v.  Bank  of  Acadia     .     .     . 

v.V.S 


McLaflin  v.  Jones  .  .  . 
Me  Lain  v.  Wallace  .  .  . 
!McLaren  r.  Pennington     . 

V.  State     .... 

McLean  v.  City  State  Bank 

V.  Eastman   .     .     . 

V.  Lafayette  Bank 


1  Disney  247  . 
124  Ga.  557  . 
126  Ga.  707  144 
78  App.  Div.  22 
1  Dutch.  317  . 
107  App.  Div.  104 
85  Ohio  St.  203 
67  Pa.  St.  391  . 
10  Mo.  577  .  . 
26  ISlinn.  336  . 
53  Ala.  456  .  . 

164  N.  C.  24  . 
168  Mass.  312  . 
14  La.  Ann.  458 

165  Cal.  326  . 
177  Fed.  576  . 
212  Fed.  702  . 

9  Wend.  46,  11  id 

114  La.  289   . 


115  Fed.  972 
155  111.  539  . 
103  Ind.  562 
1  Paige  102  . 
141  Wis.  577 
210  Fed.  21 . 
21  Hun  312 
3  McLean  587 


V.  Moore 


McLemore  v.  La.  State  Bank 
McLennan  v.  Bank  .... 

V.  Farmers'  Sav.  Bank 

McLeod  V.  Drummond      .     . 
V.  Evans 


McMahon  v.  Bank 

— V.  Lawler 

McManus  v.  Crickett 

McMasters  v.  Pennsvlvania  R.  Co. 


145  S.  W.  1074 
91  U.  S.  27  .  . 
87  Cal.  569 
131  Iowa  696  . 
17  Ves.  Jr.  153 
()6  Wis.  401   . 
67  Conn.  78 
190  Mass.  343  . 
1  East  106  .  . 
69  Pa.  St.  374  . 


311,  494 

II.  250  a 

147  c,  169  a 

.     .     342 

102,  n.  13 

.  608 

.  474 

.  468 

.  754 

.  370 

II.  241  j 

.  166 

.  456 

.  466 

106,  146/ 

128,  II.  253 

.  .  .  102  c 

473  .  .  232, 

251,  252 

289  e,  322  a, 

373,  458,  459 

.  .  II.  259 

...  317 

186,  210,  568 

.  .  .  338 


...  56 
...  708 
.  .  9,  n.  9, 
50,  73,  704 
694,  II.  142 
.  II.  20S/ 
.  .  171  h 
.  324,  590 
.  .  .  317 
248,  567,  568 
...  615 
.  .  .  610 
.  102,  n.  9 
.  .  9,  n.  7 


xc 


TABLE   OF   CASES 


McNamara  v.  TvIeDonald 

McNeely  Co.  v.  Bank  of  North  America 

McNeill  V.  Paco 

McNulta  V.  Corn  Belt  Bank  .... 

McQuiddy  v.  King 

McVeigh  v.  City  of  Chicago  .... 

McWilliams  v.  Webb 

Meach  v.  Meach 

Meacher  v.  Fort 

Mead  v.  Engs 

V.  Young 

Meadors  v.  Johnson 

Meadow  v.  DoUar  Sav.  Bank     .     .     . 

Meadowcroft  v.  People 

V. 

Meads  v.  Merchants'  Bank  .... 
Mechanics  &  Farmers'  Bank  v.  Smith 
Mechanics  &  Traders'  Bank  v.  Dakin 

V.  Debolt 

Mechanics'  Bank  v.  Bank  of  Columbia 

V.  Crow 

V.  Earp     . 

V.  Levy 

V.  Merchants'  Bank   .... 

V.  Seitz  Bros 

V.  Seton 

V.  Straiton 

V.  Valley  Packing  Co.     .     .     . 

Mechanics'  Banking  Association  v. 
New  York  &  Saugerties  Lead  Co.    . 

Medland  Nat.  Bank  v.  Brightwell  .     . 

Meighan  v.  Emigrant  Ind.  Sav.  Bank 

Meighen  v.  Bank 

Meirke  v.  Jefferson  Co.  Sav.  Bank 

Meisser  v.  Thompson 

Mellen  v.  Whipple 

Melton  V.  Pensacola  Bank      .... 

Melville  v.  Doidge 

Mendel  v.  Boyd 

Mentz's  Assignee  v.  Mahoney     .     .     . 

Mercantile  Bank  v.  JNIcCarthy   .     .     . 

V.  New  York 

Mercantile  Nat.  Bank  v.  N.  Y.       .     . 

V. 

Mercantile  Tr.  Co.  v.  Miller  ,     .     .     . 

Mercer  v.  Dyer 

Merchant  v.  Merchant 

Merchants  &  Farmers'  Bank  of  Char- 
lotte V.  Meyer .     . 

Merchants  &  Manufacturers'  Nat. 
Bank  v.  Stafford  Nat.  Bank    .     .     . 


69  Conn.  484 615 

221  Pa.  St.  588      ...      291  e, 
472,  473,  474 

69  Fla.  349 696 

164  111.  427  .     119,  150,  714,  730 

67  So.  1015 II.  15 

49  111.  318  ...  .  II.  241  j 
32  Iowa  577  ...  492,  541 
24  Vt.  591 550 

3  Hill  (S.  C.)  227  .  .  .  .  476 
5  Cow.  303 232 

4  T.  R.  28  .  .  .  .  474,  480 
27  Okla.  544     ..     .       II.  230  i 

56  Ga.  605 302 

103  111.  56 628  b 

163  111.  56 628  & 


25  N.  Y.  143 
19  Johns.  115 
50  Barb.  593 
1  Ohio  St.  591 
5  Wheat.  326 


155,  414,  n.  14 
...     291 
.     .     .     346 
...         6 
.     .     .70,  102, 
n.  21,  154,  156,  744 

60  N.  Y.  85 565 

4  Rawle  384      224,  249,  250,  269, 

274,  283,  290,  702,  703,  704 

3  Paige  606 360 


6  Met.  13  .  .  . 

226,  256,  299 

130  Pa.  St.  632   . 

.  .  .  562 

1  Pet.  299  ..  . 

.   133,  699 

3  Keyes  365   .  . 

...  370 

4  Mo.  App.  200  . 

.  .  217,  593 

23  How.  Pr.  74,  35 

N.  Y.  505  98, 

n.  34,  158 

148  Mo.  358  . 

...  237 

168  App.  Div.  542 

.  .  .620  b 

25  Pa.  St.  288  . 

.  .113,295 

208  N.  Y.  347  . 

.  .   620  cJ 

9  111.  App.  368 

.  .  693,  696 

1  Gray  321 

...  499 

190  Fed.  126  . 

.  .  .  166 

6  C.  B.  450  .  . 

...   26 

71  Neb.  657   . 

.  .   169  a 

150  Ky.  409   . 

.  169  a,  357 

7  Mo.  App.  318 

...  171 

121  U.  S.  138  . 

.  .   II.  241  V 

121  U.  S.  138  . 

.  .  .47,  767 

172  N.  Y.  35  .  I 

I.  241  u,  241  w 

166  Cal.  563   . 

.  .  .   622  A 

15  Mont.  317  . 

.  ...  338 

2  Bradf.  432  . 

.  ...  611 

74  N.  C.  514     ..     .      II.  230  h 
44  Conn.  564,  U.  S.  Dist.  Ct.  252 


TABLE   OF   CASES 


XCl 


Merchants  &  Planters'  Bank  v.  Meyer 

Merchants  &  Planters'  Nat.  Bank  v. 

Trustees  of  Masonic  Hall  .     .     .     . 

Merchants'  Bank  v.  Baird      .... 


V.  Cardoza 

V.  Carhart 

V.  Central  Bank 

V.  Clark 

V.  Cook 

V.  Denierc 

V.  Exch.  Bank  of  New  Orleans 

V.  Jefferies 

V.  Lassee 

V.  Livingstone 

V.  Maple 

V.  Marino  Bank 

V.  McNeir 

V.  Prudential  Ins.  Co.      .     .     . 
11.  Rudolf 


56  Ark.  499 

G5  Ga.  003    . 
IGO  Fed.  042 


3  Jones  &  S.  102 
05  Ga.  394   . 
1  Kelly  418  . 
139  X.  Y.  314 

4  Pick.  405  . 
92  Ga.  739  . 
10  La.  457  . 
21  W.  Va.  504 
33  Mo.  350  . 
74  N.  Y.  223 

05  111.  App.  484 
3  Gill  90  .     . 
51  Minn.  123 
110  Mo.  App 
5  Neb.  527  . 


V.  Spicer 

V.  State  Bank 

V.  Superior  Candy  etc.  Co. 

Merchants  etc.  Nat.  Bank  v.  First  Nat. 

Bank 

V.  Horton 


0  Wend.  445 
10  Wall.  075 
41  Wash.  053 


170  S.  W.  852 
27  Okla.  689 


02 


317,  562  a,  568 


.    II.  243 

.    05,  74, 

414,  414/ 

.     11.201 

.     .     202 

154,  744 

.     .     134 

.     .     716 

.     .     325 

.  479,  485 

.     .     173 

.      49,  52 

.     .     103 

.     .     324 

.     .     107 

.     . 158  c 

.     .     474 

.  40,  137, 

159  /,  107,  108 

.     .     .     393 

152,  155,  101 

...     454 


103 


.     .  399,  406 
II.  230  d,  230  n 


Merchants'  Lacede  Nat.  Bank  v.  Troy 

Grocery  Co 

Merchants'  Nat.  Bank  v.  Coates     .     . 

V.  Cook 

V.  Cumming 


V.  Eagle  Nat.  Bank  of  Mass.   . 

V.  Ford 

V.  Glendon  Co 

V.  Goodman 

V.  Hanson 

V.  Mears 

V.  Nat.  Bank  of  Commonwealth 

V.  Nichols 

V.  Ritzinger 

V.  Ritzinger  et  al 


144  Ala.  605 
79  ^lo.  168 
95  U.  S.  342 
Thompson's     Nat 

920.     .     .     . 
101  Mass.  281 
124  Kv.  403 
120  Mass.  97 
109  Pa.  St.  422 
33  Minn.  40 
8  Bissell  158 
139  Mass.  573 


II.  253,  257  a 

.     .  493,  522 

.     .    II.  252 

Bank     Cas. 

.     .  II.  24lb 

352,  404,  488 

.     .II.  200 

.      II.  200  a 

230,  274,  282 

.     .593,  752 

.     .     .       75 

349,351,352,455 


V.  Sharkey    .... 
V.  State  Nat.  Bank     . 


V.  Stone 
V.  Tracy 

S. 


U. 


V.  Wehrmann 


223  111.  41     .     .     291  e,  357,  300 

20  Brad.  App.  29  .     .     .  494,  530 

118  111.  480,  20  111.  App.  29     329, 

309.  372.  375 

64  Or.  32      .     .     .  II.  230,  230  c, 

230  (/,  230  A- 

10  Wall.  004      .     .    40,  51,  98.  n. 

31,  152,  153,  155,  158,  100.  171, 

174,  298,   359,   378,  402,  413, 

414,  n.  10.  II.  208  g 

115  Mich.  048 329 

77  Ilun  443 160 

101  U.  S.  1  .  .  .  .  II.  241  u 
214U.  S.  23  ....  11.41 
09  Ohio  St.  100     .     .  48,  78,  090 


Xcii                                                    TABLE   OF  CASES 

Merchants'  Nat.  Bank  v.  Wehrmann  202  U.  S.  295    .     .    59,  77,  78  b, 

690,  II.  208  a 

Merchants'  State  Bank  v.  Tuft  .     .     .  14  N.  D.  238    .     .     .     .     74,  78 

Mercia  v.  Burget 36  Ind.  App.  453  ...     .       47 

Meriden  Sav.  Bank  v.  MeCormack      .     79  Conn.  260 608 

Meredith  v.  Amer.  Nat.  Bank    ...  127  Tenn.  90    .     .     .      II.  230  a 

V.  First  Nat.  Bank     ....  127  Tenn.  68    .     .     .      II.  230  n 

Merriam  v.  Haas 154  U.  S.  542 605 

t;.  Woloott 3  Allen  258 477 

Merrick  v.  Bank  of  the  MetropoUs      .     8  Gill  59 110,  120 

MerriU  v.  First  Nat.  Bank     ....  75  Fed.  148       ....      629  A 

j;.  Shaw 38  Me.  267 688 

Merritt  v.  Gate  City  Nat.  Bank     .     .     100  Ga.  147 421  d 

Mervin  v.  Butler 17  Conn.  138 45 

Mester  v.  Quincy  Nat.  Bank      ...  163  111.  App.  645  ...     .     208 

Metcalf  V.  Merchants'  etc.  Bank     .     .  89  Miss.  649     ...     .       186  a 

Metcalfe  v.  Bruin 12  East  400 29 

V.  WiUiams 104  U.  S.  98 365 

MetropoUtan  Bank  v.  Claggett  ...  141  U.  S.  520    ..     .      II.  244  a 

1;.  Godfrey 23  111.579 74 

MetropoUtan  Nat.  Bank  v.  Jones   .     .     137  111.  634 494 

„.  Loyd 90  N.  Y.  530     .     .     .     .  574,  .589 

MetropoHtan  Sav.  Bank  v.  ^lurphy    .     82  Mich.  314 609 

MetropoUtan  Stock  Exch.  v.  Lyndon- 

viUe  Nat.  Bank 76  Vt.  303 730 

MetropoUtan  Tr.  Co.  v.  Mclvinnon     .     172  Fed.  846 77,  78  b 

Melzger  v.  So.  Bank 98  Miss.  108 166 

Meuer  v.  Phenix  Nat.  Bank  ....  94  App.  Div.  331  .     .     .     .     406 

V, 87  App.  Div.  281  .      414  e,  414  g 

Meyer  v.  First  Nat.  Bank      ....  10  Idaho  175    ..     .  II.  52,  253 

V.  Indiana  Nat.  Bank     ...  27  Ind.  App.  354  .     .     .     .     457 

I,.  Rosenheim 115  Ky.  409 248  a 

Meyers  v.  Knickerbocker  Tr.  Co.    .     .     139  Fed.  Ill 675 

.?;.  New  York  County  Nat.  Bank  36  App.  Div.  187       .     .     .  326  g 

V.  VaUey  National  Bank      .     .  18  Nat.  Bank'cy  Reg.  34    .       77 

Miami  v.  Shutts 59  Fla.  462 568 

Michener  v.  Dale 23  Pa.  St.  59 611 

Michigan  State  Bank  v.  Gardiner  .     .     15  Gray  356 576 

Michigan  Tr.  Co.  v.  State  Bank      .     .     Ill  Mich.  306 702 

Midland  Nat.  Bank  v.  Brightwell  .     .     148  Mo.  358 214 

Midland  Sav.  etc.  Co.  v.  Foss  Imp.  Co.     34  Olda.  564 777 

Mierke  v.  Jefferson  Co.  Sav.  Bank       .     208  N.  Y.  347 620  d 

Milburn  v.  State  of  Maryland    ...     1  Md.  1 42  c 

Miles  V.  Macon  Co.  Bank      ....  187  Mo.  App.  230      .     .  169,  320 

Milford  V.  Worcester 7  Mass.  48 754 

Millard  v.  Nat.  Bank  of  Republic  .     .  3  McArthur  54      ....     474 

MiUer  v  Austen 13  How.  218       51,  289,  299,  300 

„.  Bank 172  Pa.  St.  197      ...     .  289  d 

V.  BilUngsly 41  Ind.  489 499 

V.  Burk 68  N.  Y.  615     .     .     .     .  9,  n.  12 

V.  Connor 177  Mo.  App.  630      ...   675, 

678.  687,  688 

J,.  Dows 94  U.  S.  444 12 

V.  Farmers  &  Mechanics'  Bank     30  Md.  392 591 

V.  King 223  U.  S.  505    .     .     75,  II.  208  b 


TABLE   OF  CASES 


XClll 


Miller  v.  Lowe 

V.  Mickel 

V.  Miller 

V.  Norton 

V.  Payne 

V.  Pierpont 

V.  Race 

V.  Receiver  of  Franklin  Bank 

V.  Spaulcling 

V.  State  Bank 

Miller's  Appeal 

Milliken  v.  Sharpleigh 

V.  Steiner 

Million  V.  Commercial  Bank       .     . 
Mills  V.  Bank  of  U.  S 


V.  Barney 

Mills  Co.  Xat.  Bank  v.  Perry     .     .     . 

Millspaugh  v.  Putnam 

iMillward  Cliff  Estate 

]\Iilmo  Nat.  Bank  v.  Cobbs   .     .     .     . 

Milnes  v.  Dawson 

Milroy  v.  Lord 

Minard  v.  Walts 

Mine  etc.  Supply  Co.  v.  Stockgrowers' 

Bank 

Miners  etc.  Bank  v.  Snyder   .... 

Minet  v.  Gibson 

Mingus  V.  Bank  of  Etlu-I 

Mining  Co.  v.  Anglo-California  Bank 
Minneapolis  Threshing  Alach.  Co.  v. 

Jones 

Minneapolis  Tr.  Co.  v.  Manage  .  . 
Minor  v.  INIechanics'  Bank     .... 


IGO  Cal.  90       .     . 
9  Colo.  331 
3  P.  Wms.  356       . 
114  Va.  609       568, 
150  Wise.  351 
87  Conn.  406 
1  Burr.  457  . 

I  Paige  444  . 
107  Me.  264 
57  Minn.  310 
218  Pa.  St.  50 
36  Mo.  599  . 
56  Ga.  251  . 
159  Mo.  App.  601 

II  Wheat.  431 

22  Cal.  240 

72  Iowa  15 

16  Abb.  Pr.  380 

161  Pa.  St.  157 

53  Tex.  Civ.  App. 


569 


338 


221 


414 


5  Exch.  948 
4  DeG.  F.  &  J. 
186  Fed.  245 


264 


173  Fed.  859  .  .  . 
100  ISId.  57  .  .  . 
1  H.  Bl.  509,  3  Term 
136  Mo.  App.  407  . 
104  U.  S.  192  .  .  . 


481 


.  678 

.  334 

.  611 

577,  585 

.  717 

295  / 

637,  654 

343,  641 

.  (i96 

.  604  a 

632  A  g 

.  592 

.  98  a 

.  166 

9,  n.  19, 

231,  233 

.  299 

.  129 

.  610 

.  146  c 

414  a, 

h,  414  I 

.     551 

.  610 

.  185 


50,  65 
.  770 
.  370 
.  324 
.  358 


V.  Rogers 


Minturn  v.  Fisher 

Missouri  etc.   Tr.   Co.  v.   Third  Nat. 

Bank 

Missouri  Pac.  Ry.  Co.  v.  Continental 

Nat.  Bank 

Missouri  River  Telegraph  Co.  v.  First 

Nat.  Bank  of  Sioux  City  .... 
JNIissouri  State  Bank  v.  South  St.  Louis 

Founch-y  Co 

Mitchell  I'.  Bank  of  Indianola     .     .     . 

V.  Beelanan 

V.  Cook 

V.  Easton 

V.  Howe  Sav.  Bank    .... 

V.  Walker 


95  Minn.  127 74  c 

73  Minn.  441 772 

1  Pet.  46      .     .       24,  26,  30,  37, 
42,  98,  102,  171,  172,  669,  675 

40  Conn.  572 610 

4  Cal.  35      .     381,  382,  383,  387 

154  Mo.  App.  89   .     .  463,  476  h 

212  Mo.  505        186,  289  a,  322  a 


74  111.  217     .     . 

145  Mo.  App.  257 
98  Miss.  658 
67  Cal.  117 
29  Barb.  243 

37  Minn.  335 

38  Hun  257 
25  Inter.  Rev 


Ree 


Mix 


■  V.  Wilkins 

Nat.  Bank  of  Bloomington 


II.  230  b 


186,  289  a 
. 322,  687 
.  .  159 
.  .  302 
.  .  620 
ord  64  .  II. 
257 
.  .  302 


37  Minn.  335  ...  . 

91  111.  20 14,  600 


xciv 


TABLE   OF   CASES 


Mobile  V.  Tuille  .... 
Mobley  v.  Clark  .... 
Mohawk  Bank  v.  Broderick 


Mohawk  Nat.  Bank  v.  Schenectady 
Bank 

Moise  V.  Chapman 

Moline  State  Sav.  Bank  v.  Liggett 

Molt  Iron  Works  v.  Metropolitan  Bank 

Moniteau  Nat.  Bank  v.  Miller    .     .     . 

Monongahela  Nat.  Bank  v.  First  Nat. 
Bank 

V.  Overholt 

Montague  v.  Pacific  Bank      .... 

Montelins  v.  Charles 

Montgomery  v.  Albion  Nat.  Bank  .     . 

Montgomery  Bank  v.  Walker 

Montgomery  Co.  v.  Cochran       .     .     . 

Montgomery  Co.  Bank  v.  Albany  City 
Bank 


3  Ala.  144 43 

28  Barb.  390 227 

10  Wend.  306,  13  Wend.  133  9, 
n.  9  and  11,  243,  244,  389,  421, 
n.  4  and  9,  422,  425,  442 


V.  Bank  of  State  of  N.  Y.    .     . 

Moody  V.  Mack 

Moore  v.  Bank  of  Commerce      .     .     . 

V.  Bushell 

V.  Davis 

V.  Jones 

V.  Lowrey 

V.  Meyer 

V.  Ryder 

V.  Tenth  Nat.  Bank  .... 

V.  Turberville 

V.  Waitt 

Moores  v.  Citizens'  Nat.  Bank  of  Piqua 

Mordis  v.  Kennedy 

Morehouse  v.   Second  Nat.   Bank  of 

Oswego 

Moreland  v.  Brown 

V.  State  Bank 

Moreland's  Assignee  v.  Citizens'  Sav. 

Bank 

Morgan  v.  Bank  of  North  America 


V.  Bank  of  State  of  N.  Y.    .     . 

V.  Brower 

V.  First  Nat.  Bank      .... 

V.  Malleson 

V.  Merchants'  Nat.   Bank  of 


78  Hun  90  . 

24  Ga.  249  . 
106  111.  App. 
78  Wash.  294 
73  Mo.  187  . 

226  Pa.  St.  270 
96  Pa.  St.  327 
81  Fed.  602 
76  lU.  303  . 
50  Neb.  652 
181  Ala.  368 
126  Fed.  456 

3  Seld.  460  . 
8  Barb.  399 
3  Seld.  459  . 
43  Mo.  210  . 
52  Mo.  377  . 
27  L.  J.  Eq.  3 
57  Mich.  255 
3  Woods  53 

25  Iowa  336 
57  Ala.  20  . 
65  N.  Y.  441 
111  N.  Y.  447 
2  Bibb  602  . 
13  N.  H.  415 
111  U.  S.  156 
23  Kan.  408 

98  N.  Y.  503 
86  Fed.  257 
1  Breese  205 


143 


97  Ky.  217  .  . 
8  Serg.  &  R.  73 


1  Duer  434  .  . 
77  Ga.  634  .  . 
93  N.  C.  352  . 
L.  R.  10  Eq.  475 


Memphis 

V.  Tener 

U.  S.  Mortgage  &  Tr.  Co. 


Morley  v.  Culverwell 
Morrell  v.  Wootten 
Morrill  v.  Brown 


13  Lea  234 
83  Pa.  St.  305  . 
208  N.  Y.  218  . 
7  M.  &  W.  178 
16  Beavan  197 . 
15  Pick.  177   . 


...  698 
...  637 
.  .  .  620  & 
.  317,  604  a 
II.  230,  n.  51 

248  h 
II.  230  i 
.     631 
.  421 
II.  230 
144  6, 153, 169 
.  .  451,  56& 

232,  272,  278 
.  .  409 
.  .  278 
421,  n.  15 
.  .  103 
.512,  564 
493,  511,  521 
680,  II.  212  a 
495,  541 
214,  594 
565 
317 
359 
231 
103 
421,  544 

II.  230,  n.  56 
.  567  c 
159,  750 


697, 


II.  230 


.  266 
9,  n.  11, 

698,  709 
.  474 
.  679 

h,  230  n 
.  610 

103,  145 

267,  285 
.  472 
.  389 

398,  407 
.  637 


TABLE   OF   CASES  XCV 

Morrill  v.  Raymond 28  Kan.  415 343 

Morris  V.  Ala.  Carbon  Co 139  Ala.  020      ....  217,  249 

V.  Beaumont  Nat.  Bank      .     .  37  Tex.  Civ.  App.  97      .     9,  480 

V.  Edwards 1  Ham.  189 037 

V.  Eufaula  Nat.  Bank      .     .     .  100  Ala.  388    247,  247  c,  252,  421 

t;.  First  Nat.  Bank      ....     102  Ala.  301 Ill 

V.  State 102  Ark.  513 028 

V.  Third  Nat.  Bank    ....  142  Fed.  25    50,  50,  II.  208,  208  b 

Morris  Canal  cfc  Banking  Co.  v.  Van 

Vorst 3  Zabr.  98 42 

Morris-Milles  Co.  v.  Von  Pressentin    .  03  Wash.  74     .     .     .    230,  230  a 

Morrison  v.  Bailey 5  Ohio  St.  13    .     .     .      381,  382, 

383,  387,  494,  538 

V.  London  Co.  etc.  Bank     .     .  (1914)  3  K.  B.  350     .     .     .317  a 

V.  McCartney 3  Mo.  183 421 

V.  Price 23  Fed.  217       ...      11.  212  h 

Morse  v.  Chapman 24  Ga.  249 338 

■ V.  Hodson 5  Mass.  314 19 

V.  Mass.  Nat.  Bank    ....  1  Holmes  C.  C.  209  .      155,  157, 

378,  414,  425,  453 

y.  U.  S 174  Fed.  539     ....    11.259 

Mortimer  f.  Potter 213  111.178.     .     .      093,11.203 

Morton  v.  Nailor 5  Hill  583 494,  538 

V.  Rogers 14  Wend.  575 240 

Mortzeman  v.  Younkin 27  Iowa  350      .     .     .       II.  241  c 

Mosby  V.  Williamson 5  Heisk.  278 027 

Moses  V.  Frankhn  Bank 34  Md.  574 493,  519 

V.  OcoU  Bank 1  Lea  398 140,  719 

Mosler  Safe  Co.  v.  Guardian  Tr.  Co.  .  153  App.  Div.  117     ..     .    083, 

087,  691,  693,  696 

Moss  V.  Goodhart 209  Fed.  102     ...     .  II.  250, 

250  a,  250  A 

Mosse  V.  Salt 32  Beav.  209     .     .   292,  309,  326 

Mott  V.  Havana  Nat.  Bank  .     .     .     .     22  Hun  354 255 

V.  U.  S.  Tr.  Co 19  Barb.  568 754 

Moule  V.  Brown 4  Bing.  N.  C.  266,  4  Scott .     694 

238,  243,  421 

Moultrie  V.  Hoge 21  Ga.  513 128 

Mount  V.  First  Nat.  Bank     ....  37  Iowa  457      .     . 
Mount  Holly  L.  &  M.  Turnpike  Co.  v. 

Ferree 17  N.  J.  Eq.  118   . 

Mount  Morris  Bank  v.  Twenty-third 

W^ard  Bank 172  N.  Y.  246  .     . 

Mount  SteHing  Nat.  Bank  v.  Gre^e  99  Ky.  262  .     .     . 

Mount  Sterling  Turnpike  Co.  !;.Looney  1  Met.  (Kj-.)  550  . 

Mount  Vernon  Bank  v.  Porter   .     .     .  148  Mo.  170      .     . 

Mountford  v.  Harper 10  M.  &  W.  825    . 

Movins  V.  Lee 30  Fed.  298       .     . 

Moyser  v.  Whitaker 9  Barn.  «fc  Cr.  409 

Mudd  V.  Farmers'  etc.  Bank       .     .     .  175  Mo.  App.  398 

t;.  Reeves 2  H.  &  J.  308    .     . 

Mueneh  v.  Valley  Nat.  Bank      ..ell  Mo.  App.  144  . 

Muir  V.  Citizens'  Nat.  Bank ....  39  Wash.  57      .     . 


.  .  227, 

255 

713 

.  349, 

351, 

351  A, 

419 

• 

458 

. 

144 

173  6,  1 

76  a 

552 

130 

.  .  . 

380 

.  .  . 

573 

059 

559 

683.  II 

.  42, 

212  a, 

242 

XCVl 


TABLE   OF   CASES 


Muleahey    v.    Emigrant    Indus.    Sav. 

Bank 

V.  Hibernia  Sav.  etc.  Society    . 

Mulfinger  v.  ISIulfinger 

Mulherin  v.  Kennedy' 

Mullick  V.  Radakissen 

Mulllns  V.  Brown 

Mumford  v.  Hawkins 

Munger  v.  Albany  Co.  Bank       .     .     . 

Munn  V.  Burch. 

Munnerlyn  v.  Augusta  Bank       .     .     . 
Munson  el  al.  v.  SjTaeuse,  etc.  R.  R.  Co. 

Murphy  v.  Gumaer 

V.  INIetropolitan  Nat.  Bank 

V.  Wheatley 

Murray  v.  Cannon 

V.  Earl  of  Stair 

V.  Judali 

■  V.  Lardner 

■ V.  Nelson  Lumber  Co.     . 

V.  Piukett 

V.  Walker 

Murred  v.  Traders'  etc.  Bank     .     .     . 

Musco  V.  United  Surety  Co 

Musgrove  v.  Alacon  Co.  Bank    . 
INIussey  v.  Eagles'  Bank    .     .     .     .     , 
Mustard  v.  Union  Nat.  Bank     .     .     . 
Muth  V.  St.  Louis  Tr.  Co.      .     .     .     . 

Mutual  Bank  v.  Rotge 

Mutual  Savings  Inst.  v.  Enslin  .     . 
Mutual  Tr.  Co.  v.  Stern    .... 

Myers  v.  Albert 

V.  Board  of  Education     . 

V.  Southwestern  Nat.  Bank 


89  N.  Y.  435 
144  Cal.  219 
114  Md.  463 
120  Ga.  1080 

28  Eng.  L.  &  Eq 
32  Kan.  312. 

5  Den.  355 
85  N.  Y.  587 
25  lU.  35   . 
88  Ga.  337  . 
103  N.  Y.  58 
18  Colo.  App.  183 
191  Mass.  159 
102  Md.  501 
41  Md.  466  . 
2  Barn.  &  Cr.  82 

6  Cow.  484 


315 


94 


2  Wall.  110  . 
143  Mass.  251 
12  CI.  &  F.  764 
156  Ky.  536 
113  Va.  665 
132  App.  Div.  300 
187  AIo.  App.  483 
8  Met.  306  9,  98 
86  Me.  177  .  . 
88  Mo.  App.  596 
94  Mo.  App.  94 
28  La.  Ann.  933 
46  ]Mo.  200 
235  Pa.  St.  202 
76  Wash.  218  . 
51  Kan.  87  .  . 
103  Pa.  St.  1  . 


.  604 

116,  708 

.  609 

767,  769 

421,  n.  9 

,  .  544 

143,  159 

298,  302 

,  393,  450,  494 

.  .   322  a 

...  125 

...  129 

472,  473,  474 

...  770 

308,  610,  615 

...  390 

393,  421,  n.  9, 

425,  446 

.  .  565 

101,  762 

.  .  326 

.   II.  40 

.  .  128 

.  .   13 

161,  169 

17,  155,  413 

.  .  70S 

.  .  773 

174  a,  413 

.  415 

.  454 

117,  252 

.  609 

590  d 

.  472 


N 


Nance  v.  Hemphill 1  Ala.  551  .  . 

Naser  v.  First  Nat.  Bank   ....  36  Hun  343 

Nash  V.  Brown 165  Mass.  384  . 

V.   Manufacturers  &  Traders' 

Bank !  5  Hun  568  .  . 

Nashville  Produce  Co.  v.  SeweU      .     .  121  Ga.  278       . 

Nassau  Bank  v.  Broadway  Bank    .     .  54  Barb.  236     . 

V.Jones    .     .     .    ' 95N.  Y.  115     . 

Nathan  v.  Uhlmann 101  App.  Div.  388 

National  Albany  Exch.  Bank  v.  Wells  18  Blatchf.  478 

National  Bank  v.  Atkinson    ....  55  Fed.  465 

V.  Babbidge 160  Mass.  563  . 

V.  Berrall 70  N.  J.  L.  757 

V.  Berry 53  Kan.  696.     . 

V.  Board  of  EquaHzation  .  .  64  Iowa  140 


11, 


.   13 

.  346 
2,  767 


II.  230  d 

183,  248 

.  .  411 

.  .  730 

.   629  a 

II.  241  V 

65,  144 

146  I 

.  .  493 

.  .  143 

241,  n.  98 


TABLE    OF   CASES 


XCVll 


National  Bank  v.  Rrulcn  &  Williams 

c.  Biirkliart 

V.  Carpenter 

V.  Carpes 

V.  Case 

V.  Chicago,  B.  &  N.  R.  Co. 

V.  City  Bank 

V.  Colby 


04  Tex.  571 
100  U.  S.  68G    . 
o2  N.  J.  L.  165 
28  Tex.  Civ.  App. 


II.  230 
.  451,  509 
.  II.  230  (^ 
334    .        145/ 


99  U.S.  028.     .     ir.  208  «,  212  6 
44  Minn.  224 544 


103  U.  S.  008 
21  Wall.  009 


V.  Commonwealth 
V.  Drake  ... 
V.  Eliot  Bank    . 


II. 


V.  Ellicott     .     .     . 
V.  Equitable  Tr.  Co. 
v.  Everett      .      .     . 
V.  First  Nat.  Bank 


V.  Fisher 
V.  Flanagan  . 
V.  Fridenberg 
V.  Graham     . 


9  Wall.  353  . 
25  Kan.  504.  .  . 
20  haw.  Rep.  138  . 
494,  499, 
31  Kan.  173  .  . 
223  Pa.  St.  328      . 

372   .  . 

App.  719 


130  Ga. 
141  Mo. 


.  .  .  221 
.  II.  250  a, 
250  c,  257  a 
241  b,  241  g 
.  .  124 
289,  493, 
11,  520,  508 
.  .  247 
105  c 
.  .  509 
403,  400, 
400  d 
IT.  241  g 
.  .  5(i7 
7,  II.  253 


V.  Grimes 

V.  Hamilton  Nat.  Bank 

V.  Indiana  Banking  Co.  .     .     . 

V.  Insurance  Co 

V.  Johnson 

Levanseler 

Lewis    

Logan  

Lj'neh 

]\iateby 

V.  Matthews 

V.  Miner 

V.  Naell 

V.  Nat.  Bank 

V.  Nolting 

V.  Norton 

V.  Perry 

V.  Purcell  Grocery  Co.     . 

V.  Rowley 

V.  Second  Nat.  Bank  of  La. 

r.  Sixth  Nat.  Bank     .... 

('.  Smith 

r.  Speight 

V.  Stever        

V.  Thomas 

V.  Wade 

('.  Washington  Co.  Nat.  Bank 

/'.  West.  Nat.  Bank    .... 

V.  Whitney 

National  Bank  of  America  v.  Indiana 

Banking  Co 

National  Bank  of  Auburn  v.  Lewis 


45  Kan.  720      .     . 

129  Mo.  178      .     . 

200  Pa.  St.  243      . 

79  Penn.  100,  100  U.  S.  699  48, 
102,  727 
.  II.  230  b 
...     250 


49  Kan.  219 
42  Fed.  880 

114  111.  483  . 
104  U.  S.  54 
91  Kv.  181  . 

115  Mich.  372 
78  Wis.  475 
35  Neb.  182 
09  W.  Va.  333 
53  Kan.  567 
98  U.  S.  625 
167  Cal.  532 
52  Kan.  211. 

7  W.  Va.  544 
94  Va.  263  . 
1  Hill  571  . 
72  Iowa  15  . 
34  Okla.  34  . 
52  Kan.  394 
00  Ind.  479  . 
212  Pa.  St.  238 
0(5  N.  Y.  271 
47  N.  Y.  668 
109  Pa.  St.  574 
30  R.  I.  294 
84  Fed.  10  . 
5  Ilun  005  . 
51  Md.  128  . 
103  U.  S.  99 

1 14  111.  483  . 
75  N.  Y.  510 


306 


.  346,  542 
325,  326,  567 
II.  230,  230  h 
.  144  m 
.  .  144 
421  i 
II.  230  (/,  230  h 
.  .  604 
48,  752,  II.  244 
.  419,  454 
.  .  .  219 
.  .  .  413 
.  .  .  4S() 
.  .  .  134 
.  .II.  229 
...  50 
.  II.  230  d 
410,  493,  517 
...  05 
...  502 
507 
.  .  .  10() 
.  .  75.  104 


.  .  II. 
300,  302, 


zoo 
303 


419,  464 
752,  754 


il'),  494,  530,  542 
.  .   11.230  c 


XCVm  TABLE   OF   CASES 

National  Bank  of  Camden  v.  Pierce    .  18  Alb.  Law  Jour.  16      .   46,  II. 

208  g,24lr 
National    Bank    of    Chattanooga    v. 

Mayor 8  Heisk.  814     ..     .      II.  241  a 

National  Bank  of  Chemung  v.  Elmira  53  N.  Y.  49       ...      II.  241  a 
National  Bank  of  Commerce  v.  Arm- 

bruster 42  Okla.  656 603 

V.  Farmers'  etc.  Bank     ...  87  Neb.  841      ....       466  b 

V.  First  Nat.  Bank     ....     152  Pac.  596 454 

V.  Merchants'  Amer.  Nat.  Bank  148  Mo.  App.  1     352,  463,  466  d 

V.  Merchants'  Nat.  Bank    .     .  91  U.  S.  92  .     .     .     .     218,  225, 

226,  227,  593 
V.  Nat.   Mechanics'   Banking 


Ass'n 55  N.  Y.  211     .     .   479,  480,  481 

V.  New  Bedford 155.  Mass.  313  .     .     .      II.  241  b 

V.  Takoma  Mills 182  Fed.  1    .     .     290,  291  e,  472 


National  Bank  of  Commonwealth  v. 

Grocers'  Nat.  Bank 35  How.  Pr.  412    ...     .     463 

V.  Mechanics'  Nat.  Bank     .     .  94  U.  S.  437      ...      II.  250  e 

National  Bank  of  Fairhaven  v.  Phoenix 

Warehousing  Co 6  Hun  71      II.  206  a,  208  g,  257 

National  Bank  of  Fayette  Co.  v.  Du- 

shane 96  Pa.  St.  340  ..     .       II.  230  i 

National  Bank  of  Madison  v.  Davis    .  6  Cent.  Law  Jour.  106     II.  230  d 

National  Bank  of  Metropolis  v.  Orcutt  48  Barb.  256     ...      II.  206  a 

National  Bank  of  Michigan  v.  Green  .  33  Iowa  140      .     .     12,  n.  13,  49 
National    Bank    of    New    Haven    v. 

Phoenix  Bank 6  How.  71 46 

National  Bank  of  North  American  v. 

Bangs 106  Mass.  441  ..     .     463,  466, 

466  d,  477,  488,  489 

National  Bank  of  RepubUc  v.  Millard  10  Wall.  152     ..     .     289,  474, 

493,  511,  513,  568 

National  Bank  of  Rochester  v.  Pearson  Thomp.  Nat.  Bank  Cas.  637     73 
National  Bank  of  Rockville  v.  Second 

Nat.  Bank  of  Lafayette      ....  69  Ind.  479  .     .     .     .       410,  517 

National  Bank  of  Rondout  v.  Byrnes  84  App.  Div.  100  .     .     .     .     145 

National  Bank  of  Winterset  v.  Eyre    .  52  Iowa  114      ...     II.  230  m 
National  Butchers  &  Drovers'  Bank  v. 

Hubbell 117  N.  Y.  384  .     . 

National  Citizens'  Bank  v.  Bowen  .     .  109  Minn.  473  .     . 
V.  Howard 3  How.  Pr.  n.  s.  572 


National  City  Bank  v.  Hotchkiss    .     .     231  U.  S.  50 

V.  Third  Nat.  Bank    ....     177  Fed.  136 

Wescott 118N.  Y.  468 


.     .     631 

101,  IL  31 

.     .     575 

.     .     324 

436,  474 

391,  479 


National  Commercial  Bank  v.  MiUer  .     77  Ala.  168  .     .     .    346,  396,  399 

414,  n.  12,  493,  515,  577,  584 
National  Commercial  Bank  of  Mobile 

V.  Mobile 62  Ala.  284  .     .     .  II.  241,  n.  55 

National  Council  of  Knights  v.  Wilson     147  Ky.  293 21 

National    Dredging    Co.    v.   Farmers' 

etc.  Bank 6  Penn.  (Del.)  580     .  289  a,  290, 

472,  473,  474,  480 
National  Exch.  Bank  v.  Boylen  .  .  26  W.  Va.  554  .  .  .  II.  230  I 
1;.  Ginn&Co 114  Md.  181     .     .     .     .351,454 


TABLE   OF   CASES 


XCIX 


National  Exch.  Bank  v.  McLoon    .     . 

V.  JNIoore 

V.  Nat.  Bank  of  North  America 

National  Gold  Bank  v.  McDonald  .  . 
National  Lock  Co.  v.  People.  .  .  . 
National  Mahaiwe  Bank  v.  Peek  .  . 
National   Mechanics'   Banking    Ass'n 

V.  Conklin 

National  Pahquioque  Bank  v.  Bethel 

Bank 

National  Park  Bank  v.  Kldred  Bank  . 
V.  German  Mul.  W.  &  Security 


73  Me.  498 49r> 

2  Bond  170  .  49,  II.  230  d,  230  i 
132  Mass.  143  .  .  .  352,  3.53 
51  Cal.  04    .     .     .   237,  509,  572 


50  111.  App.  .330 
127  Mass.  298 

24  Hun  490 


Co. 


V.  Gunst  .... 
V.  Harmon    .     .     . 
V.  Ninth  Nat.  Bank 
V.  Seaboard  Bank  . 
V. 


V.  State  &  Johnson     .... 

National  Produce  Co.  v.  Sewell  . 

National  Revere  Bank  v.  Nat.  Bank  of 
Republic 

National  Security  Bank  v.  Cushman  . 

V.  Price 

National  Shoe  &  Leather  Bank  v.  Me- 
chanics' Nat.  Bank 

National  State  Bank  v.  Boylan  .     .     . 

V.  Brainard 

V.  Weil 

V.  Ringel 


30  Conn.  325 
90  Hun  285 

53  N.  Y.  S.  Ct 
1  Abb.  N.  Cas 
79  Fed.  891 . 
40  N.  Y.  77 
44  Hun  49    . 
114  N.  Y.  28 
58  Hun  81    . 
121  Ga.  278 


National  State  Bank  v.  Young  .     .     . 
National  Ulster  Co.  Bank  v.  Madden 

Nave  V.  First  Nat.  Bank 

V.  Hadley 

Nebraska  Hay  etc.  Co.  v.  First  Nat. 

Bank 

Neal  V.  Coburn 

V.  Moultrie 


172  N.  Y.  102 
121  Mass.  490 
22  Fed.  097  . 

89  N.  Y.  407 
2  Abb.  N.  Cas 
01  Hun  339 
141  Pa.  St.  457 
51  Ind.  393  . 
25  Iowa  311 
114  N.  Y.  280 
88  Ind.  204  . 
74  Ind.  155  . 


.     .     450 
502,  503 

.     .       30 


171,  II.  250  a 
.     .       248  6 


307 
292 


210 


Neely  v.  Grayson  Co.  Nat.  Bank 
V.  Rood 


ISO 


Neiffer  v.  Bank  of  Knoxville  . 
Nelligan  v.  Citizens'  Bank  of  La. 
Nelson  v.  First  Nat.  Bank     .     . 


Nesmith  v.  Washington  Bank  .  .  . 
Nevada  Nat.  Bank  r.  Dodge      .     .     . 

Newark  v.  Tunis 

Newburyport  v.  First  Nat.  Bank    .     . 

V.  Spear 

Newburyport  Sav.  Bank  v.  Bank  of 

Columbia 

Newburyport  Sav.  Inst.  v.  Brookline  . 

Newell  V.  Hadley 

New  England  Fire  &  Marine  Ins.  Co. 

V.  Schettler 


78  Neb.  334 
92  Me.  139 
12  Ga.  104 
25  Te.\-.  Civ.  App 
54  Mich.  134 
1  Head  102  .  . 
21  La.  Ann.  332 
48  111.  30  .  . 
107  Mass.  48  . 
0  Pick.  329  .  . 
119  Fed.  57.  . 
81  N.  J.  L.  45  . 
210  Mass.  304  . 
204  Mass.  140  . 


11 


1.36 

257 

080 

403 

479 

248  b 

504  A 

,  186 


214,  249,  272 

109,  134,  136 

...  023 


IL 
II. 
11. 


257  a 
230  a 
230  c 
.  421  b 
.  .  299 
II.  241  m 
.  .  485 
.  .  170 
.  .  170 


513 


.   .   22o 

.  .  403 

12S,  n.  14 

.  .  329 

,  289,  320,  508 

98,  n.  14,  144 

.   192,  312 

.   407,511 

.  .  .  407 

9,  n.  11,  502 

.   II.  241  X 

.   II.  241  b 

317  a 

...  317 


91  S.  C.  294  217,  400  d,   400  g 

220  Mass.  300 017 

200  Mass.  335  .  .  .  .   395  c 

88  lU.  100 89 


493,  502 
.   21 


45,  726,  758,  764 
289,  289  o,  337 
....  46 
.  .  9,  n.  9,  50 
....  389 


C  TABLE  OF  CASES 

New     England     Mar.     Ins.     Co.     v. 

Chandler 16  Mass.  275 190 

New     Farmers'     Bank's     Trustee    v. 

Young 100  Ky.  683 338 

New  Hampshire  Sav.  Bank  v.  Downing  16  N.  H.  187    .     .    89,  98,  n.  22 

New  Haven  v.  Weston 87  Vt.  7 48 

New  Hope  &  Delaware  Bridge  Co.  v. 

Perry 11111.467 652 

V.  PhcEnix  Bank 3  Const.  166 162 

New  Jersey  Steamboat  Co.  v.  Brockett  121  U.  S.  637    ..     .    102,  n.  15 
Newmark   Grain    Co.    v.    Merchants' 

Nat.  Bank 166  Cal.  203     .     .   313,  568,  574 

New  Orleans  Canal  &  Banking  Co.  v. 

City  of  New  Orleans 9  Otto  97     ...     .      II.  241  u 

New  Orleans  Nat.  Bank  v.  Raymond  .  29  La.  Ann.  736    .     .     .II.  228 
Newport  Nat.  Bank  v.  Board  of  Edu- 
cation        144  Ky.  87  .     .     II.  208  a,  208  b 

New  York  Bank  v.  Gibson     ....  5  Duer  574 
New  York  Bowery  Ins.  Co.  v.  N.  Y. 

Ins.  Co 17  Wend.  359 

New  York  Cable  Co.  v.  Mayor,  etc.  of 

N.  Y 104  N.  Y.  43 

New  York  Co.  Nat.  Bank  v.  Mussey  .  192  U.  S.  138 

New  York  Dry  Dock  v.  Hicks    ...  5  McLean,  111 

New  York  Firemen's  Ins.  Co.  v.  Ely  .  2  Cow.  707  . 

New  York  Iron  Mine  v.  Citizens'  Bank  44  Mich.  344 
New  York  Life  Ins.  Co.  v.  City  Nat. 

Bank 121  Mo.  App.  479      ...     124 

V.  Patterson 35  Tex.  Civ.  App.  447    .     .    493, 

494,  527  A 

New  York  M.  Iron  Works  v.  Smith     .  4  Duer  362 565 

New  York  Mortgage  Co.  v.  Sec'y  of 

State 150  Mich.  197 46 

New  York,  etc.  R.  R.  Co.  v.  Haws      .  56  N.  Y.  175 654 

New   York   Produce   Exch.    Bank   v. 

Houston 169  Fed.  785 290 

V.  Twelfth  Ward  Bank   ...  135  App.  Div.  52  ....     444 

476  b,  479 

New  York  St.  L.  &  T.  Co.  v.  Helmer  .  77  N.  Y.  64 777 

New  York  Tr.  &  Loan  Co.  v.  Helmer .  12  Hun  35 14 

Newark  Sav.  Inst.  Case 28  N.  J.  Eq.  552   .     .     .  566,  617 

Newberry  Petroleum  Co.  v.  Weare      .  27  Ohio  St.  343      ...     .       46 

Newbold  v.  Wright 4  Rawle  195      .     .     .     .     9,  n.  9 

Newell  V.  Nat.  Bank  of  Somerset    .     .  12  Bush  57  ...     .      II.  230  d 

NewUn  v.  McAfee 72  Ala.  357 576 

Newport  Nat.  Bank  v.  Tweed    ...  4  Houston  (Del.)  99,  225    . 

II.  230  c 

Newton  v.  Snyder 44  Ark.  42 612 

Niagara  Bank  v.  Roosevelt    ....  9  Cow.  409 637 

Niagara  Co.  Bank  v.  Baker   ....  15  Ohio  St.  68  .     .9,  n.  9,  50.  73 

Niblack  V.  Coster 80  Fed.  596 166,  299 

V.  Park  Nat.  Bank     ....  169  111.  517 494 

Nicholas  v.  Adams 2  Whart.  (Pa.)  17       ...     611 

NichoUs  V.  Pearson 7  Pet.  109     .     .     .     .     ,     .       49 

Nichols  V.  Bank 55  Mo.  App.  81     .     .     .     .  167  & 


TABLE   OF   CASES 


CI 


Nichols  V.  State 

V.  Taunton  Safe  Deposit  etc. 

Co 

Nicholson  v.  Crook 

V.  Rieketts 

Niekerson  v.  Kimball 

Nit'klas  V.  Parker 

Nicollet  Nat.  Bank  v.  City  Bank    .     . 

Niles  V.  Olszak 

Nineteenth  Ward  Bank  v.  First  Nat. 

Bank 

Nix  V.  EUis 

Ni.\on  State  Bank  v.  First  State  Bank 
Noble  V.  Doughten 

Noble  State  Bank  v.  Haskell      .     .     . 


46  Neb.  715      . 

203  Mass.  551  . 
5G  Md.  55    .     . 
29  L.  J.  Q.  B.  55 
1  Chic.  Law  Jour. 
G9  N.  J.  Eq.  743 
38  Minn.  85      . 
87  Ohio  St.  229 


186,  360,  568 

687,  696,  770 
.  .  .  346 
...  439 
42  II.  241  e 
.  610,  G14 
.  .  .  699  c 
.     .      339  A 


Nodine  v.  First  Nat.  Bank 
Nogga  V.  Sav.  Bank  .  . 
Nolan  V.  Bank  .... 
Nolting  V.  Nat.  Bank    .     . 


Nonotuck  Silk  Co.  v.  Fair 
Norfolk  Nat.  Bank  v.  Schneuk 
Norman  v.  Rieketts       .     .     . 


Norris  v.  Here      .     .     . 

V.  Staps    .     .     . 

North  British  etc.    Ins. 
chants'  Nat.  Bank     . 


Co. 


Mer- 


Northfield  National  Bank  v.  Arndt 
North  River  Bank  v.  Aymar       .     .     . 

North  Ward  Nat.  Bank  of  Newark  v. 

Peterborough 

Northampton  Bank  v.  Pepoon    .     .     . 
Northampton  Nat.  Bank  v.  Smith  . 
Northern  Bank  v.  Farmers'  Bank  .     . 

V.  Johnson 

Northern  Central  R'y.  Co.  v.  Bastian 
Northern  Nat.  Bank  v.  Lewis     .     . 
Northern  Tr.  Co.  v.  First  Nat.  Bank  . 

V.  Rodgcrs 

Northrop  v.  Hope 

V.  Newton 

V.  Sanborn 

Northwestern  Bank  v.  Maehir    .     .     . 
Northwestern  etc.  Iron  Co.  v.  Lough  . 
Northwestern  R'y.  Co.  v.  Whinray 
Northwestern  Tr.  Co.  v.  Bradbury 


Norton  v.  Bank    . 

r.  Sevmour 

V.  U."  S.     . 


1.S4  ATass.  49 557 

118  Ga.  345       .     .     .       334,338 
180  Ala.  291 248 

72  Kan.  336     421  a,  421  d,  426, 

543,  544,  573,  574,  582,  582  C 

22  Okla.  48 13 

219  U.  S.  104 13 

41  Or.  386    .     .  289  a,  290,  291  e 

79  Conn.  425 613 

67  Barb.  24  .  .  .  414,  n.  10 
99  Va.  54  .  .  289  a,  311,  326, 
326  e,  334,  343,  604 
112  Mass.  354  .  .  .  .  9,  n.  3 
46  Neb.  381  .  .  II.  230,  230  g 
Lond.  Bank.  Mag.  June,  1886 

497 395 

22  La.  Ann.  905    ...     .     604 
Hob.  211 43 

161  App.  Div.  341     ..     .     472 

132  Wis.  383 72 

3  Hill  (N.  Y.)  262      ..     .    112, 
134,  136 

10  Vroom  380  .     .     .     .    II.  241 

11  Mass.  288 158 

169  ISIass.  281 454 

18  B.  Monr.  506  ...  .  650 

5  Coldw.  88 744 

15  Md.  494  .  .  .  .   98,  n.  26 

78  Wis.  475 144 

25  N.  D.  74 604  / 

60  Minn.  208 493 

73  Me.  66 615 

3  Conn.  544 712 

22  Vt.  433 366 

IS  W.  Va.  271 14 

13  N.  D.  601 169 

10  Exeh.  77 31 

112  Minn.  76 678 

117  ISIinn.  83  ...  .  13.  675, 

675  c,  690,  693.  694 

61  N.  H.  .'S92  ....  65,  752 

3  C.  B.  792 439 

205  Fed.  593  .  .  .  .II.  259 


Cll 


TABLE   OF   CASES 


NorviU  V.  Hudgins 4  Munf.  496 565 

Norway  Sav.  Bank  v.  Merriman     .     .  88  Me.  146 610 

Note-holders    of    Bank    of    Tenn.    v. 

Funding  Board 16  Lea  46 650 

Noyes  v.  Newbnryport  Sav.  Inst.    .     .  164  Mass.  583  ....       604  c 

Nully  V.  Gravson  Co.  Nat.  Bank    .     .  25  Tex.  Civ.  App.  513    .     .  494 

Nutt  V.  Morse 142  Mass.  1 614 

Nutting  V.  Burkett 48  Mich.  241 423 


0 


Oakland  Bank  of  Savings  v.  Wilcox     . 

Oakland  Co.  Sav.  Bank  v.  State  Bank 

Oakley  v.  Workingmen's  Benevolent 
Society 

Gates  V.  First  Nat.  Bank  of  Mont- 
gomery     

V.  Smith. 

Gber  v.  Carson 

V.  Cochran 

O'Brien  v.  Elmira  Sav.  Bank      .     .     • 

—  V.  Smith 

V.  Weiler 

V.  Williamsburg  Sav.  Bank 

Ocean  Nat.  Bank  v.  Carll       .... 

Ocean  Tow-Boat  Co.  v.  Ship  Ophelia  . 

O'Connor  v.  Brandt 

V.  Dunnigan 

V.  Majoribanks 

V.  Mechanics'  Bank    .... 

Oddie  V.  Nat.  City  Bank 

Oeh-icks  v.  Ford 

Officer  V.  Officer 


60  Cal.  127 147 

113  Mich.  284 701 

2  Hilton  487 143 


100  U.  S.  239  49, 
176  Ala.  39  .  . 
62  Mo.  209  .  . 
118  Ga.  396   . 
99  App.  Div.  76 

I  Black  99  .  . 
68  Hun  64  .  . 

101  App.  Div.  108 
7  Hun  237  .  . 

II  La.  Ann.  28 
12  App.  Div.  596 
158  App.  Div.  334 
4  Man.  &  G.  435 
124  N.  Y.  324  . 
45  N.  Y.  735     . 
23  Hun  49    .     . 
120  Iowa  389    . 


Ogden  V.  Benas 

V.  Dobbin 

V.  Marchand 

V.  Raymond 

Ogdensburg  Bank  v.  Van  Rensselaer  . 
O' Grady  v.  Stotts  City  Bank      .     .     . 

O'Hare  v.  Second  Nat.  Bank  of  Titus- 
ville 

Ohio  Railroad  Co.  v.  Wheeler     .     .     . 

Ohio  Valley  Banking  etc.  Co.  v. 
Wathen 

Ohio  VaUey  Nat.  Bank  v.  Hulitt     .     . 

Oil  City  V.  OU  City  Tr.  Co 

Oil  WeU  Co.  w.  Exch.  Nat.  Nank    .     . 

Olcott  V.  Rathbone 

Old  Colony  Trust  Co.  v.  Common- 
wealth      

Oldham  v.  First  Nat.  Bank  of  Wil- 
mington   


Law  R.  Com.  P.  C 
2  Hall  112  ..  . 
26  La.  Ann.  61  . 
22  Conn.  384  .  . 
6  Hill  240  ..  . 
106  Mo.  App.  366 


77  Pa.  St.  96 
1  Black  286 


563,  II.  230  g 
.  334.  625  6 
.  .  9,  n.  3 
.  214,  590  b 
.  611,  620  b 
...  421 
...  610 
...  610 
.  II.  250  a, 
250  c,  250  d 
...  546 
.  .  .  338 
...  609 
...  325 
.  .  . 289  a 
451,  569,  571 
.  .  9,  n.  4 
.  .  .  183, 
186,  190,  289 
513  .  475 
.  .  217 
.  .  565 
128,  n.  22 
144,  n.  19 
.  289  a, 
334,  458 

734,  II.  229 
...   46 


166  Ky.  274 709 

204  U.  S.  162  ..  .  679,  684 
1  Dist.  R.  (Pa.)  661  .  II.  241  a 
131  Pa.  St.  101  ....  252 
5  Wend.  490  ...  .  169,  544 

220  Mass.  409 777 

85N.  C.  240  .  .  .  .IL  230j 


TABLE   OF   CASES 


cm 


Old  Nat.  Bank  v.  Exch.  Nat.  Bank 

. V.  State 

Olive  Hill  Imperial  Bank  v.  Common- 
wealth      

Olmstead  v.  Winstead  Bank  .     .     .     . 

Olney  v.  Chadsey 

O'Neil  V.  New  England  Tr.  Co.       .     . 

O'Neill  V.  Bradford 

Ontario  Bank  c.  Lightbody    .... 

t'.  Schermerhorn 

Ordway  v.  Central  Nat.  Bank    .     .     . 
Orme  v.  Baker 


Orn  V.  Merchants'  Nat.  Bank 

Orr  I'.  Laeey 

V.  McGregor 


—  V.  Union  Bank  of  Scotland 


Osborn  v.  Gheen 

Osborne  v.  Byrne 

Osgood  t'.  Lewis 

Ostrander  v.  Scott 

Oswego  Mining  Co.  v.  Skillern   .     .     . 

Otes  V.  Gross 

Other  V.  Iveson 

Otis  Elevator  Co.  v.  First  Nat.  Bank  . 

Oulton  V.  Sav.  Inst 

Overholt    v.    Nat.    Bank    of    Mount 

Pleasant       

Overman  v.  Hoboken  City  Bank     .     . 

Overstreet  v.  Citizens'  Bank  .     .     .     . 

Owen  V.  Bowen 

V.  Branch  Bank  of  Mobile  .     . 

Owens  V.  Atlanta  Tr.  etc.  Co.     .     .     . 

V.  Amer.  Nat.  Bank   .     .     .     . 

V.  Stapp 

Owenson  v.  Morse 

Oxford,  etc.  v.  Bunnell 

Oyster  &  Fish  Co.  v.  Bank     .     .     .     . 


50  Wash.  418 
58  W.  Va.  559 

140  Ky.  210 
32  Conn.  278 
7  U.  1.  224  . 
28  R.  I.  311 
1  Finn.  390  . 
13  Wend.  101 
10  Paige  107 
47  Md.  217  . 
74  Ohio  St.  337 


16  Kan.  341 
2  Dougl.  2.'i2 
43  Hun  529 

1  Macq.  H.  L 

16  D.  C.  189 
43  Conn.  155 

2  Har.  &  G.  495 
101  111.  339  . 
73  Ark.  324 
96  111.  612     . 

3  Drew.  187 
163  Cal.  31  . 

17  Wall.  109 


21 


513 


II 


.     .     331 

.    II.  200 

622,  625  O 

.     .     652 

. 144,  150 

.     .     314 

.     .     299 

.  637,  662 

.     .     298 

.  230  a,  243 

133,  166, 

,  589,  589  b 

II.  228 

.     750 

.     615 

.     480 

.     460 

617,  632 

.     103 

.     546 

590  c 

186,  568 

435,  553 

.     485 

2 


566 


82  Pa.  St.  490  .  .  .  II.  230  h 
1  Vroom  61,  2  Vroom  563      351, 

409 
12  Okla.  383 320 

5  Car.  &  P.  93,  96     .     .     .     185 

3  Ala.  258 664 

119  Ga.  924 697 

36  Tex.  Civ.  App.  490  .  .  329 
32  111.  App.  653  ...  .  360 
7  T.  R.  64 637 

6  Conn.  552 712 

51  Ohio  St.  106     ...     .     415 


Pabst  Brewing  Co.  v.  Reeves      . 
Pace  V.  Howard  College  Trustees 
Pacific  Bank  v.  Stone    .     .     . 
Pacific  Building  Co.  v.  Hill    . 
Pacific  Life  Ins.  Co.  v.  Bauerle 
Pacific  Nat.  Bank  v.  Mixter  . 
Pacific  Title  etc.  Co.  v.  Sargent 

Pack  V.  Thomas 

Packard  v.  Lewiston      .     .     . 

V.  Bankes      .... 

I'.  Sears 

Packers  Nat.  Bank  ;•.  Rushart 
Packing  Co.  v.  Davis    .     .     . 


42  111.  App.  154 
15  Ga.  486   . 
121  Cal.  202 
40  Or.  280    . 
143  111.  459  . 
124  U.  S.  721 
73  Ohio  St.  485 
13  S.  &  M.  11 
55  Me.  456  . 
12  East  20    . 
6  Ad.  &  El.  469 
98  Neb.  354 
118  N.  C.  555 


II 


494 
605 
143 


253,  257  a 
. 768,  769 
.421,n.  9 
.  11.241 
.  .  637 
.  .  468 
.  .  169 
583  a,  583  6 


CIV 


TABLE   OF   CASES 


Padgett  V.  Bank  of  Mountain  View 
Paint  Co.  v.  Nat.  Bank     .... 

Palmer  v.  Lawrence 

V.  Marshall 

V.  Ridge  Mining  Co.  .     .     . 


Palmer  v.  Yates 

Pancoast  v.  Ruffin 

Pangborn  v.  Westlake 

Panhandle  Nat.  Bank  v.  Emery      .     . 
Parcher  v.  Saco  &  Biddeford  Sav.  Bank 

Pardee  v.  Fish 

Parish  v.  Wheeler     ....... 

Parke  v.  Roser 

Parker  v.  Carolina  Sav.  Bank     .     .     . 


V.  Gordon 

V.  Hartley 

V.  Knickerbocker  Tr.  Co. 


V.  Marchant 
V.  Marston  . 
V.  Robinson  . 
V.  Stroud 


141  Mo.  App.  374      .     .  324,  327 

4  Utah  353 252  a 

3  Sandf.  161      .     .  668,  669,  673 

60  111.  289 565 

34  Pa.  St.  288 71 

3  Sandf.  137      .     .       9,  n.  9,  115 

1  Ohio  St.  381 641 

36  Iowa,  526 734 

78  Tex.  498       ....  143,  145 

78  Me.  470        614 

60  N.  Y.  265     .  51,  298,  299,  302 

22  N.  Y.  494 750 

67  Ind.  503 482 

53  S.  C.  583      ...     120,   144, 
675  a,  678,  691,  693 

7  East  385 45 

91  Pa.  St.  465  ...     .  207,  567 

137  App.  Div.  719    317  a,  289  a, 

342,  459,  604 

Y.  &  Coll.  C.  C.  290       .     .     606 


Parker-Fain  Co.  v.  Orr  .  . 
Parkersburg  Bank's  Appeal  . 
Parkersburg  Nat.  Bank  v.  Als 
V.  Hannaman    . 


Parrish  v.  Commonwealth 
Parsons  v.  Treadwell     .... 

Parton  v.  Hervey 

Partridge  v.  Coates 

Paschall  v.  Whitsell       .... 
Pascoag  Bank  v.  Hunt 
Pate  V.  Snow  Hill  Banking  Co.  . 
Patriotic  Bank  v.  Farmers'  Bank 


Pattek  V.  Pattek 

Patten  v.  Amer.  Nat.  Bank   . 

Patterson  v.  First  Nat.  Bank 

V.  Poindexter     . 

V.  State  Bank  . 


27  Me.  196  .  .  . 
71  Fed.  256  .  . 
98  N.  Y.  379  .  . 
1  Ga.  App.  628  . 
6  Wk.  No.  Cas.  394 
5  W.  Va.  50  .  . 
63  W.  Va.  358  .  . 
136  Ky.  77  . 
50  N.  H.  356  .  . 

1  Gray  119  .  .  . 
Ry.  &  Mood.  153 
11  Ala.  472  .  .  . 
3  Edw.  Ch.  583  . 
162  N.  C.  508  .  . 

2  Cranch  C.  C.  560 

166  Mich.  446  .     . 
15  Colo.  App.  479 


622 


Patterson  Bank  v.  Butler  .     .     . 
Pattison  v.  Syracuse  Nat.  Bank 

Patton  V.  Beecher 

V.  State  Bank    .     .     .     . 

Patton's  Adm'r  v.  Ash  .     .     .     . 

Paul  V.  McGraw 

V.  Virginia 


Pauly  V.  State  L.  &  Tr.  Co. 
Paxton  V.  Courtney       .     . 
V.  Sweet   .... 


Payne  v.  BuUard       .     .     . 

V.  Clark    .... 

V.  Commercial  Bank 


73  Neb.  384   .  . 

6  Watts  &  Serg.  227 

55  Ind.  App.  331 

7  N.  J.  Eq.  268 
80  N.  Y.  94  . 
62  Ala.  579  .  . 

2  N.  &  M.  464 

7  Serg.  &  R.  116 

3  Wash.  296   . 

8  Wall.  168  .  . 

56  Fed.  430   . 
2  Fost.  &  Fin.  131 
1  Green  (N.  J.),  196 
23  Miss.  88  .  .  .  671 
23  Mo.  259  .  .  .  . 
6  Sm.  &  Mar.  24  .  . 


611,612 
.  686 
.  322 
543,  545 
.  630 
.  309 
.  469 
628,  628  b 
309 
754 
460 
761 
173 
295/ 
9, 

n.  19.  220 
590,  590  c 
289  a, 
309,  322  a 
451,  460 
51,  299 
.  563 
.  265 
47,  195 
.  576 
.  650 
.  552 
II.  241  h 
.  46 
.  680 
9,  n.  8 
.  43 
672,  687 
.  307 
.  165 


TABLE  OF  CASES 


CV 


Payne  v.  Gardner 

Peabody  v.  Citizens'  State  Bank 
Peachey  v.  Rowland      .... 

Peacock  v.  I'urcell 

Peak  V.  Ellicott 

Pearce  v.  Davis 

v.V.S 


Pearsall  v.  Nessau  Nat.  Bank     .     . 
Pearson  v.  Bank  of  Metropolis  .     . 

Pearsons  v.  Gardner 

Pease  v.  Francis 

V.  Landauer 

v.V.S 

V.  Warren 

Pease  etc.  Co.  v.  State  Nat.  Bank  . 


Peck  V.  First  Nat.  Bank 

V.  Mayo   . 

Pecords  v.  McKim 
Pedder  v.  P*reston 


29  N.  Y.  14G  .  . 
98  Minn.  302  .  . 
10  E.  L.  &  Eq.  442 
14  C.  B.  N.  s.  728 
3  Kan.  15G  .  . 
1  M.  &  Rob.  365 
192  Fed.  5(51  . 
74  App.  Div.  89 
1  Pet.  89   .  . 

113  App.  Div.  597 
25  R.  I.  220 
03  Wis.  20  .  , 
192  Fed.  561 
20  Mich.  9  .  , 

114  Tenn.  023 
43  Fed.  357 
14  Vt.  33   .  , 

115  Md.  299     . 
9Jur.  N.  s.  496,  11  C 


220, 


Pederson  v.  South  Omaha  Nat.  Bank 

Peel  v.  Tatlock 

Peerrot  v.  Mount  Morris  Bank  .     .     . 

Pelham  v.  Adams 

Pelletier  v.  State  Nat.  Bank  .... 
Pelton  V.  Commercial  Nat.  Bank  of 

Cleveland 

Pemigewassett  Bank  v.  Rogers  .  .  . 
Pemiscot  Co.  Bank  v.  Central  State 

Nat.  Bank 

Pendergast  v.  Bank  of  Stockton  .  . 
Pendleton  v.  Bank  of  Ky 

V.  Commonwealth       .... 

Penfield  v.  Thayer 

Penfold  V.  Charlevoix  Sav.  Bank     .     . 

1'.  Mould 

Peninsular  Bank  v.  Hanmer  .... 
Penn  Bank  v.  Farmers'  Deposit  Nat. 

Bank 

V.  Frankish 

Penn  Bank's  Estate 

Pennell  v.  Deffell 


52  Neb.  95  .  . 
1  Bos.  &  P.  419 
120  App.  Div.  247 

17  Barb.  384  . 
114  La.  174   . 

101  U.  S.  143  . 

18  N.  11.  256  . 


398, 


.  .  289 

. 458,  408 

.  .  102 

,  .  565 

,  .  567 

.  552 

II.  259 

.  329 

222,  231 

.  083 

.  173  b 

494,  .537 

II.  2.->9 

.  5(J4 

399,  493 

.  217 

12,  n.  15 

.  324 

s.  535 

327 

.326^ 

.   42 

.  433 

.   51 

654,  658 


II.  241  u 
103,  125 


B.  N 


177  S.  W.  74 152 

6  Am.  Law  Rec.  574   .  II.  212 

1  T.  B.  Monr.  171  19,  25,  27, 

42,  102,  156,  168,  254 

110  Va.  229 289 


2  E.  D.  Smith  305 
140  Mich.  126  .  . 
L.  R.  4.  Eq.  562  . 
14  Mich.  208  .  . 


.  608 
102  c,  709 
.  610 
.  153 


V.  Ennis 

Pennington  v.  Third  Nat.  Bank 


Pennington  Co.  Bank  v.  First  State 
Bank 

Pennsylvania  L.  Ins.  Co.  v.  Bauerle    . 

Penobscot  &  Kennebec  R.  R.  Co.  v. 
Dunn 

Pensacola  etc.  Bank 

Pentz  V.  Sackett 

People  V.  Assessors  of  Albany     .     .     . 


130  Pa.  St.  209      ...     .     337 

91  Pa.  St.  339 433 

152  Pa.  St.  65 291  e 

4  De  G.  M.  &  G.  372     .     .    343, 

355,  590 

126  Mo.  App.  355      ...     400 

114  Va.  674       ...  166,  248  a, 

568  d,  569,  629  a 


110  Minn.  263 
143  111.  459  . 


403 

777 


36  Me.  501 671 

59  Fla.  347     101, 164, 165  c,  171  ^ 

Hill&  D.  113 144 

5  Thomp.  &  C.  155   .      II.  241  b 


CVl 


TABLE   OF  CASES 


People  V.  Bank  of  Dansville 

V.  Bank  of  Niagara 

V.  Bartow 

V.  Bercovitz       .     . 

V.  Brady  .... 


V.  Brewster  .     .     .     . 
V.  Britton      .     .     .     . 

V.  Calif.  Safe  etc.  Co. 


City  Bank 


Commissioners 


V.  Commissioners  of  Taxes 


Dolan  .     .     . 

Frey     .     .     . 
Hudson  Bank 
Jansen 
Jenkins 
Johnson    . 
Kemp  . 
Knapp       .     . 


Knickerbocker  Tr.  Co.  . 
Lasalle  St.  Tr.  etc.  Bank 
Manhattan  Co.  .  .  . 
Merchants'  Tr.  Co.     .     . 


Co. 


Inst. 


V.  Mercantile  Co-operative  Tr. 
•  V.  Mechanics  &  Traders'  Sav. 


V.   Merchants   &   Mechanics' 


39  Hun  187 . 

.  .  567 

6  Cow.  19G  . 

. 760,  761 

6  Cow.  290  . 

.  .   13 

163  Cal.  636 

• 

.  .  394 

271  111.  100  . 

.  II.  200 

268  lU.  192  . 

. 

.  .   13 

4  Wend.  498 

•    •    • 

.  .   13 

134  App.  Div. 

275  . 

.  .  132  6- 

168  Cal.  241 

334,  338, 

632  A  h,  111 

160  Cal.  374 

, 

629,  632  d 

22  Cal.  App.  69  . 

.  .  775 

93  N.  Y.  583 

.  248,  G30 

96  N.  Y.  32 

.  .  567 

7  Colo.  226  . 

.  .  761 

4  Wall.  244  . 

II.  2, 

241  c,  241  y 

8  Hun  536  . 

II.  241  r 

4  L.  &  E.  Rep 

.213 

II.  241  i 

2  Black  620 

II.  241  t 

94  U.  S.  415 

II.  241  c 

69  N.  Y.  91 

II.  241  h 

36  N.  Y.  59 

.      II.  241  k 

165  Cal.  140 

.  .  394 

6  Cow.  217  . 

.  .  761 

7  Johns.  332 

.  .   37 

17  Cal.  500 

.  .  .  42c 

14  111.  342  . 

.  .  .  346 

76  Mich.  40 

.  .  .  377 

147  App.  Div. 

436 

.   768,  776 

206N.  Y.  373 

.  .  .  774 

127  App.  Div. 

215 

.  .  632  A  ik 

269  111.  588 

.  .  .  679 

9  Wend.  351 

.  .  6,  764 

116  App.  Div.  41 

309,  309  d. 

322  e, 

629  A, 

632Ai,  70& 

104  App.  Div. 

219 

.  .  .  145 

28  Hun  375 

.  .  .  632 

Bank 


V.  Milwaukee  Ave.  Sav,  Bank 

V.  Mohr 

V.  Mutual  Tr.  Co 

V.  Oakland  Co.  Bank       .     .     . 
V.  Oriental  Bank 

V.  Security  Life  Ins.  Co.      .     . 

V.  Shaw 

V.  Sheppard 

V.  State  Bank 

V.  State  Treasurer       .... 


78  N.  Y.  269     248,  493,  524,  568 
230  111.  505  .     .     .     .  625  O,  687 

157  Cal.  732 394 

96  N.  Y.  10 768 

1  Dougl.  282     .    46,  63,  761,  764 

124  App.  Div.  741       622,  625  O, 

625  C 

78  N.  Y.  122 632, 


V.  St.  Nicholas  Bank 


5  Johns.  236 
37  App.  Div. 
36  Hun  607 
4  Mich.  27  . 
24  111.  433  . 
77  Hun  159 


119 


.  298 
.  569 
.  609 
.  646 
.  647 
338,  414, 


414  a,  414  m,  493,  569 


TABLE   OF  CASES                                                    Cvii 

People  V.  Thompson 21  Wend.  235 7G0 

V.  Throop 12  Wend.  183 124 

V.  Utica  Ins.  Co l.'i  Johns.  3r>8 13 

V.Vilas 3GN.  Y.  459 31 

V.  Walker 15  Cal.  App.  400  ....     394 

t;.  Washington  &  Warren  Bank  6  Cow.  211   .     .     .    0.54,700,701 

V.  Young 207  X.  Y.  522 i:i 

People's  Bank  u.  Bennett 159  Mo.  App.  1     .     .     .      144  h, 

144  d,  100,  109  a 

V.  Franklin  Bank 88  Tenn.  303    ..     .  400  d,  470 

V.  Gridley 91  111.  457 710 

I'.  Jefferson  Co.  Sav.  Bank  .     .     100  Ala.  525 217 

V.  Kurts 99  Pa.  St.  344 103 

V.  Legrand 103  Pa.  St.  307      ....     502 

V.  Macon  Exch.  Bank     .     .     .  110  Ga.  820       .     .     .  097,  099  c, 

099  d,  703,  709 

V.  Nat.  Bank 101  U.  S.  181    .     .     .     .   05,  101 

V.  Stewart 152  Mo.  App.  314      .     .     .     503 

V.  Tufts 35  Cal.  792        324 

People's  Homo  Sav.  Bank  v.  Rickard  139  Cal.  285      ...       083,  709 

People's  Nat.  Bank  v.  Brogden  ...     98  Te.w  300 225 

V.  Central  Tr.  Co 179  Mo.  048 777 

V.  Kingfisher  Co 24  Okla.  145     ...     .    II.  244 

V.  Mayre 191  U.  S.  272    .     .     .       II.  241  v 

V.  Rhoades 90  Atl.  409 358 

V.  Wheeler 21  Okla.  387      .     .    190,  507,  508 

People's  Sav.  Bank  v.  Cuppo      ...     91  Pa.  St.  315 020 

V.  Lacy 40  So.  340 493 

People's  State  Bank  v.  Brown    ...  80  Kan.  520      .     .     421  d,  421  h 

People's  Tr.  Co.  v.  Pabst 113  App.  Div.  375      ..     .  125  e 

Peoria  &  Pekin  Union  R.  Co.  ?;.  Buckly     114  lU.  337 540 

Pepper  v.  Springfield  Inst,  for  Savings  218  Fed.  814     .     .  094,  II.  212  b 

Peppin  ?;.  Cooper 2  B.  &  Aid.  431     ....       27 

Percy  t;.  Mil laudon 3  La.  Ann.  508.     .     .       117,127 

Perkins  v.  Chalhs 1  N.  II.  254 505 

V.  Franklin  Bank 21  Pick.  483 030 

Perley  v.  IMuskegon  Co 32  JSIich.  132 289 

Perry  t;.  Bank  of  Smithfield  .     .     .     .     131  N.  C.  117 493 

Perry  Naval  Stores  v.  Caswell    ...     03  Fla.  552 108,  100 

Persons  v.  Gardner 42  App.  Div.  490        .     .     .     077 

Peters  v.  Fort  Madison  Constr.  Co.     .     72  Iowa  405 015 

?;.  Union  Tr.  Co 131  Mich.  322 032/ 

Peters  Shoe  Co.  v.  Murray     ....  31  Tc.x.  Civ.  App.  259     247,  248 

248  a,  451,  589  b,  590  c 

Peterson  v.  The  Mayor 17  N.  Y.  449 159 

V.  Union  Nat.  Bank   ....  52  Pa.  St.  200  .     .  359,  509,  572 

Petillon  V.  Noble 9  Leg.  News,  314  (Biss.)     . 

II.  257  c 

Petrie  v.  Myers 54  How.  Pr.  513    ...     .     324 

Petrue  r.  Wakem 99  111.  App.  403     .   311,425,544 

Petty  V.  Gacking 97  Ark.  217 313 

Pew  V.  First  Nat.  Bank  of  Gloucester     130  Mass.  391 150 

Peyton  v.  Hallett 1  Caines  303     ....  494,  538 

Phelan  t;.  Iron  Mt.  Bank Ill  U.  S.  125 508 

V.  Moss 07  Pa.  St.  02 505 


CVIU 


TABLE   OF   CASES 


Philadelphia  Bank  v.  Ex'rs  of  Thomas 
Officer 

Philadelphia  Loan  Co.  v.  Towner   .     . 

Philadelphia  Nat.  Bank  v.  Morgan 

Philadelphia  Railroad  Co.  v.  Derby     . 

Philadelphia,  Wilmington,  &  Balti- 
more R.  R.  V.  Quigley 

Phillips  V.  BuUard 

V.  Franciscus 

V.  Mercantile  Nat.  Bank     .     . 

V.  Suffolk  Sav.  Bank  .... 

v.V.S 

Phillips  Academy  v.  King       .... 

Philpot  V.  Temple  Banking  Co.       .     . 


12  Serg.  &  R.  49  .  .  .  .  295 

13  Conn.  259  ...  .  73,  743 
1  Marvel,  265 175 

14  How.  468  .  102,  n.  6  and  12 


122  U.  S.  607  . 
58  Ga.  256  .  . 
52  Mo.  370  .  . 
140  N.  Y.  556  . 
219  Mass.  597  . 
201  Fed.  259  . 
12  Mass.  546  . 
3  Ga.  App.  742 


Phipps  V.  Milbury 

V.  Tanner 

Phoenix  Bank  v.  Bank  of  America 
Risley 


Phoenix  Nat.  Bank  v.  Taylor      .     .     . 

Pickering  v.  Hastings 

Pickett  V.  Baird  Investment  Co.     .     . 

V.  Merchants'  Nat.   Bank  of 

Memphis 

Pickle  V.  Muse 


8  Met.  79     .     . 
5  Car.  &  P.  488 
1  N.  T.  Leg.  26  (Oh 
111  U.  S.  125 
113  Ky.  61  . 
56  Neb.  201 
22  N.  D.  343 

52  Ark.  346 
88  Tenn.  389 


300, 


102,  n.  15 
544,  546 
.  300 
.  171/ 
.  342 
IL  259 
.   55 
.  298, 
400,  611 
.  232 
.  444 
414,  n.  16 
248,  568 
468,  471 
.  693 
236  a,  421  d 


.      II.  230  c 

.     409,  410, 

457,  460,  493 


io) 


Pierce  v.  Boston  Five  Cents  Savings 

Bank 

V.  Butler 

V.  Rowe 

V.  State  Normal  Bank     .     .     . 

V.  Wilhams   . 

Pierson  v.  Thompson 

PindaU  v.  N.  W.  Bank 

Pine  V.  Smith 

Pine  River  Bank  v.  Hodsdon      .     .     . 

Piner  v.  Clary 

Pinkney  v.  Kanawha  Valley  Bank  .     . 


129  Mass.  425  ...     .  610,  612 
14  Mass.  303     .     .       9,  n.  9,  221 

1  N.  H.  182 309 

215  Mass.  18  297,  298,  302  c 

23  L.  J.  Exch.  322     ..     .       42 
1  Edw.  Ch.  212     ...     .     140 


Piscataqua  Bridge  v.  N.  H.  Bridge 
Piscataqua  Exeh.  Bank  v.  Carter    .     . 
Pittsburg  V.  First  Nat.  Bank      .     .     . 
Pittsburg  Locomotive  &  Car  Works  v. 

State  Nat.  Bank 

Plane  Mfg.  Co.  v.  Auld 

Planters'  Bank  v.  Bank  of  Alexandria 

V.  P"'armers  &  Mechanics'  Bank 

— ■ •  V.  Kesee 

—  V.  Lamkin 

V.  Merritt 


7  Leigh  617 
11  Gray  38  .     . 
46  N.  H.  114    . 
17  B.  Mon.  (Ky.) 
69  W.  Va.  446  . 
68  W.  Va.  254 
7  N.  H.  69   .     . 
20  N.  H.  246     . 
230  Pa.  St.  176 


...  659 
.  .  12,  n.  5 
...     669 

645  .  .  299 
...     219 

218,  236  a,  451 

...         6 

9,  n.  9  and  17 

.     . 357,  604 


V.  Sharp  .  . 
V.  State  .  . 
V.  Union  Bank 


Planters  &  Merchants'  Bank  v.  Hill 


2  Cent.  Law  Jour 
14  S.  D.  512      . 
10  Gill  &  J.  346 
8  Gill  &  J.  449 
7  Heisk.  200      . 
R.  M.  Charlt.  29 
7  Heisk.  177     421, 
4  Sm.  &  Mar.  75 
6  How.  301  .     . 
6  Sm.  &  Mar.  628 
16  Wall.  483     . 
1  Stew.  201  .     . 


692  II.  208  / 
248,  590  c 
.  763 
.     322 

367,  375 
26,  43 

493, 527 
.  750 
.  6,  49 
.  761 
.  248 
17,22 


TABLE   OF   CASES 


CIX 


Planters'  State  Bank  v.  Schlamp     .     . 

Piatt  V.  Bcebe 

V.  Grub!) 

V.  Sauk  Co.  Bank 

V.  Wilmot 

Piatt,  Petition  of 

Piatt,  Rec,  V.  Beach 

V.  Bentley 

Player  v.  Archer 

Plets  V.  Johnson 

Plover  Sav.  Bank  v.  Moodie  .     .     .     . 

Plymouth  Bank  v.  Bank  of  Norfolk    . 

Poirier  v.  Morris 

Poland  V.  Love 

Polglass  V.  Oliver 

PoUzzotto  V.  People's  Bank    .     .     .     . 

Pollack  V.  Nat.  Bank 

Pollack  Bros.  v.  Niall-Herin  Co.      .     . 

Pollard  /'.  Bowcn 

V.  Ogden 

V.  Rowland 

V.  Stockholders  of  Ky.  Export- 


124  Ky.  295  . 

57  N.  Y.  339  . 
48  Hun  447 

17  Wis.  222  . 

193  U.  S.  G02  . 

1  Bened.  534  . 

2  Bened.  303  . 
11  Am.  Law  Reg. 

2  Sid.  121  .  . 

3  Hill  112     .  . 
135  Iowa  685  . 


10  Pick.  454  . 
20  Eng.  L.  &  Eq 
164  Fed.  186  . 
2  C.  &  J.  15  . 
125  La.  770  . 
168  Mo.  App.  368 
137  Ga.  23  .  . 
57  Ind.  232  .  . 
2  E.  &  B.  459  . 
2  Blackf.  22  (Ind.) 


...     562 

II.  201,  2.^0 

...     604 

...     299 

.     675 

II.  246.  257 

.      II.  250  a 

171     .     .     338 

...       43 

.     .     370 

221,  236  o, 

240,  421  h,  422 

9,  n.  11,  698 

103     .     .     565 

.     .     493 

. 447, 637 

.     .     468 

.  368,  569 

.       248  a 

.     .     423 

.     .     572 

.     .     267 


ing  Co.    .     .     . 

V.  Wellford 


Pomeroy  v.  Arrisworth       .... 

Pond  V.  Underwood 

Poorman  v.  ISIills 

Pope  V.  Bank  of  Albion      .... 

V.  Capitol  Bank  of  Topeka 

Porter  v.  Bank  of  Rutland     .     .     . 

V.  Marine  Sav.  Bank       .     . 

V.  Packers'  Nat.  Bank    .     . 

V.  Sherman  Co.  Banking  Co. 

V.  Talcott 

V.  Tavlor 

v.V.'s 

Portland  Bank  v.  Storer    .... 

Pospisil  V.  Hajicek 

Pott  V.  Clegg 


Potter  V.  ISIerchants'  Bank 

V.  Tallman    . 

Potts  ('.  Schumaker  .     .     . 
Powell  V.  Jones     .... 

V.  Morrison  . 

I'.  Regem       .     .     . 

Powers  V.  Woolfolk  .     .     . 
Powles  V.  Paige    .... 


Prather  v.  Kean  .... 
Pratt  V.  Foote      .... 

V.  Short    .... 

t'.  Union  Nat.  Bank 


4  J.  J.  Marsh.  52  , 
99  Tenn.  113     .     , 
22  Barb.  118     . 
2  Ld.  Raym.  1210 
35  Cal.  118 
59  Barb.  226 
20  Kan.  440 
19  Vt.  410    . 
153  N.  Y.  19 
95  Neb.  255 
40  Neb.  274 
1  Cow.  359  . 
Mau.  6  &  Sel.  156 
91  Fed.  494 
7  IMass.  433      . 
190  111.  App.  638 
16  M.  &  W.  321 

28  N.  Y.  641 
35  Barb.  182 
84  Ivld.  535  . 
72  Ala.  392  . 
35  Mo.  244  . 
3  Bro.  P.  C.  436 
132  Mo.  App.  345 
3  C.  B.  25    .     . 

29  Fed.  498  . 
9  N.  Y.  466  . 
79  N.  Y.  437  . 
79  N.  J.  L.  117 


.     690 

.     473 

12,  n.  13 

.     438 

51,  298,  299,  442 

155,  406,  413 

.       72 

.     Ill 


679, 


309, 


Prescott  u.  Haughey 65  Fed.  653 


r09 
.       52 

11.  230  i 
.  544 
.  439 
II.  259 

.       77 

.     290 

.    289, 

322,  568 

158,  175 

12,  n.  15 
.  629  a 
.  576 
.  604 
.  43 
.158^ 
.  134 
.     212 

410,451 

r7 

472,  473, 
474,  487,  489 
...     132 


ex 


TABLE   OF   CASES 


Preseott  v.  Leonard 

President  v.  Corwin    - 

Preston  v.  Can.  Bank  of  Commerce 

V.  Dozier 

V.  Prather 


Prettyman  i'.  U.  S.  .     .     . 
Prewitt,  Trustee,  v.  Trimble 
Price  V.  Abbott    .... 
V.  Neale   .... 


Price,  Rec,  v.  Yates 

Prideaux  v.  Criddle 

Primm  v.  Fort 

Proctor  V.  Whitcomb 

Pronger  v.  Old  Nat.  Bank      .... 

Proseus  v.  Potter 

Prosser  v.  Wagner 

Protection  Ins.  Co.  v.  Harmer  .  .  . 
Providence    Assisting    Association    v. 

Citizens'  Sav.  Bank 

Providence  Bank  v.  Billings  .... 

Pro\'idence  Inst.  v.  Taft 

Providence  Inst,  for  Sav.  v.  Carpenter 

V.    City   of  Boston      .... 

Provident  Sav.  Inst.  v.  Malone  .     .     . 

Pruyn  v.  Van  Allen 

Pryor  v.  Bank  of  America      .... 

Pryse  v.  Farmers'  Bank 

Pueblo  Sav.  Bank  v.  Richardson  .  . 
Puget  Sound  Xat.  Bank  v.  Fisher  .  . 
PuUen  V.  Placer  Co.  Bank      .... 


32  Kan.  142 
37  N.  Y.  320 
23  Fed.  179 
135  Ga.  25   . 
137  U.  S.  604 
180  Fed.  30 
92  Ky.  176  . 
17  Fed.  506 
3  Burr.  1355 

19  Abb.  L.  J.  295 
L.  R.  4  Q.  B.  455 
23  Tex.  Civ.  App, 
139  Mass.  303  . 

20  Wash.  618    . 
20  App.  Div.  44 

1  C.  B.  N.  s.  289 

2  Ohio  452  .     . 


32  Atl.  306  . 
4  Pet.  561     . 
14  R.  I.  502 
18  R.  I.  287 
101  Mass.  575 
221  U.  S.  660 
39  Barb.  354 
240  111.  100  . 

33  S.  W.  532 
39  Colo.  319 
52  Wash.  256 
138  Cal.  169 


.     .     217 
.     .     136 
.     .     352 
101,  101  d 
326/ 
II.  259 
.     .  147  e 
.    II.  257 
462,  463,  488 
II.  250  a 
232,  427 
II.  241  s 


605 


Pulmas  Co.  Bank  v.  Bank  of  Rideout  165  Cal.  126 

PurceU  V.  Allemong 22  Gratt.  739 

Purchase  v.  Mattison 6  Duer  587  . 

Putnam  v.  SuUivan 4  Mass.  45   . 

Pym  V.  CampbeU 25  L.  J.  n.  s.  277 


398 


II 


568 


.  724 
.  610 
.  438 
9,  n.  9 

317 
6 
608 
614 
241  i 
620 
706 
298 
172 
106,  166 
74  c,  75 
319  O,  400 
551,  611 
248  a, 
,  574,  578 
423 
;,  421,  n.  16 
480,  486 
.     390 


Q 

Quattrochi  Bros.  v.  Farmers'  etc.  Bank  89  Mo.  App.  500     290,  291,  291  b 

Quincy  Canal  v.  Newcomb     ....  7  Met.  277 764 

Quincy  Mut.  Fire  Ins.  Co.  v.  Interna- 
tional Tr.  Co 217  Mass.  370 317  a 

Quinn  v.  Earle 95  Fed.  728       ...  589,  629  a 


R 

Raban  v.  Cascade  Bank 33  Mont.  413 185 

Raborg  v.  Bank  of  Columbia      ...  1  Har.  &  G.  231    .     .     .     .  220 

Raesser  v.  Nat.  Exeh.  Bank  ....  112  Wis.  591     398,  400,  494,  537 

Railroad  Co.  v.  Howard 7  Wall.  392 632 

— •  V.  National  Bank 102  U.  S.  14 600 

Rambo  v.  Pile 220  Pa.  St.  235     ...     .  610 

Ramsdale  v.  Horton 3  Pa.  St.  330 659 


TABLE   OF  CASES 


CXI 


Ramsdon  v.  Boston  &  Albanj-  R.  R.  Co. 
Rand  r.  (Columbia  Nat.  Bank 

Randall  v.  Shaw 

Ranger  v.  Great  Western  R.  Co. 
Rankin  v.  Barton 

V.  Blain  Co. 

V.  Bush     . 

V.  Cooper 


Bank 


V.  Emigh  . 
V.  Fidelity 


Tr.  Co. 


V.  Miller 


V.  Sherwood 
V.  Tygard 


V.  Ware 


Ransom  v.  Mack 
Raphael  v.  Bank  of 
Rapp  V.  Nat.  Bank 
Rastell  V.  Draper 


England 


104  Mass.  117  . 
87  Fed.  520 
28  Kan.  419   . 
5  H.  L.  Cas.  72 
69  Kan.  629   . 
199  U.  S.  228  . 
20  Okla.  08 
93  App.  Div.  181 
149  Fed.  1010  . 


218  U 
189  U 


Rathbun  v.  Citizens'  Steamboat  Co. 
Ranch  v.  Bankers'  Nat.  Bank    .     . 
Ravenswood  Bank  v.  Wetzel       .     . 
Rawson  v.  Taylor     . 
Ray  V.  Bank    .     .     . 

V.  Dennis 

V.  Simmons  . 

Raymond  v.  Baar     . 

V.  McKinney 

V  Sellick   .     . 

Rayner  v.  Sligh  Furniture  Co.    .     .     . 
Raynor  v.  Pacific  Nat.  Bank  of  Boston 

Read  v.  Marine  Bank 

Real  testate  Tr.  Co.  v.  Washington  etc 
R.  Co 

Reapers'  Bank  v.  Willard 

Receiver  of  N.  Amst.  Sav.  Bank  v. 
Tartler 

Receivers  v.  Patterson  Gas  Light  Co. 

Receivers  of  Bank  of  Circleville  v.  Ren- 
nick    

Records  v.  McKim 

Rector  v.  City  Deposit  Bank      .     .     . 

V.  Com.  Nat.  Bank    .... 

Reddell  v.  Dobsee 

Redhead  v.  Iowa  Nat.  Bank  .... 


...  102 

.  .  .  679 

.  .  .  219 

.  102,  n.  10 

678,  II.  212  6 

678,  II.  212  b 

.     .     .     338 

.  1 55  j 

.  125,  128, 

128/,  II.  253 

S.  27   ...  56,  755  a 

S.  242  ..  .   679,  680, 

683,  684,  II.  212  h,  263 

207  Fed.  602  .  .  675,  678,  686, 

687,690,  II.  212  ?>,  250  d,  263 

33  Me.  509 688 

198  Fed.  795  .   27,  144,  II.  8, 

209 
88  Kan.  23  ...  .   II.  212  b 
...  255 
...  649 
414  /(,  578 
775,  Cro. 

.  366 
.  247 
494,  530 
.  169 
622  A 
.  201 
.  338 
.  610 
.  659 
547  A 
.  611 
.  596 
II.  252 
.  306 


2  Hill  592  .  . 
17  C.  B.  161  . 
136  Pa.  St.  426 
Yelv.  80,  Moore 

Jac.  88  .  . 
76  N.  Y.  376  . 
143  111.  App.  625 
58  W.  Va.  1   . 
69  Neb.  473   . 

10  Bush  344  . 
5  Ga.  357  .  . 

11  R.J.  266  . 
13  Serg.  &  R.  318 

58  Mo.  App.  303 
10  Conn.  484  . 
180  Mich.  171  . 
93  N.  Y.  371  . 

59  Hun  578   . 


191  Fed.  566 
24  111.  433  . 


4  Abb.  N.  C.  215 
23  N.  J.  L.  283 


Redington  v.  Woods 

Reed  Grocery  Co.  v.    Canton  Nat. 
Bank 


15  Ohio  322 
115  Md.  299 
200  U.  S.  405 
200  U.  S.  420 
3  .Jur.  722  . 
127  Iowa  572 

45  Cal.  406 

100  Md.  299 


493, 


144 


.  106, 
146  /:,  774 
.  646 


1 

128  c,  708 
454 


339 
338 

763 

562 
354 
354 
550 

28  b, 
717 
489 

568 


CXU  TABLE   OF   CASES 

Reese  v.  Bank  of  Commerce  ....     14  Md.  271  .     .     .   699,  701,  702 

Reeve  v.  Smith 113  111.  47 346 

Reeves  v.  State  Bank 8  Ohio  St.  465  .     .     .     250,  265, 

272,  279,  631 

Regina  v.  Esdaile 1  F.  &  F.  213 132 

V.  Watts 2  Den.  (Crown  C.)  14    .     .     460 

Regina  Flour  Mills  Co.  v.  Holmes  .     .     156  Mass.  11 246 

Reid  V.  Charlotville  Nat.  Bank  .     .     .     159  N.  C.  99     .     .     .  178,  319  B 

V.  De  Jarnette 123  Ga.  787       ...       675,  679 

Reinhardt  v.  Peoples'  Bank   ....     89  Mo.  App.  511  .     .       161,  166 
Renner  v.  Bank  of  Columbia      ...     9  Wheat.  581    .     .     .     9  C,  9  F, 

220,  229,  231 
Republic  Life  Ins.  Co.  v.  Hudson  Tr. 

Co 130  App.  Div.  618     ...     311 

Retan  v.  Union  Tr.  Co 134  Mich.  1 186  a 

Rettig  V.  Southern  lUinois  Nat.  Bank     147  111.  App.  193  .      291  e,  291  / 

Revere  v.  City  of  Boston 5  Rep.  46  (Mass.)      .      II.  241  n 

Reviere  v.  Chambliss 120  Ga.  714 493 

Rex  V.  Bird 13  East  384 43 

V.  Daye (1908)    2  K.  B.  333   .     .     .     204 

V.  Ginever 6  T.  R.  735 43 

V.  langhorn (1908)    2  K.  B.  949  .     .       294  a 

V.  Nutt Fitzg.  47 102 

?;.  Segar (1914)    3  K.  B.  1112      .     .295/ 

V.  Weymouth 7  Mod.  374 43 

Reynes  v.  Dumont 130  U.  S.  354 325 

Reynolds  v.  Chettle 2  Camp.  596 354 

V.  First  Nat.  Bank  of  Craw- 

fordsville 112  U.  S.  405    .     .     .     .II.  228 

Reynolds,  Assignee,  v.  Simpson  &  Led- 

beth 74  Ga.  454 78 

Rhodes  v.  Childs 64  Pa.  St.  18     .     .     .       611,  612 

V.  Morse 14  Jur.  800 395  A 

V.  Webb 24  Minn.  292    .     .  99,  114,  n.  12 

Rice  V.  Nat.  Bank 77  Mich.  414 324 

V.  Stearns 3  Mass.  225 217 

Rich  V.  Errol 51  N.  H.  350 752 

V.  State  Nat.  Bank  of  Lincoln      7  Neb.  201   .     .       65,  101,  144  k 

Richards  v.  Attleborough  Nat.  Bank  .     148  Mass.  187 138 

V.  Gill 138  App.  Div.  75      678,  687,  694 

V.  Kountze 4  Neb.  200 II.  228 

V.  New  Hampshire  Ins.  Co.      .     43  N.  H.  263 125 

V.  Rock  Rapids 31  Fed.  505       ...      II.  241  tj 

V.  Street 31  App.  Cas.  (D.  C.)      .     .    427, 

599,  603 

Richardson  v.  Boot 18  Colo.  App.  140      .     .      675  a, 

675  c,  687 

V.  International  Bank  ...  11  Brad.  582  ..  .   326,  445 

V.  Rice Cent.  Law  Jour.,  Vol.  VII., 

No.  12 565 

...  610 
.  .  II.  259 
...  701 
.  753,  777 
...  679 


V.  Richardson L.  R.  3  Eq.  686 

v.V.S 181  Fed.  1    .     . 

V.  Wallace 39  S.  C.  231      . 


Richeson  v.  Mona  Nat.  Bank     ...     96  Ark.  594  . 
Richmond  v.  Irons 121  U.  S.  27 


TABLE   OF   CASES 


CXlll 


Ricker  Nat.  Bank  v.  Stone 
Rickford  i'.  Kidyo     •     •     • 


Ricks  V.  Broyk's 

Ridden  v.  Thrall 

Ridgoly  Nat.  Bank  v.  Patton      .     .     . 
Ridgway  v.  Farmers'  Bank    .... 

Ridley  v.  Plymouth  Grinding  &  Baking 

Co 

Riley  v.  Albany  Sav.  Bank    .... 

V.  City  of  Rochester  .... 

Rinard  v.  Lesley 

Rindskoff  v.  Barrett 

Ring  V.  Long  Island  Real  Estate  Co. 

RingUng  r.  Kohn 

Ringo  I'.  Trustees  of  Real  Estate  Bank 
Rio  State  Bank  v.  Amondson     .     .     . 

Ripka  V.  Geddis 

Risley  v.  Phoenix  Bank 

Ritchie  v.  Bradshaw 

Rivanna  Navigation  Co.  v.  Dawson    . 
Riverside  Bank  v.  First  Xat.  Bank 

V.  Woodhaven  June.  Land  Co. 

Robards  v.  Hamrick 

Robarts  v.  Tucker 

Robb  V.  Pennsylvania  Co 

V.  Ross  Co.  Bank 

Roberts  v.  Corbin 

V.  Hall 

V.  Hill 

V.  Lane 

V.  Nat.  Bank 

V.  Roberts 

V.  State 

t'.  Tifton  Nat.  Bank  .     .     .     . 

V.  Washington  Nat.  Bank   .     . 

Robertson  v.  Allen 

V.  Buffalo  Co.  Nat.  Bank     .    . 

V.  Burdekin 

V.  Conway 

V.  Owensboro  Sav.  Bank 

Robinet  v.  Willow  Springs  Bank 

Robinson  v.  Aird 

V.  Ames 

V.  Appleby 

V.  Bank  of  Attica 

V.  Bank  of  Darien       .     .     .     . 

V.  Bank  of  Pikeville    .     .     .     . 


21  Okla.  833  .  . 

. 

.   80 

2  Camp.  537 

9,  n.  9, 

238, 

240,  243 

78  Ga.  610  .  .  . 

.  337 

12.5  N.  Y.  572  .  . 

.  Oil 

109  111.  479  .  .  . 

.  557 

12  Serg.  &  R.  250 

70,  9.S, 

n.  33,  116,  144, 

n.  22, 

100,  295 

2  E.xeh.  711   .  . 

.  127 

30  Hun  513.  .  . 

.  319 

5  Seld.  02  .  .  . 

.   55 

143  lU.  App.  450  . 

.  298 

11  Iowa  172   .  . 

9.  11.  9 

93  App.  Div.  442  . 

773,  777 

4  Mo.  App.  59  .  . 

.  .505 

8  Eng.  503  .  .  . 

.  045 

141  Wis.  82   . 

.  172 

20  Pa.  St.  140  . 

12,  n.  13 

83  N.  Y.  318  . 

.  407, 

493, 

511,  524 

5  Cal.  228  .  . 

.  421 

3  Gratt.  19  .  . 

.   55 

74  Fed.  270  .  . 

504  A 

34  App.  Div.  359 

.  573 

39  Ind.  App.  134 

.  311 

334,  590 

10  Q.  B.  500  . 

474,  480 

180  Pa.  St.  450 

.  .  470  A,  480 

41  Barb.  580  . 

150,  1.58 

20  Iowa  315   . 

.307, 

375,  493, 

49^ 

1,  490, 

528,  531 

37  Conn.  205  . 

.  . 

505,  000 

23  Blatchf.  191 

.  .  023 

04  Me.  108  .  . 

.  .  750 

10  Ga.  App.  272 

. 

.   102  c 

15  W.  R.  177  . 

. 

.  .  008 

172  S.  W.  1039 

.  075  c 

10  Ga.  App.  272 

.  11.  201 

11  Wash.  5.50  . 

.  .  133 

59  Tenn.  233  . 

.  .  505 

40  Neb.  235   . 

.  .  144 

1  Ross  L.  C.  812 

.  . 

12,  n.  13 

188  Fed.  579  . 

090,  094 

1.50  Ky.  50  .  . 

071 

A,  708  A 

178  Mo.  App.  422 

.  . 414  h 

43  Fla.  30  .  . 

339, 

560,  017 

20  Johns.  140  . 

.  .  227 

09  App.  Div.  509 

, 

.  .  010 

21  N.  Y.  400  . 

.  .  452 

V.  Bealle 
V.  Bland 


20  Ga.  17  .  .  .  .  049,  0.52, 
055,  087,  091,  701 
140  Ky.  538  ....  289  a, 
455,  459,  494 
20  Ga.  275  .  .  .  120,  039,  087 
2  Burr.  1077 743 


CXIV 


TABLE   OF  CASES 


Robinson  v.  Commonwealth       .     , 

V.  Frost 

V.  Hawksford , 

V.  Lane 

V.  Nat.  Bank  of  New  Berne 

V.  Ring , 

V.  Smith 

V.  Ward 

V.  Wiley 

Robinson-Pettit  Co.  v.  Sapp  . 

Robson  V.  Bennett 

V.  Oliver 

Roca  V.  Byrne 

Rochester  City  Bank  v.  Elwood 
Rochester  Printing  Co.  v.  Loomis   . 

Rock  V.  Nichols 

Rock  County  Nat.  Bank  v.  Hollister  . 
Rock  River  Bank  v.  Sherwood   . 

Rockwell  V.  Bank , 

V.  Dye 

Rodick  V.  Gandell 

Roe  V.  Bank  of  Versailles  .  .  .  , 
Roebling  v.  First  Nat.  Bank  .  .  . 
Roger  V.  Keystone  Nat.  Bank    .     .     . 

Rogers  v.  Durant 

V.  Huntingdon  Bank  .     .     .     . 

V.  Kelly 

V.  N.  J.  Ins.  Co 

Rogers  Commission  Co.  v.  Farmers' 

Bank 

RoUin  V.  Steward 

Rolls  V.  Pearce 

RoUston  Nat.  Bank  v.  Carleton      .     . 

Rooney  v.  Dunleary 

Root  V.  Erdlemeyer 

Rosa  V.  Brotherson 

Roseorla  v.  Thomas 

Rose  V.  Hart 

V.  Houston 

Rosenback  v.  Salt  Springs  Nat.  Bank 

Rosenbaum  v.  Hazard 

Rosenberg  v.  Weeks 

Rosenblatt  v.  Haberman 

V.  Johnston 

Rosenthal  v.  Ehrhicher 

V.  Mastin  Bank 

Roseville  Trust  Co.  v.  Barney    .     .     . 

Ross  V.  Bank 

V.  Bedell 

V.  Curtis 

Rothernberg  v.  Vierath 

Rothschild  v.  Corney 


3  Sum.  220 10 

14  Barb.  536 325 


9  Q.  B.  52 


19  Ga.  339 
19  Hun  477  .  , 
72  Me.  140  .  . 
14  Cal.  94  .  , 
2  Cow.  &  P.  59 
188  Mass.  533 
160  Ky.  445 

2  Taunt.  388 
10  Q.  B.  704 
145  N.  Y.  182 
21  N.  Y.  88 
45  Hun  93    . 

3  Allen  342  . 
21  Minn.  385 
10  Wis.  230 

4  Colo.  App.  562 
42  App.  Div.  520 

1  DeG.  M.  &  G.  763 


.     .     .     378,  380, 
421,  n.  10,  495 
656,  679,  692,  694 
II.  257  a 


.     615 

.     600 

.     604 

.     458 

679,  690 

408,  418 

.     425 

.590  c 

23,30 

.     629 

.     710 

.     246 

.     750 

II.  230 

.     425 

.    495, 


511,  541 
167  Mo.  406      ..     .    101,  144  h 

30  Fed.  744 78 

83  Pa.  St.  248 565 

140  U.  S.  298 377 

12  Serg.  «&  R.  77   .     .       701,  702 
2  Camp.  123 713 

4  Halst.  Ch.  R.  167    ..     .       24 

100  Ark.  537 493 

14  C.  B.  594     .        458,  459,  507 

5  Ch.  D.  730     ..     .       549,  550 


136  Mass.  226  . 

...   30 

39  Ind.  App.  108 

.   493,  550 

37  Ind.  225  .  . 

.   II.  241  a 

10  Wi3nd.  86  . 

...  599 

3  Q.  B.  234  .  . 

...  103 

8  Taunt.  499  . 

...  336 

11  Tex.  324  .  . 

.  .  .  324  c 

53  Barb.  495  . 

698,  II.  212 

233  Pa.  St.  206 

.  .   421  d 

67  Tex.  578   . 

II.  241  c,  241  s 

8  Mo.  App.  486 

...  424 

104  U.  S.  462  . 

.   II.  241  u 

154  Pa.  St.  396 

.  .  .  421 i 

17  Blatchf.  318 

493,  513,  522 

96  Atl.  67  .  . 

.   632  A  h 

20  Nev.  191 

...  679 

5  Duer  462  .  . 

.   393,  565 

30  Barb.  238  . 

.   499,  506 

81  Md.  624  .  . 

.  .  .  590  6 

9  Barn.  &  Cr.  389 

.  .  .  402, 

441,  442,  443 

TABLE   OF  CASES  CXV 

Rouch  V.  Bankers'  Nat.  Bank  ...  143  111.  App.  025  ...  .  4.59 
Roughan    v.    Chenango    Valley    Sav. 

Bank                 158  App.  Div.  786     .     .     .020  J 

Rounds  V.  Smith 42  111.  245     .     414,  451,  494,  530 

Rouvant  v.  San  Antonio  Nat.  Bank    .     03  Te.\.  010 400 

Row  V.  Dawson 1  Ves.  Sen.  331      ....     407 

Royal  Bank  v.  Turquand 6  Ellis  &  Black.  327  .      98,  n.  32 

Royse  v.  Winchester  Bank     ....     148  Ky.  308 502 

Ruffin  V.  Board  of  Commissioners  .     .  09  N.  C.  498     .  186,  508,  XL  241 

RidTord  V.  Bishop 5  Russ.  340 3(J9 

Rumble  v.  Tyus 123  (ra.  295 (i23  a 

Runner,  Assignee,  v.  Dwiggins  .     .     .     147  Ind.  238 090 

Runyan  v.  Lessee  of  Coster   ....  14  Pet.  122,  131     .     .         40,  754 

Rushing  v.  Citizens'  Nat.  Bank       .     .  102  S.  W.  400  .     .     .      II.  230  h 

Russell  V.  Hanky 0  T.  R.  12 252 

V.  Langstaffe Douglas,  514 486 

V.  Washington  Sav.  Bank    .     .  23  App.  Cas.  (D.  C.)  398    .     143 

Russo-Chinese  Bank  v.  Li  Yau  Sam  (1909)     A.  C.  174      ...     179 

Rust  V.  Browning 103  Tex.  049 294  o 

Ryan  v.  Dunlap 17  111.  40 159 

V.  Manufacturers  &  Merchants' 

Bank 9  Daly  308        240 

V.  Mount  Vernon  Nat.  Bank   .  200  Fed.  452     ..     .     II.  251)  A 

J,.  224  Fed.  429 OIU) 

• V.  North  End  Sav.  Bank     .     .  108  IMass.  215  .     .     .     .      319  A 

V.  State 60  Fla.  25 394 


Sachs  V.  Sachs 181  111.  App.  342  .     .     .     289  o, 

Sackett's  Harbor  Bank  v.  Lewis  Co.  324,  328 

Bank H  Barb.  213     ...     .     59,  77 

Sacramento  Bank  v.  Pacific  Bank  .     .     124  Cal.  148 094 

Sadler  v.  Belcher 2  M.  &  Rob.  489  .  289,  589,  029 

Safford  v.  Bank 01  Vt.  373    .     .     .     .      H.  257  a 

V.  Wyckofif 4  HiU  442 03,  70_, 


Saginaw  Bank  v.  Western  Pa.  Title 

etc.  Co 

Sagory  v.  Dubois 

Sahlien  v.  Bank 

St.  Charles  Sa\'.  Bank  v.  Edwards  . 

V.  Orthweim  Investment  Co. 

St.  John  Nat.  Bank  v.  Steel  .     .     . 
St.  Louis  I'.  Johnson 


105  Fed.  491 


743,  744,  745 

111 


3  Sandf.  Ch.  406  .     .       009,  670 

90  Tenn.  229 218 

243  Mo.  553  .  .  .  109  o,  017 
100  :Mo.  App.  309  ...  109  a 
135  Mich.  105  .  .  .  .  II.  208 
5  Dill.  241    .     .     .  188,  507, 

573,  575,  589 
St.  Louis  Carbonating  Co.  v  .  Lookeba 

State  Bank 35  Okla.  434     .     .     .    252,252  c 

St.  Louis  Nat.  Bank  ;).  Allen      ...     2  McCrary  92  .     .     .     .II.  2o7 

y.  Brinkman 1  Fed.  25 II.  2o7 

y.  Papin 3  Cent.  Law  Jour.  009     II.  241  c 

St.  Louis  Perpetual  Ins.  Co.  v.  Cohen      9  Mo.  416 158 

St.  Louis  School  Board  v.  Broadway 

Sav.  Bank  Estate 84  Mo.  56 -1- 


CXVl                                                   TABLE   OF  CASES 

St.  Nicholas  Bank  v.  State  Nat.  Bank     128  N.  Y.  26 272 

St.  Paul  Nat.  Bank  v.  Cannon   ...     46  Minn.  95 564 

St.  Saviour's  Southwick  v.  Bostock      .     2  New  R.  174 27 

Salem  Bank  v.  Gloucester  Bank      .     .  17  Mass.  1    .     .     .     .89,  98,  n. 

17,  102,  n.  22,  127,  167,  171, 
468,  658  659 

Salladin  v.  MitcheU 42  Neb.  860 338 

Salt  Lake  City  v.  HoUister     .     .     .     .  118  U.  S.  256    .     .     .    102,  n.  15 

Salt  Springs  Nat.  Bank  v.  Burton  .     .  58  N.  Y.  430     ....   45,  229 

Salte  V.  Field 5  T.  R.  215 100 

Salter  v.  Burt 20  Wend.  205   .     .     .       380,  389 

V.  Williams 219  Fed.  1017  ...      II.  212  b 

Samples  v.  Bank 1  Woods  523 643 

Sanders  State  Bank  v.  Hawkins      .     .     142  S.  W.  84 13  A 

Sandford  v.  Hayes 52  Pa.  St.  26     .     .     .       193,  312 

V.  McArthur 18  B.  Mon.  411     .     .    128,  n.  22 

San  Diego  Co.  v.  Cal.  Nat.  Bank    .     .     52  Fed.  59 604  / 

San  Francisco  Nat.  Bank  v.  Dodge      .  197  U.  S.  70      .     .     .      II.  241  x 

Sandy  River  Bank  v.  Merchants'  Bank     1  Biss.  146 159 

Sargeant  v.  Webster 13  Met.  (Mass.)  497 .     .     .     120 

Sargeant's  Case 1  Rose  153 583 

Saunders  v.  Bank  of  Meeklinburg  .     .     113  Va.  656 128 

V.  Hatterman 2  IredeU  32 359 

V.  White 20  Gratt.  397 637 

Saunderson  v.  Jackson 2  B.  &  P.  238 365 

V.  Piper 5  Bing.  New  R.  430  .     .     .     444 

Savannah  Bank  &  Tr.   Co.  v.  Hart- 
ridge  73  Ga.  223 136 

Savings  Bank  v.  Abercrombie     .     .     .     211  Mass.  252 131 

V.  Bates 8  Conn.  505 641 

V.  Fogg 82  Me.  538        614 

Savings  Bank  of  Cincinnati  v.  Benton  2  Met.  (Ky.)  240  ....     143 

Savings  Inst.  v.  Hathorn 88  Me.  122 610 

Savings  &  Loan  Co.  v.  Multnomah  Co.  169  U.  S.  421    ..     .      II.  230  d 

SawteU  ».  Drew 122  Mass.  228  .     .     .     .9,  n.  12 

Sawyer  v.  Hoag 17  Wall.  610     ..     .      566,  632 

V.  Pawners'  Bank 6  Allen  207 150 

V.  Wiswell 9  Allen  42 565 

Sayer  v.  Wagstaff 5  Beav.  415 447 

Sayles  v.  Cox 95  Tenn.  580 248  a 

Saylor  v.  Bushong 100  Pa.  St.  23  .       398,  410,  493, 

511,  517,  526,  535 

Sayre  v.  Weil 92  Ala.  466  .     .     317,  317  a,  610 

Scanlon-Gipson  Lumber  Co.   v.   Ger- 

mania  Bank 90  Minn.  478    ..     .       290,  433 

Schaake  v.  Dolley 85  Kan.  598 13 

Sehafer  v.  Olson 24  N.  D.  542     214,    248    a,    305 

Schaffer  v.  Maddox 9  Neb.  205  .     .     .         421,  n.  14 

Schaffner  v.  Ehrman 139  111.  109 458 

Scharf  v.  Moore 102  Ala.  468 391 

Scheffenacker  v.  Hoopes 113  Md.  Ill     414,  414  e,  414  k 

Schepp  V.  Carpenter 51  N.  Y.  602 389 

Scheps  V.  Bowery  Sav.  Bank      ...  97  App.  Div.  434       ...     613 

Schick  V.  Grote 43  N.  J.  Eq.  352   .     .     .     .     613 

Sehinotti  v.  Whitney 130  Fed.  780     ..     .   289,  322  a 


TABLE   OF   CASES 


CXVll 


Schippcrs  v.  Kompkes  . 
Sehlesinger  v.  Gilhooly 
Schley  v.  Dixon    .     .     . 
Schlisinger  t'.  Kelley 
V.  Lehmaier  .     , 


Schluter  v.  Bank .     . 
Schmidt  v.  First  Nat. 
V.  Scanlon 


Bank  of  Selma 


Schneider  v.  Irving  Bank  . 

V.  Johnson     .     .     .     . 

V.  SchneidfT .     .     .     . 

V.  Union  Dime  Bank 

Schneitman  v.  Noble     .     . 


Schoenwald  ;'.  Metropolitan  Sav.  Bank 
Schofield  V.  Baker 


V.  Twining 


Schofield  Mfg.  Co.  v.  Cochran  .  . 
Scholey  v.  Ramsbottom  .  .  .  . 
SehoUmier  v.  Sehoendilen .  .  .  . 
School  District  v.  First  Nat.  Bank 

Schoolfried  v.  Moore 

Schrader  v.  Manufacturers'  Bank  . 

Schram  v.  Cartwright 

Schroeder  v.  Harvey 

Schuck  V.  Bramble 

Schuyler  Nat.  Bank  v.  Bollong  . 


V.  Gadsden 

Schwartz  v.  Nat.  Bank 

V.  State  Bank 

Scobee  v.  Bean 

Seofield  v.  State  Nat.  Bank  of  Lincoln 

Scott  V.  Armstrong 

V.  Berkshire  Co.  Sav.  Bank      . 

V.  Commonwealth       .... 

V.  First  Nat.  Bank      .... 

V.  Franklin 

V.  Fritz  

V.  Harbeck 

V.  Latimer 

V.  Meeker 

V.  Nat.  Bank  of  Chester  Valley 

V.  Ocean  Bank  in  City  of  N.  Y. 

V.  Pequonnoek  Nat.  Bank  of 

Bridgeport 

V.  Porcher 

V.  Shirk 

t;.  U.  S 

Scow  V.  Farmers'  Sav.  Bank  .... 
Scribner  State  Bank  v.  Ransom  .  . 
Scruggs  V.  Gass 


72  N.  J.  Eq.  948   . 
189  N.  Y.  1       .     II 
24  Ga.  273   .     .     . 
114  App.  Div.  546 
117  App.  Div.  428 

117  N.  Y.  12o  .  . 
22  La.  Ann.  314  . 
32  S.  D.  608     .     . 

1  Daly  500  ..  . 
161  Mo.  App.  375 
122  App.  Div.  774 
1.56  N.  Y.  S.  753 
75  Iowa  120 
57  N.  Y.  418 
212  Fed.  504 

127  Fed.  486 
119  Ga.  901 

2  Camp.  485 
78  Iowa  426 
102  Mass.  126 
9  Heisk.  171 
133  U.  S.  67 

4  Dist.  R.  632 
75  111.  638  . 
122  Md.  411 
28  Neb.  684 
32  Neb.  70  . 
191  U.  S.  451 

II.  128  a,  128 
67  Tex.  217 
135  App.  Div.  42 
109  Ky.  526 
9  Neb.  316 
146  U.  S.  499 
140  Mass.  157 

5  J.  J.  Marsh.  643 
5  Ind.  T.  292 
15  East  428 
51  Pa.  St.  418 
49  Hun  292 
89  Fed.  843  . 
20  Hun  161  . 
72  Pa.  St.  471 

23  N.  Y.  289 


21  BUitchf.  203 
3  Meriv.  652 
60  Fnd.  160  . 
130  Fed.  429 
136  Iowa  1  . 
35  S .  D.  244 
S  Yerg.  175  . 


II. 


II. 


.  .  .  617 
230  a,  230  c 
.  128,  129 
.  .  .  746 
746, 
230  Z 
317  a 
250  c 
295  a 
.  290 
.  569 
609,  613 
620  c 
.  1.^8  e 
.  620 
74  c,  II. 
128  c,  1.50  c 
.  .  679 
186,  190 
.  .  445 
.  .  551 
326,  590 
416,  421 
688,  694 
.  .  568 
.  .  489 
.  .  102  c 
.  II.  230 
II.  230  h 
48,  74  c,  754, 
,  130  c,  130  h 
472 
291 
II.  241  m 
II.  244 
.  338 
609,  610 
.  637 
.  211 
324 
334 
610 
113  c 
421 
102,  n.  20. 
191,  196,  202 
574,  483,  599 

,  .  713 
,  .  398 
,  .  557 
,  II.  156 
311.  617 
.  13  A 
,  .  662 


CXVIU                                                TABLE   OF  CASES 

Seudder  v.  Union  Nat.  Bank      .     .     .     91  U.  S.  406 406 

Seaboard    Nat.    Bank    v.    Bank     of 

America 193  N.  Y.  26 314 

Seagor  v.  Sligeriand 2  Caines  219     .     .     .     .     9,  n.  9 

Seale  v.  Baker 70  Tex.  283 132 

Searles  v.  Smith  Grain  Co.     .     .         .  80  Miss.  688     ...     .      II.  52 

Sears  v.  Emerson 182  111.  App.  522  .     .     .     .     186 

Sebastian  Co.  Bank  v.  Gann  .     .     .     .  180  S.  W.  754  .     .     .     .      671  A 

Second  Nat.  Bank  v.  Bank  of  Alma    .  99  Ark.  386       .     .   214,  224,  272 

V.  Brown 72  Pa.  St.  209  .     .     .     .    II.  230 

V.  Fitzpatriek Ill  Ky.  228      .     .     .     .    II.  230 

V.  Gibboney 43  Ind.  App.  492     289,  291,  451 

V.  Guarantee  Tr.  Co.       ...  206  Pa.  St.  616      .     .       454,  477 

V.  Hill 76  Ind.  223  .     .     .     .       557,  563 

—  V.  Merchants'  Nat.  Bank     .     .  Ill  Ky.  930      .  236,  236  a,  252  d 

—  V.  Smoot 2  McArthur  371    .     .      II.  230  e 

V.  West.  Nat.  Bank    ....     51  Md.  128 464 

V.  WiUiams 13  Mich.  255    .     .   493,  521,  550 

Security  Bank  v.  Nat.  Bank  .     .     .     .  67  N.  Y.  458     .      414,  n.  19,  482 

V.  Northwestern  Fuel  Co.    .     .     58  Minn.  577 421 

Security  Bank  of  N.  Y.  v.  Nat.  Bank 

of  Commonwealth 4  Thomp.  &  C.  518   .      II.  250  a 

Security  Nat.  Bank  v.  St.  Croix  Power 

Co 117  Wis.  211     .     .     78,11.208/ 

Security  Sav.  Bank  v.  Smith       ...  144  Iowa  203    ..     .      152,  167 

Security  Sav.  etc.  Bank  v.  IGng      .     .  69  Or.  228  214,  248,  249,  419,  586 
Security  State  Bank  v.  Bradford  State 

Bank 154  N.  W.  282 414  /i 

V.  Fussell 36  Okla.  527     ..     .   247,  295  b 

Seeley  v.  N.  Y.  Exch.  Bank  ....  Thomp.  Nat.  Bank  Cas.  804 

II.  213  d 

Seiger  v.  Second  Nat.  Bank  ....  132  Pa.  St.  307      ...       562  a 

Selden  v.  Equitable  Tr.  Co 94  U.  S.  419 4 

Selfridge  v.  Northampton  Bank      .     .  8  Watts  &  S.  320  .     .     .     .     645 
Seligman    v.    Charlotteville    National 

Bank 3  Hughes  647 65 

Selma  Sav.  Bank  v.  Harian    .     .     .     .  149  N.  W.  882 .     .     .     .       101  d 

Seneca  Co.  Bank  v.  Lamb      ....  26  Barb.  595     ...     .   48,  746 

Senter  v.  Continental  Bank   ....  7  Mo.  App.  532     ....     522 

Serle  v.  Norton 2  Moody  &  R.  401     .    421,  n.  10 

Serrell  v.  Derbyshire  Raih-oad  Co.  .     .  19  L.  J.  C.  P.  377    365,  440,  442 

Sessions  v.  Moseley 4  Cush.  78    .     .     .   549,  611,  612 

Seventeenth  Ward  Bank  v.  Webster    .  67  App.  Div.  228  .     .     .     .  147  / 

Seventh  Nat.  Bank  y.  Cook  .     .     .     .  73  Pa.  St.  483    410,  414,  474,  511 

Sewall  V.  Boston  Water  Power  Co.      .     4  Allen,  277 480 

V.  Lancaster  Bank      ....  17  Serg.  &  R.  285     701,  702,  705 

Seward  v.  Miller 106  Va.  309 72 

Seward  Co.  Commissioners  v.  Cottle  .     14  Neb.  144 289 

SeweU  V.  Corp 1  Car.  &  P.  392     .     .        9,  n.  19 

Seybel  v.  Nat.  Currency  Bank   .     .     .     54  N.  Y.  288 565 

Seybold  v.  Bank 5  N.  D.  460      ...       573,  611 

Shackamaxon  Bank  v.  Kinsler    ...  16  Week.  Not.  Cas.  509      .     334 

Shafer  v.  Nat.  Bank 53  Kan.  614      ...     II.  230  n 

Shaffer  v.  McKee 19  Ohio  St.  526     ...     .     474 

Shalenberger  v.  First  Nat.  Bank     .     .     219  U.  S.  114 13 


TABLE   OF  CASES 


CXIX 


Sharpe  v.  Bollis 

Shattuek  v.  Guarantee  Tr.  Co.  .     . 

Shaw  V.  Bail  man 

V.  Clark 

V.  Crandall  Slate  Bank  .     . 

IK  Dartnall 

V.  Nat.  German  Amer.  Bank 

V.  Picton 

V.  Spenser 


734 


Shawmut  Xat.  Bank  v.  Manson 
Shawnee  Nat.  Bank  v.  Woollen 

Shay  V.  Callanan 

Sheaf e  v.  Larimer 

Sheehan  v.  Davis 

Shelburne  Falls  v.  Townsley        .     . 

Sheldon  v.  Clews 

Sheldon  Canal  Co.  v.  Aliller  .     .     . 

Sherman  v.  F'itch 

Sherwood  v.  Home  Sav.  Bank    .     . 

Sherwood  v.  Sav.  Bank      .... 

Shiels  V.  Blackburn 

Shinkle  v.  First  Nat.  Bank  of  Ripley 
Shipman  v.  Bank 


Gl  Pa.  St.  09 
145  App.  Di\ 
34  Ohio  St.  2.')  . 
49  Mich.  384    . 
14.")  Wis.  039     . 
6  Barn.  &  Cr.  57 
132  Fed.  058     . 
4  Barn.  &  Cr.  715 
100  Mass.  382  . 
108  :\Iass.  425  . 
24  Okla.  425  .   . 
124  Iowa  370    . 
79  Fed.  921 
17  Ohio  St.  571 
102  Mass.  177 
13  Abb.  N.  C.  09 
90  S.  W.  200 
98  Mass.  59 
131  Iowa  528 


103  Mich.  109  , 
1  ir.  Bl.  158  , 
22  Ohio  St.  510 
120  N.  Y.  318  . 


Shipsey  v.  Bowery  Nat.  Bank    .     .     . 

•Shirley  v.  Whitehead 

Shoe  Lasting  Co.  v.  Western  Nat.  Bank 
Shoemaker  v.  Mechanics'  Bank  .  . 
V.  Nat.  Mechanics'  Bank     .     . 

Shopert  v.  Ind.  Nat.  Bank     .... 


289 


Short  V.  Butler 

Shortbridge's  Case 

Shower  v.  Pilch 

Shrieve  v.  Duekliam 

Shuey  v.  Adair 

Shuman  v.  Citizens'  State  Bank      . 
Shunk  V.  First  Nat.  Bank  of  Galion 

V.  Merchants'  Nat.  Bank    . 

V.  Miller 


59  N.  Y.  485  . 
1  Ired.  Eq.  130 
70  App.  Div.  588 
59  Pa.  St.  83  . 
1  Abb.  U.  S.  410 
II. 
41  Ind.  App.  474 

136  Mo.  App.  350 
12  Ves.  Jr.  28  . 
4  Exch.  477  . 
1  Lilt.  194  .  . 
24  Wash.  378  . 
27  N.  D.  599  . 
22  Ohio  St.  508 


.  .  4S(j 

.  .  4  89 

.  .  (i04 

.  .  130 

101,  125 

.  .  291 

78  b,  079 

.  .  291 

.  .  317 

.  .  573 

.  .  590 

.   547  A 

.  .  091 

98,  n.  30 

.  .  233 

.  .  028 

.  .  305 

.  .  101 

105  c,  171, 

191,  194,  017 

,  .  248 

215,  289 

11.208,  230  a 

•   171/, 

290,  291  e 

252 

550 


440  b 
223 
750 

108,  129,  157  b 
185,  205, 
289  a,  508 
311 
436 
608 
393 
093 

320  /,  334.  508 
II.  230  a 


Shute  V.  Pacific  Nat.  Bank     .... 

Sickles  v.  Ilerold 

Sigwald  V.  City  Bank 

Silisbee  State  Bank  i'.  French  Market 

Grocery  Co 

Silvain  v.  Benson 

Silver  Lake  Bank  v.  North     .... 

Simmons  i'.  Aldrieh 

V.  Bank 

V.  Cincinnati  Sav.  Society  .     . 

Simms  v.  Clark 

Simons  v.  Cissna 


19  Chic.  Leg.  N.  83 
5  Barr  250  .  .  . 
130  Mass.  487  .  . 
149  N.  Y.  332  .  . 


.  .  .  329 
.  .  .  19 
51,  298,  302 
.  .   322  e 


74  S.  C.  473 128 


103  Tex.  029  . 
83  Wash.  271  . 
4  Johns.  Ch.  370 


311,  004 

.  .  090 

40,  59, 

74,  754.  703 

41  Wis.  240   ...   II.  241  k 

41  S.  C.  186   .   167  b,  298,  494 

31  Ohio  St.  457  ....  551 

11  HI.  137 659 

52  Wash.  115 132 


cxx 


TABLE   OF   CASES 


Simonton  v.  Lanier 71  N.  C.  498 48 

Simpson  v.  Moulden 3  Cold.  429  (Tenn.)  ...     299 

V.  Pacific  Mut.  Life  Ins.  Co.    .  44  Cal.  139      414,  n.  13,  421,  426 

V.  Sav.  Bank 56  N.  H.  466 566 

V.  Thompson 43  Tex.  Civ.  App.  273    .     .     324 

V.  Waldby 63  Mich.  439 272 

Sims  V.  Bond 6  Barn.  &  Ad.  392     .     289,  293, 

343,  439,  568 

V.  U.  S.  Tr.  Co 103  N.  Y.  472 457 

Simson  v.  Ingham 2  Barn.  &  Cr.  72  .     .     .     .     327 

Sinclair  v.  Pearson 7  N.  H.  227 102 

Skilding  v.  Warren 15  Johns.  270 565 

Skillern  v.  Arkansas  Woolen  Mills  .     .  77  Ark.  172 166 

Skillman  v.  Titus 3  Vroom  96       .     .     .      388,  441 

Skinner  v.  Merc'hants'  Bank       ...  4  Allen  290 103 

Skipwith  V.  Hunt 94  Tex.  322 334 

Skowhegan  Bank  v.  Cutler     ....  49  Me.  315 710 

Skud  ?;.  TiUinghast        195  Fed.  1    .     II.  208  c,  242,  250 

Skyring  v.  Greenwood 4  Barn.  &  Cr.  281      ...     290 

Slade  V.  Squire 133  App.  Div.  666      .    II.  230  h, 

230  i 

Slanford  v.  Coram 26  Mont.  285 106 

Slaughter  v.  First  Nat.  Bank      ...  109  Ala.  157 

Slawson  v.  Loring 5  Allen  343 

Slee  V.  Bloom 19  Johns.  456 

V.  Kings  Co.  Sav.  Inst.   ...  78  App.  Div.  534 

Sleedy  v.  Roach 124  Mass.  472 

Slette  V.  Larson 125  Minn.  271 

Sloan  V.  Union  Banking  Co 67  Pa.  St.  479 

Sloman  v.  Bank  of  England  ....  14  Sim.  459 

Small  V.  City 126  Ind.  231 

V.  Franklin  Mining  Co.  .     .     .  99  Mass.  277 

V.  Smith 1  Den.  583  . 


SmaUey  v.  McGraw 148  Mich.  384 


Smart  v.  Sanders 

Smathers  v.  Western  Carolina  Bank 


5  C.  B.  895  . 
135  N.  C.  410 

V. 155  N.  C.  283 

Smedes  v.  Bank  of  Utiea 20  Johns.  372 


Smiley  v.  Fry 100  N.  Y.  262 

SmiUe  v.  Stevens 39  Vt.  315    . 

Smith  V.  Addison 5  Cranch  623 

V.  Anderson 37  Hun  72    . 

V.  Ayer 101  U.  S.  320 

V.  Bank  of  Scotland    ....  1  Dow.  Pari.  R 

—  V.  Bank  of  the  State        ...  18  Ind.  327  . 

V.  Butler 1  Jones  &  Lat. 

V.  Chester 1  D.  &  E.  655 

V.  Dorsey '  .     .  38  Ind.  451  . 

V.  Eighth  Ward  Bank     ...  31  App.  Div.  6 

V.  Equitable  Co-op.  Bank    .     .  219  Mass.  382 

V.  Essex  Co.  Bank      ....  22  Barb.  627 

V.  Exch.  Bank  of  Pittsburg      .  23  Ohio  St.  141 


II. 


230  c 

...     365 

43,  693 

.     .  609,  613 

...     612 

...     127 

...     565 

...     435 

.      II.  241  i 

393,  422,  546 

.     .     .     565 

128 

132  b,  II.  234 

...     100 

675,  679,  687, 

690,  693,  694,  696, 

...     679 

9,  n.  9,  232, 

265, 274 

.       297,  302 

302 

31 


294 


692 


463, 


146  c 
.     317 
.       21 
98,  750 
.     606 
476,  488 
.     611 
.     329 
.     566 
.     214 
72,  II.  230  a 


TABLE   OF   CASES 


CXXl 


Smith  V.  Field 

V.  First  Nat.  Bank     .... 

V.  Freeholders  of  Essex  .     .     • 

V.  Fuller 

V.  Haire 

V.  Hull  Glass  Co 

V.  Janes 

V.  Law 

— V.  Lawson 

V.  Lee 

V.  Livingston 

V.  Maddox-Rucker  Banking  Co. 

V.  Mechanics'  Bank    .... 

V.  Mercer 

V.  Miller 

V.  Mosby 

V.  Nat.  Bank 

V.  Northampton  Bank    .     .     • 

V.  Phillips  Nat.  Bank      .     .     . 

V.  Prattville  Mfg.  Co.      .     .     • 

V.  Rathburn 

V.  Sanborn  State  Bank    .     .     . 

V.  Smith 

V. 

V.  Snow 

V.  Speer 

V.  Stephens 

V.  Traders'  Nat.  Bank     .     .     . 

V.  Union  Bank  of  London    .     . 

V.  Whiting 

Smith  Roofing  etc.  Co.  v.  Mitchell 

Smiths'  Cash  Store  v.  First  Nat.  Bank 

Smock  V.  Farmers'  Union  State  Bank 

Snattinger  v.  Topeka 

Snead  v.  Williams 

Snodgrass  v.  Sweetser 

Snohomish  Co.  v.  Puget  Sound  Nat. 
Bank 

Snow  V.  Housatonie  R.  R.  Co.    .     .     . 

Snyder  v.  Corn  Exch.  Nat.  Bank    .     . 

Societe  ColonialoAnversoise  v.  London 
etc.  Bank 

Solomon  v.  Bank 

V.  Bates 

Solomons  v.  Bank  of  England     .     .     . 

Sommers  v.  Germania  Nat.  Bank   . 

Soper  V.  Buffalo  &  Rochester  R.  R.  Co, 

V.  Harvard  Colh^ge     .     .     . 

Southerland  v.  Soutlierland    .     .     • 

Southern  Bank  v.  Williams    .     .     . 


19  Idaho  558  .  389,  406,  413  b, 
414,  414  a.  414  e 
99  .Mass.  605  .  .  .  1'2S,  202 
70  App.  Div.  376  XL  230  d,  230  g 
48  N.  J.  Eq.  627    .     .     .       604  a 


86  Ohio  St.  57  . 
181  S.  W.  1()1  . 
11  C.  &  B.  897 

20  Wend.  192   . 

21  N.  Y.  299  . 
18  W.  Va.  212 


2  Th.  &  C.  591 
111  Mass.  342  . 
8  Ga.  App.  288 
6  La.  Ann.  610 
6  Taunt.  76  403 
52N.Y.545,43N 


9  Heisk.  501 
191  Fed.  226 


4  Cush.  1 
92  Atl.  217 
29  Ala.  X.  s.  503 
88  N.  Y.  660 
147  Iowa  640 

1  R.  I.  398  . 

2  Johns.  235 

3  Mad.  C.  C.  310 
34  N.  J.  Eq.  336 
173  Ind.  564  . 
74  Tex.  457 
L.  R.  10  Q.  B,  291 


186,  590  d 

.  .  308 

98,  n.  28 

.  .  421 

.  .   54 

.  .  144, 

n.  15,  165,  171 

...  610 

565 

.  389,  389  c 

...  474 

465,  487,  488 

Y.176  .  234, 

240,  247,  421 

...  338 

236  a,  250, 

272,  280,  451 

...  163 

.  .   II.  71 

...  128 

...   89 

.   324,  325 

366,  444,  485 

.   12,  n.  15 

...  706 

...  614 

...   74 

.  .   146  g 

...  245 


12  Mass.  6 
121  Ga.  772 
149  Cal.  32  . 
22  Okla.  825 
80  Kan.  341 
9  L.  T.  N.  s. 
15  Ind.  App. 


9,  n.  19,  9  B,  221 

451 

.  289  a,  322,  568 

14 

...  21,  27,  48 
Exch.  115  291,  327 
682  .  .  .  .  480 


81  Fed.  518   .  . 
8  Allen  (Mass.)  441 
221  Pa.  St.  599   . 

(1911)  2  K.  B.  1024 
72  Miss.  858 
118N.C.  287 
13  East  135 
1.52  Wis.  210 
19  Barb.  310 
1  Pick.  177  . 
5  Bush  .591  . 
25  Ga.  534  . 


II.  250  A 
.  102 
.  474 

604  a 
.  708 
.  132 
.  649 
.  300 
.  103 
.  43 
.  tK)8 
726,  750 


CXXll 


TABLE   OF   CASES 


Southern  Development  Co.  v.  Houston 
Southern    Hardware    Supply    Co.    v. 

Lester 

Southern  Ins.  Co.  v.  Milligan  .  .  . 
Southern  Loan  Co.  v.  Morris  .  .  . 
Southern  Seating  etc.  Co.  v.  First  Nat. 

Bank 

Southgate  v.  Atlantic  &  Pacific  R.  R. 
Southwest  Nat.  Bank  v.  Justice 

Southwick  V.  Estes 

V.  First  Nat.  Bank  of  Memphis 

Souverbye  v.  Arden 

Sowles  V.  Witters 

Spafford  v.  First  Nat.  Bank  of  Tama 

City 

Spahr  V.  Farmers'  Bank 

Spain  V.  Hamilton's  Administrator 
Spalding  v.  Bank  of  Susquehanna  Co. 
Sparks  v.  Farmers'  Bank  of  Delaware 
Sparrow  v.  State  Exch.  Bank 

Spaulding  Co.  v.  Roberts 

Spaulding  Mfg.  Co.  v.  Chaudoin     .     . 

Spear  v.  Ladd 

Spearring    v.   Whitney   Central   Nat. 

Bank 

Spencer  v.  Ballou 

V.  Wilson 

Spilman  v.  Payne 

Spofford  V.  Norton 

Spokane  etc.  Tr.  Co.  v.  Huff 
Spongeberg  v.  First  Nat.  Bank  .     .     . 

Sprague  v.  Farmers'  Nat.  Bank       .     . 

Spraights  v.  Hawley 

Spring  Brook  Chemical  Co.  v.  Dunn  . 

Springfield  v.  Green 

Springfield  Bank  v.  Merrick  .... 
Springfield  Inst,  for  Savings  v.  Cope- 
land    

Springfield  Marine  Bank  v.  Mitchell  . 
Springfield  Mar.  &  Fire  Ins.  Co.  v.  Peck 

Spurr  y.  U.  S 

Spurraway  v.  Rogers 

Spyker  v.  Spence 

Stackhouse  v.  Countess  of  Jersey    . 

Stacks  V.  Buten 

Stacy  V.  Dane  Co.  Bank 

V.  State  Bank 

Stafford  Nat.  Bank  v.  Dover      .     .     . 

Stagg  V.  Elliott 

Staib's  Estate,  Bender's  Appeal      .     . 

Stair  V.  York  Nat.  Bank 

Stalker  v.  McDonald 

StaUo  V.  Wagner 

Stamford  Bank  v.  Benedict    .... 


27  Fed.  344 

166  Ala.  86  . 
154  Ky.  216 
8  Barr  175  . 


568 


87  S.  C.  79  .  . 
61  Mo.  89  .  . 
157  N.  C.  373  . 
7  Cush.  385  . 
7  Hun  96  .  . 
1  Johns.  Ch.  240 
39  Fed.  403       . 


37  Iowa  181      . 
94  Pa.  St.  434  . 

I  Wall.  604  .     . 
9  Barr  28      .     . 
3  Del.  Ch.  274 
103  Mo.  App.  338 
149  Pac.  41 

87  Ark.  418       . 

II  Mass.  94      . 


129  La.  607  . 
18  N.  Y.  327 
4  Munf .  130 
84  Va.  439  . 
126  Mass.  533 
63  Wash.  225 
18  Idaho  524 


289  a,  432 
.  .  72 
.  51,298 


494,  536 
.  .  159 
.  .  247 
102,  n.  12 

II.  257  a 
.  .  610 
.  .  691 


II.  208,  228 

...  758 

493,  495,  514 

.  .  145 

.  .   27 

.  .  604 

.  .   77 

342,  343  c 

.  .  158 


63  Kan.  12  .  . 
39  N.  Y.  441  . 
39  App.  Div.  130 
7  Baxter  301  . 
14  Mass.  322  . 


458,  459 
232 
100 
338 
246 
455 
101,  128,  133, 
152,  169  a,  171  g 
219 
599 


160  Mass.  380  . 
48  111.  App.  486 
102  111.  263  .  . 
87  Fed.  701  . 
12  Mod.  517  . 
8  Ala.  333  .  . 
30  L.  J.  Ch.  421 
141  Wis.  235  . 
12  Wis.  629  .  236 

4  Scam.  91  .  . 
58  N.  H.  316  . 
12  C.  B.  N.  s.  373 
11  Pa.  St.  447  . 

5  P.  F.  Smith  364 

6  Hill  93  .  .  . 
220  Fed.  360  . 
15  Conn.  437  . 


629  a 
,  546 
,  746 


266 


.  613 

.  358 

.  347 

II.  259 

.  449 

.  144 

.  326 

.  608 

,  274. -287 

,  .  145 

II.  241  p 

98,  n.  10 

,  .  604 

.  343 

.  599 

179,  290 

70,  165 


TABLE   OF   CASES 


CXXIU 


Stamford  Bank  v.  Ferris 

Standish  Tr.  Co.  t'.  Comm.  Nat.  Bank 

Stanhope's  Case 

Staniland  v.  Willott 

Stanton  v.  Blossom 

Staples  V.  Franklin  Bank 

Stapylton  v.  Stockton 

Star  Cutter  Co.  v.  Smith 

Star  Fire  Ins.  Co.  v.  N.  H.  Nat.  Bank 

Stark  V.  Gamble 

V.  U.  S.  Nat.  Bank     .... 

Stark  Bank  v.  U.  S.  Pottery  Co.     .     . 

Starts  V.  George 

State  V.  iEtna  Banking  etc.  Co. 

V.  Bank  of  Carolina    .... 

V.  Bank  of  Fayetteville  . 

V.  Bank  of  Ogalalla     .... 

V.  Bank  of  State  of  S.  C.     .     . 

V.  Bank  of  Tenn 

V.  Bankers'  Tr.  Co 

V.  Barkman 

V.  Barnes 

V. 

V.  Bartley 

V.  Beach 

• V.  Biekford 

V.  Bonner 

V.  Brobston 

V.  Buck ^   .     .     . 

V.  Buhler 

V.  Butler 

V.  Calcaseu  Nat.  Bank    .     .     . 

V.  Clark 

V.  Clement  Nat.  Bank    .     .     . 


17  Conn.  2.->9 
10(3  N.  C.  112 


3  DeG.  &  Sm.  198 
8  Mac.  &  G.  604 
14  Mass.  IIG     . 
1  Met.  43     .     . 
91  Fed.  320       . 
37  111.  App.  212 

00  N.  11.442  . 
43  N.  H.  408  . 
41  Hun  500  . 
34  Vt.  144  .  . 
150  Mo.  1  .  . 
34  Mont.  379    . 

1  Speers  433 
3  Jones  Law  450 
05  Neb.  20  .     . 
1  Rich.  S.  C.  N.  s. 
5  Baxt.  101  .     . 
157  Mo.  App.  557 


493, 


472, 


03 


—  V.  Cockell 

—  V.  Commercial  Bank  .     .     .     . 

—  V.  Commissioners  of  Mansfield 

—  V.  Cook 

—  t'. 

—  V.  Corning  State  Sav.  Bank     . 

—  V. 

—  V.  Cramer 

—  V.  Curtis 

—  V.  Darrah 

—  V.  Davis 

—  V.  Dickerson 

—  V.  Drew 

—  V.  Dunning 

—  V.  Engle 


.     599 

.     127 

.     338 

.       13 

.     701 

.     ()()0 

.     298 

.     718 

043,  718 

0,  079, 

740,  777 

91  Ohio  St.  248      .     .     .     .    14  a 

108  Minn.  230  .     .    709,  770,  777 

108  Minn.  522 770 

39  Neb.  353 508 

147  Ind.  74  ....  028  6 
28  N.  D.  30  ...  180,  190 
103  Iowa  100  ...  .   028  b 

94  Ga.  99 338 

108  Mo.  022 028 

132  La.  1005 028 

80  Tenn.  031  .  .  .  .II.  241 
132  La.  879  .  .  .  004,004/ 
4  Ind.  310  ..  .  183,  190,  507 
84  Vt.  107  .  .  48,  289  a,  508, 
II.  12,  41,  200,  241  s,  241  ij 
27  Okla.  030 13  A 


.  170 

.  240, 

499,  573 

.  119 

.  on 

.  90 
.  (iliO 
11.  252 
425, 507 
477,  489 
.  309 


6  Sm.  &  M.  218  . 

3  Zab.  (N.  J.)  500 
3  Vroom  347  . 
174  IMo.  100   .  , 
139  Iowa  338  . 


.  98,  n.  19, 

105,  701,  702 

...   55 

.   II.  241  I 

.    13,  14,  40 

.  2,  05,  158, 

304,  017,  ()32 

130  Iowa  79   .   178,  170,  289, 

298,  304,  589,  755  a 

20  Idaho  639  ..  .   022,  ()28 

35  Conn.  374  .  .  .  .II.  257 

152  Mo.  522 028  b 

50  How.  447 109 

71  Kan.  709 186 

110  Minn.  247 028  6 

130  Iowa  078 028  b 

50  Wash.  207 46 


CXXIV 


TABLE   OF  CASES 


State  V.  Erfert 

V.  Essex  Bank   .     .     . 

V.  Farmers'  Nat.  Bank 

V.  Fields 

V.  First  Nat.  Bank     . 


102  Iowa  188 
8  Vt.  489  . 
150  Pac.  212 
78  Iowa  748 
61  Or.  551  . 
180  Mo.  717 


viUe 


V.  First  Nat.  Bank  of  Jeff  erson- 

V.  Franklin  Bank  of  Columbus 
V.  Franklin  Co.  Sav.  etc.  Co.   . 

V.  Fuller 

V.  Furth 

V.  Casting 

V.  Gates 

V.  German  Sav.  Bank      .     .     . 


V.  Germania  Bank 

V.  Grills 

V.  Haight      .... 

V.  Hart 

V.  Hill 

V.  Hoffman   .... 
V.  Interstate  Sav.  Bank 
V.  Jackson     .... 


V.  Jahraus 

V.  Keeter 

V.  Krasher 

V.  Lawrence 

V.  Leland 

V.  Lincoln  Sav.  Bank      .     . 
V.  Lincoln  Tr.  Co.       .     .     . 

V.  Mathews        

V.  McPherson 

V.  Midland  State  Bank  .     . 

V.  Miller 

V.  Mitchell 

•  V.  Morgan 

V.  Morris  R.  Co 

■  V.  Myers 

■  V.  Nat.  Bank  of  Baltimore  . 

-  V.  Newark 

-  V. 

-  V.  Nichols 

-  V. 


89  Ind.  302 720 

10  Ohio  91 716 

76  Vt.  246 2 

34  Conn.  280    .  II.  241,  259 

82  Wash.  665 028 

23  La.  Ann.  1609  ...  II.  259 
67  Mo.  139  .  .  .  .  421,  n.  21 
103  Md.  196  .  .  6,  II.  241  z 
65  Neb.  416  ...  675,  687 
106  Minn.  446       ....     678 

35  R.  I.  70  .  .  .  .  188,  289  a 
2  Vroom  399  ..  .  II.  241  z 
2  Vroom  434     ..     .       II.  241  I 

47  Neb.  459 304 

120  La.  949  ....  622,  628 
64  Ohio  St.  283  ...  .  777 
221  Mo.  478  ..  .   297,  357 

21  S.  D.  494 357 

117  La.  286 365 

80  N.  C.  472 298 

170  Ind.  43   ....   628  5 

80  Kan.  707 178 

91  Minn.  321  ....  .  628 

14  Lea  42 3 

144  Mo.  562 777 

62  Ohio  St.  146  ...  .  768 
30  S.  D.  547  ..  .   13,  128  i 

52  Neb.  1 186  a 

47  Or.  562  .   169  a,  413,  414  g 

96  Miss.  259 628 

35La.  Ann.  293  ....  298 
23  N.  J.  L.  360   ....   43 

54  Kan.  206 623 

33  Md.  75  .  .   II.  241  n,  244 

36  N.J.  (10  Vroom)  380  II.  241  g 
40  N.J.  (11  Vroom)  558  II.  241  5 
38  Wash.  309 


.   628  & 

760,  761 

.  .   13 

II.  259 

320  A,  II.  54 

II.  241  o 


V.  Norris 

V.  N.  W.  Tr.  Co.  .  . 

V.  Oleson 

V.  Paulsen  .... 
V.  People's  Nat.  Bank 


V.  Pilling  .  . 
V.  Quackenbush 
V.  Reid  .  .  . 
V.  Rhame   .  . 


40  Wash.  437 
15  S.  C.  214 

72  Neb.  497 
35  Wash.  149 
21  Idaho  686 
75  N.  H.  27 

53  Wash.  464 
98  Minn.  515 
125  Mo.  43 
92  S.  C.  455 


769 
769 
290 
768 
102  a 
132  b 
13  A,  47,  289, 
617,  618,  II.  200 
....  394 
...  628  b 
....  767 
...   13  A 


TABLE   OF   CASES 


CXXV 


State  V.  Riehereek    . 

V.  Rowles 

V.  St.  Paul  Sav 

V.  Salmon 

— ■ ■  V.  Sattley 

V.  Savings  Bank 


V.  Seneca  Co.  Bank 
V.  Shove  . 
V.  Smith  . 
V.  State  Bank 


V. 

V.  Stephens  , 

V.  Stevens 

V.  Stimpson  . 

V.  Strait    .     . 

V.  Strubell     . 

i<.  Thomas     . 

V.  Title  Guaranty  etc 

V.  TombUn 

V.  Tontine  Surety  Co 

V.  Traylor     . 

V.  Twining    . 

V.  Van  Pelt  . 

V.  Walker 

V.  Williams   . 

V.  Wilson 

V.  Winter 

V.  Woodmansee 

V.  Yetser  .     . 

V.  Young  .     . 

V.  Youngblatt 

State  Bank  v.  Aersten 
V.  Armstrong 


Bank 


Co 


Bank  of  the  Capitol 
Blakey  &  Co.     .     . 

Brown 

Bj'rne 

Chetwood       .     .     . 
Citizens'  Xat.  Bank 
Coquillard     .     .     . 

Dody 

Fearing  .... 
Forsyth  .... 
Fox 


V.  Ilawkeye  Gold  Dredging 

V.  Kain 

V.  Lock 

V.  INIcCabe    .... 
V.  IMut.  Telephone  Co. 
V.  Napier       .     .     .     . 

V.  State 

V.  Van  Horn      .     .     . 
V.  Wheeler    .... 


167  Ind.  217 
103  Miss.  806 
87  Minn.  473 
216  Mo.  466 
131  X.  Y.  165 
<S7  Minn.  473 
102  Minn.  19!) 
o  Ohio  St.  171 
76  Wis.  1      . 
91  Ark.  1      . 


Co. 


42  Xob.  890 
84  Kan.  366 

136  IMo.  537 
16  S.  D.  309 
4  Za])r.  9      . 

99  Minn.  327 
19  S.  D.  646 
53  Xeb.  464 
152  Pac.  189 
57  Kan.  841 
62  Ohio  St.  428 

100  Miss.  544 
73  N.  J.  L.  3 
1  Cart.  304 
88  Miss.  592 
8  Tex.  255    . 
7  Cranch  164 
98  S.  C.  294 

1  X.  D.  246 
97  Iowa  423 

137  La.  102 
60  Wash.  383 

3  Seam.  135 

4  Dev.  519 


663 


41  Barb.  343     . 
35  Tex.  Civ.  App 

96  App.  Div.  441 

97  Mich.  178 
3  Halst.  1  . 
114  Mo.  App 
6  Ind.  232  . 
71  Kan.  98  . 
16  Pick.  533 
41  Mont.  219 

3  Blatehf.  431 
177  Fed.  164 
1  Breese  45  . 

4  Dev.  529  . 
135  Mich.  479 
123  Minn.  314 
6  Humph.  270 
1  Bla<-kf.  279 
1  South.  (X.  J.) 
21  Ind.  90    .     . 


.3, 


87 


23, 


13 

628 
617 
569,  628 
628 
(■)75  c 
632/ 
761 
298 
628 
567  c,  590 
625  O 
.  768 
022,  628 
172 
628  b 
13  A 
590  e 
13  A 
628  b 
,  768 
,  628 
768,  776 
.   27 
.  628 
.   13 
6 
.  394 
.   13 
628  b 
13,  13  A 
.  628 
.  650 
.  324, 
328,  340 
.  232 
.  559 
.  42  a 
.     214 
40,  42  c 
.     406 
.   49 
.   48 
.  477 
166,  167 
.  158 
604 
17  I.  L".t7 
19,  297 
326  r,  561 
99 
.  .  230 


33 


382 


r60,  761 
.  644 
.  158 


CXXVl 


TABLE   OF   CASES 


87  Neb.  351 
81  Neb.  484 

123  Minn.  314 


State  Bank  of  Chicago  v.  First  Nat. 
Bank 

State  Bank  of  Gothenbury  v.  Carroll 

State  Bank  of  Isanti  v.  Mut.  Tele- 
phone Co 

State   Board   of   Agriculture   v.    City 

St.  Ry.  Co 47  Ind.  407  . 

State  National  Bank  v.  Freedmen's 
Sav.  &  Tr.  Co 

V.  Memphis 

V.  Merchants'  Bank    .     .     . 

V.  Reilly 


V. 


State  of  Minn.  v.  Bank  of  New  England 
State  Sav.  Ass'n  v.  Boatman's  Sav. 

Bank 

State  Sav.  Bank  v.  Buhl 

State  Sav.  etc.  Bank  v.  Anderson  .  . 
State  Security  Bank  v.  Hoskins       .     . 

State  Treasurer  v.  Mann 

Stearns  v.  Brown 

V.  Lawrence 

Stebbins  v.  Lardner 

V.  Phoenix  Fire  Ins.  Co.  .     .     . 

Steckel  v.  First  Nat.  Bank  of  AUentown 
Steed  V.  Amer.  Nat.  Bank      .... 

Steele  v.  Atkinson 

V.  Russell 

Steelman  v.  Atchley 

Stein  V.  Richardson 

Steiner  v.  Mut.  Alhance  Tr.  Co.  .  . 
Steinhardd  v.  Nat.  Park  Bank  .  .  . 
Stephens  v.  Chehalis  Nat.  Bank      .     . 

Stephenson  v.  Mount 

Sterling  v.  Marietta  &  Susquehanna 

Trading  Co 

Sterrett  v.  Rosencrantz 

Stetson  V.  City  Bank 

V.  City  of  Bangor 

V.  Exch.  Bank 

Kempton 


421 


466  b 
d,  421  i 

144  h 


Stevens  v.  Board  of  Education 

V.  Hill 

V. .... 

V.  McNeil     .... 


V.  Monongahela  Nat.  Bank 


V.  Park 

V.  Reeves 

V.  Stevens 

Stevenson  v.  Bank 

Stewart  v.  Fry 

V.  Huntingdon 

V.  Nat.  Union  Bank  of  Md. 


2  Dill.  11  .  . 
116  Tenn.  641  . 
83  Miss.  610     . 

3  111.  455  .  . 
124  111.  464  .  . 
70  Minn.  398    . 

11  Mo.  App.  292 

129  Minn.  193 
165  Cal.  437 

130  Iowa  339 
34  Vt.  371  . 

1  Pick.  531  . 
83  Fed.  738 

2  S.  D.  127,  143 

3  Binney  394 
93  Pa.  St.  376 
136  Ga.  693 
14  S.  C.  154 
5  Neb.  211  . 
98  Ark.  294 
37  L.  J.  Ch.  309  . 
139  App.  Div.  645 
120  App.  Div.  255 
80  Wash.  254  .  . 
19  La.  Ann.  295  . 

11  Serg.  &  R.  178 

3  Phila.  54 

12  Ohio  St.  577 
56  Me.  274  . 
7  Gray  425  . 

13  Mass.  282 
78  N.  Y.  183 
29  Me.  133  . 
5  Esp.  247  . 
26  Barb.  651 
88  Pa.  St.  157 

73  111.  387  . 
9  Pick.  198  . 
2  Hun  470  . 
113  N.  C.  488 
7  Taunt.  339 
11  Serg.  &  R.  267 
2  Abb.  U.  S.  424 


298 


.  745 

.  466 
II.  241  g 
.  124 

.  388 
186  a,  317 
.  680 

522,  561 
.  398 
.  13 
74,  74  c,  78 
.  27 
.  309 
147  a 

166,  564 
.  713 
.  145 
.  14 
317  a 
.     234 

329,  338 
.  606 

329,  777 
.  337 

207,  456 
.  454 


144 


.  103, 

179,  246 

421,  n.  14 

.   42 

II.  200 

336 

43 

565 

120 

418 

393,  425 

128,  753, 

763,  II.  230  h 

373,  421,  546 

9,  n.  3 

.  608 

.  591 

.  493 

.  103 

750,  II.  229 


TABLE  OF  CASES                                               CXXVli 

Stewart  v.  Smith 17  Ohio  St.  82 442 

V.  State 42  Tex.  242 290 

V. 95  Miss.  G27 628 

V.  Wright 147  Fed.  321      ...     .       102  /; 

Stiltz  !;.  Interwciler 1  Wilson  (Ind.)  507   ,     11.  241   I 

Stimpson  v.  Vroman 90  X.  Y.  74 547 

Stocket  V.  Dry  Dock  S.  Inst.  .  .  .  155  App.  Div.  123  .  .  .  610 
Stockton   V.   Mechanics   &   Laborers' 

Sav.  Bank 32  X.  J.  Eq.  103   .     .       566,  632 

StoU  V.  Comm.  Xat.  Bank     ....     44  Utah  266 433 

Stolze  V.  Bank 67  Minn.  172 329 

Stone  V.  Bishop 4  CHfT.  593 610 

V.  IMarsh Ry.  &  M.  364 435 

t;.  Rottman 183  Mo.  552      .     9,  60,  116,  12S, 

128/,  128  o,  128  p,  717  b 

V.  St.  Louis  Union  Tr.  Co.  .     .     183  Mo.  261 777 

Stoney  v.  American  Life  Ins.  Co.    .     .  11  Paige  635     .     .     .      98,  n.  35 

Storm  Bros.  v.  First  Xat.  Bank       .     .     148  Kv.  585 219 

Stout  i'.  U.  S 227  Fed.  799     ....    11.259 

Strachmann  v.  Yorkville  Bank  .     .     .  148  App.  Div.  8    .     .     .  697,  699 

Strain  v.  Gourdin 11  X.  B.  Reg.  156      ...     493 

Strange  v.  Lee 3  East  490 29 

Stratton  t>.  Athol  Sav.  Bank       .     .     .     213  Mass.  46 611 

Straughan  v.  Fairchild 80  Ind.  598 600 

Straus  V.  Tradesmen's  Xat.  Bank  .     .     36  Hun  451 325 

Strauss  v.  Denny 95  Md.  690 691 

Stressguth  v.  Xat.  German- American 

Bank 43  Minn.  50 272 

StribbUng  v.  Bank 5  Rand.  132 14 

Strong  V.  Grand  Trunk  R.  R.  Co.  .     .  15  Mich.  205     ....     9,  n.  7 

V.  King 35  111.  9 421 

V.  Stewart 9  Heisk.  137 272 

Stuart  V.  Commonwealth 8  Watts  74 334 

V.  Eari  of  Bute 3  Ves.  Jr.  212   .     .     .       606,  654 

V.  Hayden 72  Fed.  402 683 

V. 169  U.  S.  1  .     .     .  683,  II.  212  a 

Studebaker  tJ.  Perry 184  U.  S.  258     675,  693,  II.  212  ft 

Studley  v.  Boylston  Xat.  Bank  ...  229  U.  S.  523    ..     .       336,  337 

StufOebeam  v.  De  Lashmutt       ...  83  Fed.  449       ...       675.  679 

Sturdee  r.  Cuba  Easton  R.  Co.  .  .  .  196  Fed.  211  .  .  .  111,774 
Sturdevant    Bros.     v.    Farmers'    etc. 

Bank 69  Xeb.  220       ...    6,  65,  SO, 

169,  735,  745 

Sturdy  v.  Henderson 4  B.  &  Aid.  592     ....     (ioi) 

Sturges  V.  Bank  of  Circleville     ...  11  Ohio  St.  153      .     .     .     .    157. 

160,  167,  171 

V.  Burton 8  Ohio  St.  215 128 

■ V.  Fourth  Xat.  Bank       ...     75  111.  595 40t> 

Sturtevant  v.  Foord 4  Scott  X.  R.  668      .     .     .     443 

Stuyvesant  Bank  v.  Nat.  Mechanics' 

Banking  Ass'n 7  Sandf.  97 351 

Succession  of  Desina 123  La.  468       ....      609  A 

Succession  of  Zachario 119  La.  150 (>09 

Sufifell  V.  Bank  of  England     .     .     .     .  7  Q.  B.  D.  270       ....     661 

Suffolk  Bank  v.  Lincoln  Bank    ...  3  Mason  1    .     .        637,  646,  647 


CXrvail                                              TABLE   OF  CASES 

Suffolk  Sav.  Bank  v.  Petitioner ...  149  Mass.  7      ...      II.  241  y 

SulUvan  v.  Knolt 156  Wis.  72       .      622  A,  632  A  i 

V.  Lewiston  Inst 56  Me.  507 620 

V.  SulUvan 39  App.  Div.  99     ....     614 

Sundahl  v.  First  Nat.  Bank  ....  155  N.  W.  794       ....       50 

Sunderlin  v.  Mecosta  Co.  Sav.  Bank        116  Mich.  281 493 

Supervisors  of  Albany  Co.  v.  Stanley  105  U.  S.  305    ..     .     II.  241  w 

Supple  V.  Suffolk  Sav.  Bank        ...     198  Mass.  393 610 

Supreme  Tent  Knights  v.  Port  Hudson 

Sav.  Bank 137  Mich.  627  .     .     .     .       169  a 

Susquehanna  Ins.  Co.  v.  Perrine     .     .  7  Watts  &  S.  348  ....       43 

Susquehanna  Valley  Bank  v.  Loomis  .     85  N.  Y.  207 422 

SutcUffe  V.  McDowell 2  N.  &  M.  251       ....     393 

Sutherland    v.    First    Nat.    Bank    of 

Ypsilanti 31  Mich.  230    .     .     .     .214,217 

Sutton  V.  Baldwin 146  Ind.  361 546 

V.  Toomer 7  Barn.  &  Cr.  416      ...     380 

Sutton's  Hospital 10  Co.  30  6 62 

Svendsen  v.  State  Bank 64  Minn.  40 458 

Swall  V.  Clark 51  Cal.  227 565 

Swan  V.  Scott 11  Serg.  &  R.  164      ...     747 

Swanee  Nat.  Bank  v.  PurceU  Grocery 

Co 30  Okla.  34 78 

Swartwout  v.  Mechanics'  Bank  ...     5  Denio  555 604 

Sweeny    v.    Boston    Five    Cents    Sav. 

Bank 116  Mass.  384 608 

— V.  Easter 1  Wall.  166  .     .     .   583,  591,  593 

Sweet  V.  Barnev 23  N.  Y.  335     .....     179 

— —  V.  MontpeUer  Sav.  etc.  Co.      .     73  Kan.  47 775 

V.  Stevens 7  R.  I.  375 390 

V.  Titus 4  Hun  639 546 

Sweetser  v.  Hay 2  Gray  49 19 

V.  People's  Bank 69  Minn.  196 329 

Swenson  Bros.   Co.   v.   Comm.   State 

Bank 98  Neb.  702      .  144  b,  389,  413  h 

Swett  V.  Colgate 20  Johns.  196   .     .     .     .     .     103 

Swift  V.  Tyson 16  Pet.  1 10,  565 

Swindell  v.  Bainbridge  State  Bank      .  3  Ga.  App.  364      .     .      101,  116, 

144  c,  169  a 

Swink's  Administrator  v.  Snodgrass     .     17  Ala.  657 317  a 

Sydner  v.  Mt.  SterUng  Nat.  Bank  .     .  94  Ky.  233  ...     .      II.  230  d 

Sykes  v.  Halloway 81  Fed.  432       ...      II.  212  a 

Syracuse,  Binghampton  &  N.  Y.  R.  R. 

Co.  V.  ColUns 57  N.  Y.  641 421 


Tabor  v.  Perrot 

V.  MuUin 

Taft  V.  Quinsigamond  Nat.  Bank 
Talbot  V.  First  Nat.  Bank      .     . 
V.  Rochester       .... 


Talbott  V.  Silver  Bow  Co.      . 
Talcott  V.  Nat.  Bank    . 
Tallapoosa  Co.  Bank  ;;.  Wynn 


2  GaU.  565  .  .        249,  265,  272 

37  Colo.  399 632 

172  Mass.  363  ....  573,  574 
185  U.  S.  172  ..  .  II.  230  a 
1  Hill  295  .  248,  395,  474,  476 
139  U.  S.  438  ..  .  II.  241  s 
53  Kan.  480 290 

173  Ala.  272  ...     .  324,  335 


TABLE   OF   CASES  CXXIX 

Talledega  Ins.  Co.  v.  Woodward     .     .     44  Ala.  287 299 

Talmago  v.  Pell 3  Seld.  328  ....    59,  73,  77 

Talman  v.  Rochester  City  Bank      .     .     18  Barb.  123 63 

Tancil  V.  Seaton 28  Gratt.  601 6o4 

Tankersly  v.  Graham ^  Ala.  247 o/6 

Tapley  t'.  Martin      . 116  Mass.  276  .     .     .     •    33  J8, 

11.  2U2,  zUo  a 

Tappan  v.  Merchants'  Nat.  Bank  .     .  19  Wall.  490     .     .     .       II.  241  / 

TasseU  ?;.  Cooper 9  C.  B.  509       .     .     .     •     ■     343 

Tate  V   Bates                        118  N.  C.  287  .     .     .     .  132,  137 

!  I,.  Iliibert'     ". 2Ves.Jr.  118     400,550,611,612 

V.  Leithead Kay  650 550 

y.  Security  Tr.  Co 63  N.  J.  Eq.  559   .     .     .773.  //4 

Tay  V.  Concord  Sav.  Bank     .     .     .     .  60  N.  II.  277     .     .     .     .      440  A 

Taylor  v.  Bank  of  Ky 2  J.  J.  Marsh  568       ...       33 

..  Comm.  Bank 174  X.  Y.  181     152.153,167,169 

V.  Commonwealth       ....  119  Ky.  731      ....  632  A  b 

y   Cook 14  Iowa  501      ....  639,  651 

V.  Dol)bins 1  Strange  399 365 

V.  Empire  State  Sav.  Bank      .     66  Hun  538 /34  a 

^,   Felder                  3  Ga.  App.  287      ....     166 

,/ First  Nat.  Bank     ....  119  Minn.  525  .     .     .     .398,494 

V.  Griswold 2  Green  (N.  J.)  223  .     .     .       43 

V.  Hutehingson 145  Ala.  202      .     .   298,  302,  623 

,.  Hutton 43  Barb.  195     .     .      123,  II.  209 

,,  ^ifg.  Co 82  m.  579 234 

;..  Miami  Exporting  Co.       .     .     6  Hamm.  176 /16 

..  Moseley 6  C.  &  P.  273 481 

V.  Serivens 1  Beav.  571       ....      39o  A 

,,.  Sip 30N.  J.  L.  284      .     .     .389,421 

V.  Thomas 124  App.  Div.  53        ...     132 

..  Wickerly 69  Keb.  739       ....      622  A 

..Williams 11  Met.  44 546 

..Wilson 11  Met.  51 240.544 

Tecumseh  Nat.  Bank  v.  Chamberlain 

Banking  House 63  Neb.  163      .     .     •     •     •     \}y; 


V.  Russell 50  Neb.  277 


II.  242,  250  A,  254 
173  a 


Temple  ..  CarroU 75  Neb.  61   .     .     .      421  a,  421  t 

Templeman  v.  Hutchings 24  Tex.  Civ.  App.  1  .     .  289,  337 

Ten  Brook  v.  Brown 17  Ind.  410 608 

Tenison  ..  Patton 95  Tex.  284       .     .     .     •     •  12o  ^ 

Terhune  ..  Bank 34  N.  J.  Eq.  367    .     .     -569,087 

Terrell  ..  Branch  Bank 12  Ala.  502 130,1/9 

Terry  v.  Merchants  &  Planters'  Bank      66  Ga.  177 14 

Teutonia  Nat.  Bank  of  New  Orleans  v. 

Loeb  27  La.  Ann.  5 32o 

Thatcher  v.  Bank  of  State  of  N.  Y.     .  5  Sandf.  121      .     .  98.  n.  20.  161, 

174,  178,  179.  5o7 

r.  West  River  Nat.  Bank    .     .  19  Mich.  196    .     .     .      11.206  a 

Thayer  ..  Boston 19  Pick.  516      .     .     .       102.  n    9 

The  Atlanta  Nat.  Bank  r.  Burke    .     .  81  Ga.  600   .     .     .     .   4/2,  4/4  a 

The  Citv  of  Washington 92  U.  S.  31 .^''\\?. 

The  DistilliTV  Spirits 11  Wall.  356      .     .    109,  134,  lb6 

The  Floyd  Acceptance 7  Wall.  666 ^^ 


CXXX                                                  TABLE   OF  CASES 

The  Seattle 170  Fed.  284     ...     .    II.  229 

The  State  v.  Brobston 94  Ga.  99 338 

V.  Myers 54  Kan.  206 623 

Theological  Seminary  of  Auburn !).  Cole     18  Barb.  360 76 

Third  Nat.  Bank  v.  Allen       ....     39  Mo.  310 489 

V.  Blake 73  N.  Y.  260     .     .     .     .    II.  228 

V.  Buffalo  German  Ins.  Co.      .  193  U.  S.  581     II.  209,  212,  212  a 

V.  Clark 23  Minn.  263 217 

V.  Exum 163  N.  C.  199  .     .     .583  c,  586 

V.  Harrison 3  McCrary  316      ....  136  a 

V.  Ober 178  Fed.  678 458 

V.  St.  Charles  Sav.  Bank     .     .  244  Mo.  554     ...     .  65,  101, 

152,  160,  166 

Third  Nat.  Bank  of  Baltimore  v.  Boyd  44  Md.  27  .  .  59,  77,  II.  208  a 
Third  Nat.  Bank  of  Louisville  v.  Vicks- 

burg  Bank 61  Miss.  112 285 

Third  Nat.   Bank  of  Philadelphia  v. 

I^IiUer 8  Pa.  St.  241.    .     .   II.  230,  n.  55 

Thomas  v.  City  Nat.  Bank    ....  40  Neb.  501      ...     65,  144  h 

V.  Exch.  Bank 99  Iowa  202      .      326  e,  329,  494 

V.  Farmers'  Nat.  Bank   ...     46  Md.  43 II.  244 

V.  Fenton 5  D.  &  L.  28 380 

V.  First  Nat.  Bank     ....     213  lU.  261 300 

V.  Gilbert 55  Or.  14          II.  201,  212  b,  238 

V.  Hopper 5  Ala.  442 334 

V.  Internat.  Bank 46  111.  App.  461     ...     .     360 

f.  Supervisors 115  N.  Y.  47     .     .     .     .544,546 

V.  Tavlor 224  U.  S.  73      ....    II.  253 

V.  Todd 6  HiU  340 637,  659 

Thomas,  Administrator,  v.  Lewis    .     .     89  Va.  1 612 

Thomas  McGhee  v.  First  Nat.  Bank  .  40  Neb.  92  ...     .      II.  230  b 

Thomasson  v.  Bank 45  S.  C.  570 298 

Thomaston  Bank  v.  Stinson  ....     21  Me.  195 74 

Thompson  v.  Bank 82  N.  Y.  1    .     .    322,  395  A,  414 

V. 3  HiU  77 265 

V.  Bell 26  Eng.  L.  &  Eq.  536     98,  n.  20 

V.  Farmers'  State  Bank  .     .     .     159  Iowa  662 307  c 

V.  Giles 2  Barn.  &  Cr.  422      ...     583 

V.  Greeley 107  ^lo.  577 128 

V.  Hazelwood  Sav.  etc.  Co.       .  234  Pa.  St.  452      .     .   325  a,  620 

V.  Mecosta 141  Mich.  175 146  I 

V.  Pitman 1  Fost.  &  F.  339    .     .     .     .     552 

V.  Redman 11  M.  &  W.  487    .     .     .     .     335 

V.  Riggs 5  Wall.  663  .     .     .     .      184,  193, 

289,  312,  568 

V.  St.  Nicholas  Nat.  Bank  .     .  47  Hun  621       ....    II.  255 

V.  Young 2  Ham.  334 27 

Thorn  v.  Sinsheimer 66  111.  App.  555     .     .     .     .421  g 

Thorndike  v.  Stone 11  Pick.  183 50 

Thornslow  v.  State 95  Tenn.  196     ...     .    II.  259 

Thornton  v.  Lane 11  Ga.  459        670,  675,  679,  687 

V.  Marginal  Freight  R'y.     .     .     12  Mass.  32 138 

V.  State 5  Ga.  App.  397      ...     .       99 

V.  Thornton 99  Ga.  585 421  6 

Thorp  Grain  Cleaner  Co.  v.  Smith       .     110  N.  Y.  183 511  c 


TABLE   OF   CASES 


CXXXl 


Thorpe  v.  Owen 

V.  Wegefarth 

Thrall  v.  Newell 

Threlfal  v.  Giles 

Thresher,  Administrator,  v.  Dyer,  Ex- 
ecutor       

Thweat  v.  Bank  of  Hopkinsville      .     . 

Tibby  Bros.  Glass  Co.  v.  Farmers'  etc. 
Bank 

Ticonic  Bank  v.  Johnson 

Tiernan  v.  Comm.  Bank 

V.  Jackson 

Tierney  v.  Fitzpatrick 

Tiffany  v.  Nat.  Bank  of  Mo.       .     .     . 

Tillinghast  v.  Bailey 

V.  Wheaton 

Times  Square  Auto.  Co.  v.  Rutherford 
Nat.  Bank 

Timmis  v.  Gibbins 

Tinkliam  v.  Hayworth 

Tippets  V.  Walker 

Title  Guarantee  etc.  Co.  v.  Haven  No.  2 

Title  Insurance  etc.  Co.  v.  Williamson 

Titus  V.  Mechanics'  Nat.  Bank  .     .     . 

Tobacco  Pipe  Makers  ;;.  Woodroffe     . 

Tobey  v.  Manufacturers'  Bank  .     .     . 

Tobin  V.  McKinney 


5  Beav.  224  . 
56  Pa.  St.  82  . 
19  Vt.  202  .  . 
2  M.  &  Rob.  492 


...     010 

637,  II.  244 

...     477 

289,  589,  629 


69  Conn.  404 
81  Ky.  1 

220  Pa.  St.  1 
21  Me.  426  . 

7  How.  (Miss.) 
5  Pet.  580     . 
122  App.  Div. 
18  Wall.  409 
86  Fed.  46    . 

8  R.  I.  536   . 


648 


623 


265, 


551 

748 


.     493 
.     334 
274,  285 
.     550 
.     610 
II.  230 
II.  213,  250  d 
...     612 


77  N.  J.  L.  649     414,  414  A-,  415 


Tockusch  V.  Towsey      .     .     .     .     , 

Toll  V.  Cobbey 

Toll's  Appeal 

Tolman  v.  Amer.  Nat.  Bank 
Tombigbee  R.  R.  Co.  v.  Kneeland 

Tomblin  v.  Higgins 

Tomkins  v.  Saltmarsh  .... 
TomUnson  v.  Ellison      .... 

Tootle  V.  Caldwell 

V.  Cook 


Toovey  v.  Ayrhart 

Tough  V.  Citizens  State  Bank     .     .     . 

Tourtelot  v.  Tinke 

Tower  v.  Appleton  Bank 

Towle  V.  Starr 

Town  of  Concord  v.  Concord  Bank     . 

Town  of  Eagle  v.  Kohn 

Town  of  East  Hartford  v.  Amer.  Nat. 

Bank 

Town  of  Learcy  v.  Yarnall     .... 

Towne  v.  Rice 

Townsend  v.  Bank  of  Racine      .     .     . 

V.  Bilhngo 

V.    Webster  Five  Cents  Sav. 

Bank 

Towson  V.  Ha\Te  de  Grace  Bank  .  . 
Trabue  v.  Cook 


14  Eng.  L.  &  Eq.  64 
31  111.  519  ..  . 
4  Mass.  595  .  . 
126  App.  Div.  802 
18  Cal.  App.  324  . 
35  N.  J.  L.  588  265, 
7  Barn.  &  Cr.  838 
7  R.  I.  236  . 

15  S.  D.  257 
14  S.  D.  52  . 
51  Te.x.  129 
22  Colo.  App.  244 
91  Pa.  St.  434 
22  R.  I.  462 
4  How.  16  . 
53  Neb.  92  . 
14  Serg.  &  R.  275 
104  Mo.  105 
30  Kan.  125 
4  Colo.  App.  Ill 
136  Iowa  694 
89  Kan.  583 
87  Fed.  840 
3  Allen  387 
67  Minn.  370 

16  N.  H.  26 
84  111.  292  . 

49  Conn.  539 
47  Ark.  280 
122  Mass.  67 
7  Wis.  185  . 
1  Hilt.  353  . 

143  Mass.  147 
6  Har.  &  J.  47 
124  S.  W.  455 


.  662 

248,  568 

.   71 

466  d 

.     Ill 

272,  569 

.   43 

.  334 

302  h 

302  h 

.     248 

679,  693 

.  715 

.  474 

46,  63 

11.  230  d 
.  194 
.  611 
.  219 
.  247 
.  628 

590  rf 
.  686 
.  648 
297,  298 
.  295 
.  505 

.  317 

.  758 

12,  n.  18 
.  662 
.  393 

.  347 

14,  032 

II.  230  d 


CXXXll 


TABLE   OF   CASES 


Tracy  v.  Talmage 


Traders'  Bank  v.  Campbell  .... 
Traders'  etc.  Bank  v.  Black  .... 
Tradesman's  Bank  v.  Merritt  .  .  . 
Tradesman's  Nat.  Bank  v.  Third  Nat. 

Bank 

Trangiac  v.  Arden 

Tremont  Bank  v.  Paine 

Trentel  v.  Barandon 

Trimbey  v.  Vignier 

Trimble  v.  Reed 

Trinidad  Nat.  Bank  v.  Denver  Nat. 

Bank 

Tripp  V.  Curtenius 

V.  Swanzey  Paper  Co.     .     .     . 

Troike  v.  Cook  Co.  Sav.  Bank    .     .     . 

Troy  City  Bank  v.  Grant 

True  V.  Thomas 

Trust  &  Sav.  Bank  v.  Mfg.  Co.  .  . 
Trustees    of    Dartmouth    College    v. 

Woodward 

Tryon  v.  Oxley 

Tubb  V.  Fowler 

Tucker  v.  N.  H.  Tr.  Co 

Tucker  Mfg.  Co.  v.  Fairbanks    .     .     . 

Tueley  v.  Thomas 

Tufts  V.  People's  Banking  &  Tr.  Co.  . 

TurnbuU  v.  Bowyer 

V.  TurnbuU 


18  Barb.  462 
4  Kern.  162 
14  Wall.  87  . 
108  Va.  59  . 
1  Paige  302  . 


66  Pa.  St.  435  . 
10  Johns.  293  . 
28  Vt.  24  .  . 
8  Taunt.  100  . 
1  Bing.  N.  C.  151 
97  Ky.  713  .  . 


Turner  v.  Bank  of  Fox  Lake 


4  Dill.  290  .  . 

36  Mich.  494  . 

13  Pick.  291  . 
127  lU.  App.  413 

77  N.  Y.  365  . 

16  Me.  36  .  . 

150  lU.  336  .  . 

4  Wheat.  636  . 
3  G.  Green  289 
118  Tenn.  325  . 
69  N.  H.  187  . 
98  Mass.  101  . 
8  Car.  &  P.  104 
59  N.  J.  L.  380 
40  N.  Y.  456  . 
118  App.  Div.  449 
23  How.  Pr. 


299, 


.  72 
.  757 
II.  252 
106,  135 
.  360 


.  466 
.  615 
.  144 
.  593 
12,  n.  13 
.  147/ 


252,  578 

302,  303 
.  365 
.  186 
.  454 
.  359 
578,  628  b 

6 

.  432 
.  706 

.  777 

.  593 

9,  n.  16 

.557  c 

477,  487 
.  614 


V.  Farmers'  Bank 

V.  First  Nat.  Bank  of  Keokuk 

V.  Hotsprings  Nat.  Bank     .     . 

V.  Kimball 

Tuttle  V.  Frelinghaysen 

V.  Iron  Nat.  Bank      .     .     .     . 

V.  Walton 

Tweddle  v.  Atkinson 

Twenty-Sixth  Ward  Bank  v.  Stearns 
Twin  City  Bank  v.  Nebeker  .     .     .     . 

Twining  v.  U.  S 

Tygard  v.  McComb 

TyrreU  v.  Emigrant  Ind.  Sav.  Bank    . 
Tyson  v.  State  Bank 


12 


Tyson  &  Rawls  v.  Western  Nat.  Bank 


148  Ky.  692 
26  Iowa  563 
18  S.  D.  498 

37  Okla.  92  . 

38  N.  J.  Eq. 
170  N.  Y.  9 
1  Ga.  43  .  . 
30  L.  J.  Q.  B.  265 
148  N.  Y.  515 
167  U.  S.  196 
141  Fed.  41 
54  Mo.  App.  85 
77  App.  Div.  131 
6  Blackf .  225  . 
77  Md.  412  .  . 


399,  3  Keyes  425 
240,  247,  544,  567 
...  188 
191,  II 


250  c 
.  494 
.421  a 
.  626 
294  a 
.  698 
.  499 
.  134 
II.  241 
256,  259 
.  611 
.  613 
52,  252,  272 
.  .  .  217 


II. 


U 

Uhl  V.  Harvey 78  Ind.  26 675 

Ullman  v.  Barnard 7  Gray  554        576 

Ulster  Co.  Sav.  Inst.  v.  Nat.  Bank      .  5  Silv.  (N.  Y.)  144     ..     .     451 

Unak  Nat.  Bank  v.  Butler     ....  113  Tenn.  574  .     .     .  393,  395  A 

Union  Bank  v.  City  of  Richmond  .     .  94  Va.  386   .     .        II.  241,  241  e 


TABLE   OF   CASES 


CXXXUl 


Union  Bank  v.  Clossey 

V.  Ellicott 

V.  Johnson     .     . 

V.  Knapp       .     . 


V.  Laird 

V.  Middlobrook 

V.  Planters'  Bank 

— ■ V.  Ridgcly 

V.  U.  S.  Exch.  Bank   .... 

Union  Biscuit  Co.  v.  Springfield  Grocer 
Co 

Union,  etc.  v.  Roclvy 

Union  Gold  Hill  Mining  Co.  v.  Rocky 

Mt.  Nat.  Bank 

Union  Nat.  Bank  v.  Baldenwick     .     . 

V.  Chambers 

V.  Desmond 

V.  Halley 


11  Johns.  1S2    . 
6  Gill  &  J.  363 
9  Gill  &  J.  297 
3  Pick.  96     .     . 

2  Wheat.  390  . 
33  Conn.  IfX)  . 
9  Gill  &  J.  439 

1  Har.  &  G.  413 
143  App.  Div.  128 

143  Mo.  App.  300  . 

2  Colo.  248  .     .     . 


.     .     23,  24 

.     . 637,  041 

.     .     .     591 

.      113,290, 

291,  294,  295 

699,  701,  713 

.     .     .     468 

9,  n.  17,  322 

16,  20,  27,  43 

.      697,  763 

.     474,  480, 

485,  543 

...     171 


V.  Hunt  . 
V.  Lyons  . 
V.  Mathews 


96  U.  S.  640  . 
45  111.  375  .  . 
9  Phila.  131  . 
33  111.  App.  102 
19  S.  D.  474      . 

7  Mo.  App.  22 
220  Mo.  538      . 


.     .    II.  229 

...     489 

...     466 

...     208 

675  c,  688, 

693,  694,  696 

.     .     59,  77 

160,  755  a 


V.  Ocean  Co.  Bank 

V.  Railway    . 

V.  Rowan       .     .     . 

V.  Sixth  Nat 

Union  Sav.  Bank  v. 
V.  Leiter  . 


98  U.  S.  621     48,  72,  750,  754, 

755,  758,  II.  228,  228  a,  244 

80  111.  212    .     375,  398,  494,  530 


Bank 
Krumm 


Union  Stock  Yards  Bank  v.  GiUespie 
Union  Tr.  Co.  v.  Preston  Nat.  Bank 
V.  Tx-umbull 


Union  Tr.  etc.  Bank  v.  Tyler      .     .     . 
United  German  Bank  v.  Katz     . 
United  Security  Co.  v.  Losterburg  .     . 
United  Security  Life  Ins.  &  Tr.  Co.  v. 

Central  Nat.  Bank 

United  Society  v.  Underwood 
United   States   v.   Amer.   Exch.   Nat. 

Bank 

V.  Bank  of  Montreal  .     .     .     . 

■ V.  Bartow 

V.  Book 

V.  Breese 

V.  Breeze 

V.  Britton 

V.  Buchanan 

V.  Cadwallader 

V.  Central  Nat.  Bank      .     .     . 


V.  City  Bank  of  Columbus 
V.  Clinton  Nat.  Bank 


145  lU.  208  . 
23  S.  C.  339 
43  N.  Y.  452 
152  Pac.  681 
145  Cal.  696 
137  U.  S.  411 

136  ISIich.  460 

137  111.  146  . 
161  Mich.  561 
57  Md.  128  . 
152  Pac.  1163 


185  Pa.  St.  586   , 
9  Bush  (Ky.)  609 

70  Fed.  232   . 
21  Fed.  236   . 

20  Blatchf.  351 
2  Cranch  C.  C.  294 
131  Fed.  915  . 
173  Fed.  402  . 
107  U.  S.  655  . 
8  How.  83,  102 
59  Fed.  677 
15  Fed.  222  . 
24  Fed.  577 

21  How.  356  . 


28  Fed.  357 


II.  230  d 
.  .  72 
.  .  454 
. 772,  777 
.671,  690 
.  .  326  / 
155  i,  419 
.  .  324  e 
.  .  (iOS 
.  .  751 
72,  172  a 

. 473,  474 
. 128,  130 

.  .  479 
.  .    4 
.  II.  259 
.  .  298 
11.  55,  256 
.  II.  259 
.  II.  259 
.  9,  n.  5 
.  II.  259 
II.  241  V 
II.  241  V 
152,  154, 
159,  167,  171 
...  489 


CXXXIV 


TABLE   OF   CASES 


United  States  v.  Cook  Co.  Nat.  Bank  11  Leg.  News  344 

y  9  Biss.  55 

V.  Corbett 166  Fed.  687 

V.  Cutts 1  Sumner  133 

V.  Eastman 132  Fed.  551 

V.  Eekford 6  WaU.  484  . 

V.  First  Nat.  Bank     ....  82  Fed.  410 

V.  Fish 24  Fed.  585 

V.  German 115  Fed.  987 

V.  Heinzie 161  Fed.  425 

V   183  Fed.  907 

V, 218  U.  S.  532 

V,  Herrig 204  Fed.  124 

V.  HiUegass 176  Fed.  444 

V.  Kinney 90  Fed.  257 

V.  Kirkpatrick 9  Wheat.  720 

V.  Knox 102  U.  S.  422 

„.  Lee 12  Fed.  816 

V.  Mann 17  Alb.  L.  J.  85 

V.  Martindale 146  Fed.  280 

V.  McClarty 196  Fed.  523 

V.  Morse 161  Fed.  429 

V.  Nat.  Bank 6  Fed.  134    . 

V  73  Fed.  379 

y. 205  Fed.  433 

V.  Nat.  Bank  of  Commerce      .  205  Fed.  433    433 

V.  Nat.  Bank  of  the  Republic  .  2  Maekey  289 

V.  Nat.  Exeh.  Bank    ....  45  Fed.  163       . 

V  214  U.  S.  302    . 

V.  Norton 188  Fed.  256     . 

V.  Peters 87  Fed.  984       . 

V.  Rhawn 33  Leg.  Int.  258 

V.  Smith 152  Fed.  542     . 

V.  State  Bank 96  U.  S.  30  .     . 

V,  Steinman 172  Fed.  913     . 

V.  Taintor 11  Blatchf.  374 

V.  Thompson 98  U.  S.  46  .     . 

V.  Warner 26  Fed.  616 

V.  Wilson 106  U.  S.  620    . 

V, 176  Fed.  806 

V.  Young 128  Fed.  Ill 

United  States  Bank  v.  Westervelt  .     .  55  Neb.  425 

United  States  Fidelity  etc.  Co.  v.  Adoue  104  Tex.  379 

V.  Boley  Bank 43  Okla.  819 

V.  Citizens'  Nat.  Bank    ...  147  Ky.  285 

V.  Foster  Deposit  Bank  ...  148  Ky.  776 

V.  Foster  Deposit  Bank's  Re- 
ceiver        153  Ky.  698 

V.  Muir 115  Fed.  264 

V.  People's  Bank 127  Tenn.  720 

V.  Poetker 180  Ind.  255 

United  States  Nat.  Bank  v.  Burton  .  58  Vt.  426  . 

V.  First  Nat.  Bank  ....  79  Fed.  296 

V.  First  etc.  Sav.  Bank  ...  60  Or.  266  . 


II 


477 


II 


317 


55 


II 


250 


II.  250  c 
II.  250  c 
II.  259 
.  713 
II.  259 
.  632 
316,  489  e 
II.  259 
II.  259 
.  359, 
,  79,  259 
II.  259 
II.  259 
II.  259 
II.  259 
II.  259 
38,  489 
II.  212  b 
II.  259 
II.  300 
II.  259 
II.  259 
55,  259 
.  489 
.  207 
.  474 
II.  244  k 
489 
466  h,  487 
.  476 
II.  259 
II.  259 
II.  300 
.  55,  259 
590,  752 
II.  259 
II.  259 
.  489 
11.  259 
II.  241  u 
II.  259 
256,  259 
.  219 
317  a,  604 
21  a 
21 
38 


317 


II 


21,  38 
.145^ 
a,  604  a 
13,  19 
233,  255 
.  144j 
155  d,  169,  406 


TABLE   OF   CASES 


CXXXV 


United  States  Nat.  Bank  v.  Geer 
United  States  Tr.  Co.  v.  Brady  . 

Uphan  V.  Lefavour 

Upton  V.  Nat.  Bank  of  S.  Reading 

V.  Tribilcock 

Usher  v.  Tucker  .     .     . 
Utica  Ins.  Co.  v.  Bartow 

V.  Bloodgood 

V.  Cadwell 

V.  Kip 

V.  Lynch  . 

V.  Scott     . 


Utley  V.  HiU 


55  Xeb.  469  . 
20  Barb.  119  . 
11  Met.  174  . 
120  Mass.  153  . 
91  U.  S.  50  .  . 
217  Mass.  441  . 
6  Cow.  290  .  . 
3  Wend.  652 
3  Wend.  296  . 
8  Cow.  20,  3  Wend 
11  Paige  520  . 
8  Cow.  709  .  . 
19  Johns.  1  .  . 
155  Mo.  678     . 


36 


.  217 
769,  777 
.  562 
75,  II.  228 
.   89 
398,  543 
.   13 
.  743 
.  743 
.  743 
.  590 
13 


743 
,628  6 


Vail  V.  Newark  Sav.  Inst. 
Vaisey  v.  Reynolds  .... 

Valk  V.  CrandaU 

Vallett  V.  Parker       .... 
Van  Allen  v.  Amer.  Nat.  Bank 

V.  The  Assessors     . 

Van  Amee  v.  Bank  of  Troy    . 
Van  Antwerp  v.  Ilurlbnrd 


Van  Bibber  v.  Bank  of  La. 


32  N.  J.  Eq.  627   .   186,  629,  630 

5  Russ.  12    .     ...     .     .     .     606 

1  Sandf.  Ch.  179  ...     .     144 

6  Wend.  615 745 

52  N.  Y.  1  .  .  .  344,  567,  590 
3  Wall.  573  .  .  II.  241  d,  241  y 
8  Barb.  213 599 

7  Blatchf.  426,  8  id.  282    II.  216, 

245,  250  a 

14  La.  Ann.  481    ...     .    474, 

494,  511,  536 


Van  Buren  Co.  Sav.  Bank  v.  Sterling 

Woolen  Mills 

Van  Buskirk  v.  State  Bank    .... 
Vandagrift  v.  Masonic  Home      .     .     • 

V.  Rich  HiU  Bank 

Vandeford  v.  Farmers'  etc.  Bank    .     . 

Van  Dyck  v.  McQuade 

Van  Leuven  v.  First  Nat.  Bank      .     . 

Van  Reed  v.  People's  Nat.  Bank     .     . 


125  Iowa  645 
35  Colo.  142 
242  Mo.  138 
163  Fed.  823 
105  Md.  164 
18  Hun  370 
54  N.  Y.  671 

198  U.  S.  554 
67  App.  Div. 


75 


Van  Reemsdyk  v.  Kane 
Van  Wart  v.  WooUey  . 
Vance  v.  Bank      .     .     . 

V.  Lowther    . 

V.  Mottlev     .     . 


Vanderberg  v.  Palmer 

Vanderzee  v.  Willis 

Van  Peet  v.  Gardner 

Vansands  v.  Middlesex  Co.  Bank    .     . 
Van  Tuye  v.  N.  Y.  Real  Estate  Se- 
curity Co 

V.  Schwab 

V.  Sullivan 


1  Gall.  371   . 

3  Barn.  &  Cr 
1  Blackf.  80 

1  Ex.  D.  176 
92  Tenn.  310 

4  Kay  &  John 
3  Brown  C.  C, 
54  Neb.  702 
26  Conn.  144 


439 


s.  204 
21 


360 

49,  407,  493 

289  a,  358 

679,  II.  212  a 

.  .  169 

.  .  632 

.  52,  144, 

10,  II.  208  b 

II.  200,  25 

II.  52.  70, 

257  a 

.  .   10 

,  265,  277 

14 

.  485 

172,  174 

.  610 

.  325 

.  687 

.  701 


153  App.  Div.  409 
105  App.  Div.  412 
156  N.  Y.  S.  309  . 


252, 


.  632  A  i 
.  .  690 
.  687,  696 


Van  Wagenen  v.  Genesee  Falls  Sav. 
Ass'n 


SS  Hun  43 179 


CXXXVl 


TABLE   OF   CASES 


Van  Winlde  Gin  Co.  v.  Citizens'  Bank 
Van  Zandt  v.  Hanover  Nat.  Bank  .     . 

Vanzant  v.  Arnold 

Varley  v.  Sims 

Vaudor  v.  Roach 

Vaughn  v.  Menlove 

Veazie  Bank  v.  P^'enno 

V.  Winn 


Venango  Nat.  Bank  v.  Taylor    .     .     . 

Venner  v.  Farmers'  L.  &  T.  Co.      .     . 

Vere  v.  Lewis 

Vermilye  v.  Adams  Express  Co.      .     . 

Vermont  &  Canada  R.  R.  Co.  v.  Ver- 
mont Central  R.  R.  Co 

Vernon  v.  Bovery 

V.  Hankey 

Viekrey  v.  State  Sav.  Ass'n    .... 

Vidal  V.  Mayor 

Viets  V.  Union  Nat.  Bank  of  Troy  .     . 

Vilas  Nat.  Bank  of  Plattsburg  v.  Strait 

Village  of  Port  Jer\'is     v.     First  Nat, 
Bank  of  Port  Jervis 

Vincent  v.  Port  Huron  Sav.  Bank  . 

Vining  v.  Bricker 

Virginia  Coupon  Cases 

Voltz  V.  Nat.  Bank 

Vose  V.  Grant 

Voss  V.  German  Amer.  Bank      .     .     . 


89  Tex.  147  . 
149  Fed.  127 
31  Ga.  210  . 
100  Minn.  331 


72  Cal.  614  .  . 
3  Bing.  New  Cas. 
8  Wall.  533  .  . 
40  Me.  62  .  . 
56  Pa.  St.  14  . 
54  App.  Div.  271 
3  T.  R.  182  .  . 
21  Wall.  139     . 


34  Vt.  2  .  . 
2  Show.  296 
2  T.  R.  287 
21  Fed.  773 . 
2  How.  128  . 
101  N.  Y.  563 
58  Vt.  448    . 


96  N.  Y.  550 
147  Mich.  437 


14  Ohio  St.  331 
114  U.  S.  269,  234 
158  lU.  532  .     . 

15  Mass.  505    . 
83  lU.  599    .     . 


.     324 

.  325  a 

12,  n.  16 

.    494, 

550  d,  611,  612 

.     611 

468    .     .     194 

141,  II.  200 

391,  421,  425 

.     338 

.     777 

.     370 

9,  n.  9 


728 
447 
400  A 
592 
76 
344 
144 

146 
620. 
620  d 
734 
51 
728 
717 
562 


620  h, 


W 


Waco  Nat.  Bank  v.  Rogers    .     . 
Wade  V.  Amer.  Colonization  Soc. 

— V.  New  Orleans  Canal  Co. 

V.  Smith 

— V.  Witliington    .... 


Wade's  Case 

Wagner  v.  Citizens'  Bank,  etc.  Co. 

V.  Crook 

• V.  Howard  Sav.  Inst. 

Wainwright  v.  Weber    .... 


Waite  V.  Dowley 

Wakefield  Bank  v.  Truesdale 
Wald  V.  Wheelon  .  .  .  . 
Waldron  v.  AUing     .     .     .     . 


51  Texas  606    . 

7  Sm.  &  ^lar.  697 

8  Rob.  (La.)  140 
213  Mass.  34     . 

I  Allen  561  .  . 
Rep.  Pt.  5,  14  a 
122  Tenn.  164  . 

167  Pa.  St.  259 

52  N.  J.  L.  225 

II  Vt.  576  .  . 
94  U.  S.  .527  . 
55  Barb.  602  . 
27  N.  D.  624  . 
73  App.  Div.  86 


Walker  v.  Bank 

— V.  British  Guaranty  Ass'n 

V.  Chapman 

V.  Grand  Rapids  Co.  . 

—  V.  Manhattan  Bank    . 

— — —  V.  Rostron 


5  Seld.  582  . 
18  Q.  B.  277 
22  Ala.  116  . 
70  Wis.  92  . 
25  Fed.  247  . 
9  M.  &  W.  411 


324, 


128  i, 
212 


II.  241  s 
.  76 
.  649 
.  608 
.  480 
.  447 
289  a, 

325,  334 

236  h 

620  d 

.  662 

II.  241  h 
.  169 

730,  746 
II.  50, 

250  A  a 

.  252 

.   42 

19 

.  166 

204,  317 

313,  398 


TABLE   OF  CASES 


CXXXVU 


Walker  v.  St.  Louis  Nat.  Bank 

V.  The  State  Trust  Co. 

V.  Walker      .... 


Walker  Bros.  v.  Skliris  .  .  . 
Wall  V.  Provident  Inst.  .  . 
Wallabout  Bank  v.  Peyton     . 

Wallace  v.  Bank 

V.  Hood 

V.  Kelsall       .     .     .     . 

V.  Lincoln  Sav.  Bank 

V.  Stone 

Wallis  V.  Littell 

V.  Manhattan  Co.  .     . 

Walls  r.  Bailey 

Walsh  V.  First  Nat.  Bank 

V.  Gladstone      .     .     . 

V.  Rogers       .     .     .     . 

v.V.S 


Walsh's  Appeal 

Walter  v.  Dolan 

V.  Ford 

Walters  v.  Brown 

Walters  Nat.  Bank  v.  Bantock  .     . 

Wapello  State  Sav.  Bank  v.  Colton 

Ward  V.  Johnson 

V.  Joslin 

V.  Northern  Bank  .... 

V.  Smith 

V.  Turner 


5  Mo.  App.  204 
30  App.  Div.  55 
91  U.  8.  704,  5  Heisk 
68  N.  H.  407 
34  Utah  353 
3  Allen  9G     . 
123  N.  Y.  App.  Div 
89  Tenn.  630     . 
89  Fed.  11    .     . 
7  M.  &  W.  242 
89  Tenn.  630     . 
65  N.  W.  113 
5  Law  T.  Rep.  n 
2  HaU  495    .     . 
49  N.  Y.  464     . 
201  Fed.  522     . 
1  Phil.  Ch.  C.  294 
12  Neb.  28  .     . 
174  Fed.  615     . 
122  Pa.  St.  177 
26  Am.  Law  Reg 
74  Mo.  195  . 
15  ISId.  292  . 
41  Okla.  153 


25 


Wardell  v.  Howell 

Wardlow  v.  Troy  Oil  Co 

Ware  v.  Street 

Warhus  v.  Bowery  Sav.  Bank  .  . 
Waring's  Admr.  v.  Edmonds  .  . 
Warner  v.  De  Witt  Co.  Nat.  Bank 

V.  Penoyer 

V.  Sauk  Co.  Bank  .     .     .     . 

Warren  v.  Oilman 

V.  Imbeam 

V.  NLx 


133  Iowa  147 
95  111.  215  . 
186  U.  S.  142 
14  B.  Monr.  35 
7  Wall.  447  . 
2  Ves.  Sen.  443 
9  Wend.  174 
74  S.  C.  368 
2  Head  609 
21  N.  Y.  546 
11  Md.  424  . 
4  111.  App.  305 
91  Fed.  587  . 
20  Wis.  492 
17  Me.  360  . 
63  Kan.  415 
97  Ark.  374  . 


63 


.  .  103 
.   319  A 
425 .  247 
.  .  717 
.  .  360 
.  .  620 
727  .  603 
.  172 
679,  690 
.  435 
.  137 
.  248 
489  .  390 
.  .  319 
.  9,  n.  12 
.  .  337 
.  .  554 
.  .  476 
.  II.  259 
.  .  612 
(U.  S.)  590 
.  .  550 
.  .  233 
324,  325, 
493,  534  A 
27,  27  a 
186,  618,  750 
.  777 
.  231 
247,  637 
.  611 
.  565 
.  134 
644,  662 
.  620 


214, 


.  608 
.  750 
.  116 
.  193 
.  233 
625  B 
183,  186  a. 


V.  Robinson 


V.  Shook 


Warren  Bank  v.  Suffolk  Bank    .     .     . 

Warren  Deposit  Bank  v.  Md.  Fidelity 
etc.  Co 

Warren  etc.  Co.  v.  Miner's  etc.  Bank 

Warrensburg  Co-op.  Bldg.  Ass'n  v 
Toll 

Warwicke  v.  Noakes 

Wasgate  v.  First  Nat.  Bank  ... 


190,  289,  675  c,  679,  696 

25  Utah  205 128, 

128/,  172  6,717 

1  Car.  &  P.  59 4 

10  Cush.  583  (iMass.)     102,  n.  17, 
220,  236,  265,  269 

116  Kv.  38  .     .     .21,  101  d,  144 
166  111.  App.  540  .     .     .     .     311 

83  Mo.  94 421 

Peake  N.  P.  98      .     .     .     .     395 

117  Minn.  9      .     .     .      493,494 


CXXXVUl  TABLE   OF   CASES 

Washborn  v.  State  Bank 86  Kan.  468 208 

V. 87  Kan.  698      .     .     .   317  a,  451 

Washburn  t;.  Lee 128  Wis.  312     ...     .       317  a 

Washington  v.  Bank  for  Sav.      ...  65  App.  Div.  338  ....     610 

Washington  Bank  v.  Lewis    ....  22  Pick.  24  .     .     .   103,  134,  136 
Washington  Brick  etc.  Co.  v.  Traders' 

Nat.  Bank 46  Wash.  23 586 

Washington  Co.  Nat.  Bank  ?;.  Lee .     .  112  Mass.  521  .     .     .      11.206  a. 
Washington  etc.  Ry.  Co.  v.  Real  Estate 

Tr.  Co 177  Fed.  306     ..     .    144  i,  773 

Washington  Nat.  Bank  v.  Pierce     .     ,     6  Wash.  491 146  h 

Washington  State  Bank  v.  Dickson  .     35  Wash.  641 101 

Wasson  v.  Lamb 120  Ind.  514     .     291,  291  b,  573 

Waterloo  Milling  Co.  v.  Kuenster  & 

Co 158  lU.  61,  259      ....     274 

Waters  v.  Bank  of  Ga R.  M.  Charlt.  193      ...     649 

Waterson  v.  Masterson 15  Wash.  511 696 

Watertown  Sav.  Bank  v.  Mattoon  .     .  78  Conn.  388    ...     .      17,  21" 

Watervhet  Bank  v.  White      ....     1  Den.  608 419 

Watriss  v.  First  Nat.  Bank  of  Cam- 
bridge        124  Mass.  571  .     .     .     .    II.  244 

Watson  V.  Bennet 12  Barb.  196     .     .  102,  n.  9,  169 

V.  Fagner 99  111.  App.  364     ...     .     208 

V. 105  lU.  App.  52     ....     208 

V. 208  111.  136 194 

V.  Phoenix  Bank 8  Met.  217  .     .     .     .     291,  294, 

295,  311,  322 

V.  Poulson 7  Eng.  L.  &  Eq.  585,  15  Jur. 

1111 389 

V.  RusseU 3  B.  &  S.  34 398 

V.  Town  of  Fairmont       ...  38  W.  Va.  183  .     .     .      II.  241  h 

Watt  V.  Cans  &  Co 114  Ala.  264     .     .      421  b.  421  d 

Watt-Harley-Holmes  Hardware  Co.  v. 

Day 1  Ga.  App.  646      .     .     395,  543, 

545,  546 

Watts  V.  Board  of  Commissioners  .     .     21  Okla.  231 186  a 

V.  Christie 11  Beav.  546     ..     .      289,  313, 

326,  338,  458,  568 

V.  Dubois 66  S.  W.  698     .     .     .     .    II.  242 

V.  Wells 7  Mon.  L.  R.  (Q.  B.)  387   .       65 

Wayne  v.  Comra.  Nat.  Bank      ...  52  Pa.  St.  343  .     .      21,  37,  42  c 

Weakley  v.  McClarty 136  Ky.  837 679 

Wear  v.  Lee 87  Mo.  358 421 

Weatherbee  v.  Litchfield 186  Mass.  399 614 

Weaver  v.  Nixon 69  Ga.  699 544 

Webber  v.  Cambridgeport  Sav.  Bank  .  186  Mass.  314  .     .     .  620,  620  d 

Weber  v.  Spokane  Nat.  Bank     ...  50  Fed.  735       .     .      754,  II.  236 

V.  Weber 9  Daly  211 610 

Webster  v.  Howe  Machine  Co.  .     .     .     54  Conn.  394 748 

Weckler  v.  First  Nat.  Bank   ....  42  Md.  58      59,  77,  103,  II.  208  a 

Wedemeyer  i;.  Hindelang 161  Mich.  600  .  87,675,  690,  691 

694,  706 

Wedlake  v.  Hurley 1  C.  &  J.  83 493 

Weed  V.  Bergh 141  Wis.  569     ...     .        2,  13 

V.  Bond 21  Ga.  195 565 


TABLE   OF   CASES  CXXXIX 

Weed  V.  Panama  R.  R.  Co 17  N.  Y.  362 102 

Weeks  i;.  Internat.  Tr.  Co 125  Fed.  370      74  a,  II.  228  c,  242 

Weems  v.  Melton 150  Pac.  720 147  a 

Wegner  v.  Second  Ward  Sav.  Bank     .     76  Wis.  242 620  c 

Weiand's  Adm'r  V.  State  Nat.  Bank    .  112  Ky.  310      .     .    .   311,    398, 

400,  446,  543 

Weinhard  v.  Comm.  Nat.  Bank      .     .  41  Or.  359    ..     .    II.  5,  14,  38, 

205,  212  6,  238 

Weinstock  v.  Bellewood 12  Bush  139      ...      494,  532 

Weisberger    Co.    v.    Barberton    Sav. 

Bank 84  Ohio  St.  21 474 

Weisinger  v.  Bank 10  Lea  330 290 

Weisner  Nat.  Bank  v.  Jeffreys    ...  14  Idaho  659    .     .     .       II.  241  / 

Welch  V.  German  American  Bank  .     .  73  N.  Y.  424     .     .     .       472,  473 

V.  Goodwin 123  Mass.  71 464 

V.  Seymour 28  Conn.  387 27 

Weld  V.  City  of  Bangor 59  Me.  416  .     .     .     .      II.  241  a 

V.  Gorham 10  Mass.  366    ....     9,  n.  9 

Wellington  v.  Jackson 121  Mass.  157 468 

Wellington  Nat.  Bank  v.  Robbins  .     .     71  Kan.  748 476 

Wells  V.  Brigham 6  Cush.  6 372 

V.  Morrison 91  Ind.  51 546 

V,  Tucker 3  Binn.  366  .     .     .     .       608,  611 

t,.  Western  Union  Tel.  Co.  .     .     144  Iowa  605 406 

Welton  V.  Adams  &  Co 4  Cal.  37      ....      299,  649 

Wendell  v.  French 19  N.  H.  213 309 

V.  Washington  &  Warren  Bank     5  Cow.  161 645 

Werk  V.   Mad   River  Valley  Branch 

Bank 8  Ohio  St.  301 421 

West  V.  Amer.  Exch.  Bank    ....     44  Barb.  175 599 

V.  Errol 58  N.  H.  233 752 

V.  First  Nat.  Bank  of  Elmira  .     20  Hun  408 89 

V.  McCullough 123  App.  Div.  846      ..     .     609 

J,.  St.  Paul  Nat.  Bank     ...     54  Minn.  466 219 

V.  Topeka  Sav.  Bank       ...     66  Kan.  524 617 

West  Branch  Bank  v.  Fulmer     ...  3  Barr  399   ....       227,  232 

West  Branch  State  Bank  v.  Haines     .  135  Iowa  313    .     .       103  a,  124, 

422,  425 

West  St.  Louis  Sav.  Bank  v.  Shawnee 

Co.  Bank 95  U.  S.  557      .     .   156,  158,  169 

Western,  etc.  R.  R.  v.  Franklin  Bank     60  Md.  361 103 

Western  Bank  v.  Coldeney     ....  120  Ky.  776      .  144  b,  147  a,  172 

V.  Gilstrop 45  Mo.  419 159 

V.  Mills 7  Cush.  539 746 

Western  German  Bank  v.  Norvell  .     .  134  Fed.  724     ..     .  216,  248  a 

Western  National  Bank  v.  White    .     .     131  S.  W.  828 4o8 

Western  Pacific  Ry.  Co.  v.  Godfrey     .     166  Cal.  346 696 

Western  Reserve  Bank  v.  Mclntyre  .  40  Ohio  St.  52  .  .  .  .11-  244 
Western  Union  Tel.  Co.  v.  Bi-Melallic 

Bank 17  Colo.  App.  229      .     .      466,/, 

474,  474  c 

V.  LouisseU 11  Ala.  App.  563  ....     398 

West  Virginia  Nat.  Bank  v.  Dunkle  .  65  W.  Va.  210  .  II.  241  v,  241  y 
Western  Wheeled  Scraper  Co.  v.  Sodi- 

lek 50  Neb.  105       ....      236  5 


cxl 


TABLE  OP  CASES 


Westfall  V.  Braley 

Westminster  Bank  v.  Wheaton  .     .     . 

Weston  V.  Barker 

V.  Hight 

Westwater  v.  Lyons 

Wetherell  v.  O'Brien 

Wetherill  v.  Bank  of  Pa 

Weatherow  v.  Lord 

Weyer     v.     Second     Nat.     Bank     of 

Franklin 

Wharton  v.  Morris 

V.  Walker 

Wheatley  v.  Glover 

V.  Purr 

V.  Strobe 

Wheeler  v.  Aiken  Co.  Bank    .... 

V.  Gould 

V.  Nat.  Bank 

V.  Werner 

Wheelock  v.  Freeman 

V.  Kost 

Whelan  v.  Childress 

Whistler  v.  Forster 

Whitaker  v.  Bank  of  England    .     .     . 

Whitbeck  v.  Mercantile  Bank     .     .     . 

Whitcomb  v.  Carpenter 

White  V.  Ambler 

V.  Commercial  etc.  Bank     .     . 

V. 

V.  Cont.  Nat.  Bank    .... 

V.  Cushing 

V.  Franklin  Bank 

V.  Howe 

V.  Knox 

V.  Nat.  Bank 

V.  Springfield  Bank     .... 

V.  Springfield  Inst 

Whitehead  v.  Walker 

White  River  Sav.  Bank  v.  Capital  Sav. 

Bank 

Whitesides  v.  Northern  Bank     .     .     . 

Whitman  v.  Cox 

V.  Oxford  Sav.  Bank  .... 

Whitmash  v.  George 

Whitmore  v.  Wilks 

Whitney  v.  Butler 

V.  Esson 

V.  First  Nat.  Bank  of  Brattle- 

boro 

V. 

V.  Foster 

V.  Ragsdale 

Whitsett  V.  Pacific  Nat.  Bank    .     .     . 


10  Ohio  St.  188 
4  R.  I.  30  . 
12  Johns.  276 
17  Me.  287  . 
193  Fed.  817 
140  lU.  146  . 
1  Miles  399  . 
41  App.  Div.  413 


163 


57  Ind.  198  . 
1  Dall.  125  . 
4  Barn.  &  Cr 
125  Ga.  710 

679,  683 
1  Keene  551 

12  Cal.  92  . 
75  Fed.  781 
20  Pick.  545 
96  U.  S.  268 
140  App.  Div.  695 

13  Pick.  165  . 
77  111.  296  .  . 
7  Humph.  303  . 

14  C.  B.  N.  s.  248 
6  Car.  &  P.  700 


127  U.  S.  193 
134  Iowa  227 
8  N.  y.  170 
66  S.  C.  491 
60  S.  C.  122 
64  N.  Y.  320 
88  Me.  339  . 
22  Pick.  181 
3  McLean  111 
111  U.  S.  784 
102  U.  S.  658 
3  Sand.  S.  C.  222 
134  Mass.  232  . 


...  662 
380,  383,  385 
...  499 
.  611,  612 
.  72,  II.  31 
.  .  .  186  & 
...  246 
.  604  b,  608 

.   II.  212  a 

...  299 

.  .  .  185 

.  675  a,  678, 

,  688,  690,  696 

.  .  610 

408,  495 

128,  140 

.  .  465 

II.  230  c,  230  d 

.     .     679 

.  .  485 


51 


II.  246,  250  d 
...  299 

380,  482,  486 
.  .  .  431, 

458,  459,  507 
.  II.  241  b 
...  629 
...  373 
...  629 
.  .  .  248  a 
.  476,  477 
...  374 

161,  298,  322 
.  128,  652 
.  .  II.  246 
.  326,  593 
...  565 
...  474 
.  227 


10  Mees.  &  Wels.  696 


77  Vt.  123  .  709,  710,  713,  714 

10  Bush  .501 485 

26  Me.  335 688 

176  U.  S.  559 675 

8  Barn.  &  Cr.  556   ...   42 
3  Car.  &  P.  364  ...  .  480 

118  U.  S.  655 679 

99  Mass.  311  .  .   9,  n.  8,  236 


50  Vt.  388  .  . 
55  Vt.  154  .  . 
117  Mich.  643  . 
33  Ind.  107  .  . 
138  Mo.  App.  81 


.  .  48 
20C,  202 

.  .  165  c 
II.  241  e 
313,  342 


TABLE   OF   CASES 


cxli 


Whittaker  v.  Crowder  State  Bank 

Whitten  v.  Haydon 

WhittinKton  v.  Farmers'  Bank  . 
Wliitwell  V.  Johnson  .... 
Whitworth  v.  Adams     .... 

Wickliam  v.  Gatrill 

Wieklitro  v.  Tm-ner 

Wicks  V.  Hatch 

Wideman  v.  Kellogg      .... 

Widgery  v.  Monroe 

Wighton  V.  Bosler 

Wienholt  v.  Spitta 

Wiesser  v.  Denison 


Wiggin  V.  Freewill  Baptist  Church 
Wilcox  V.  Nat.  Shoo  etc.  Bank    . 
Wilcox  V.  Onondaga  Co.  Sav.  Bank 
Wild  V.  Bank  of  Passamaquoddy    . 

Wilder  v.  Union  Nat.  Bank   .     .     . 


Wilderman  v.  Rogers 

Wiley  V.  Bunker  Hill  Nat.  Bank     .     . 
Wiley  V.  First  Nat.  Bank  of  Brattle- 

boro 

V.  Starbuck 

Wilkes  V.  Arthur 

V.  Knight 

Wilkinson  v.  Griswold 

V.  Johnson 

V.  Lutwidge 


2G  Okla.  78G 337 

9  Allen  408 246 

5Har.  &J.489     ....     717 
17  Mass.  452    ...       220,  231 

5  Rand.  333 49 

2  Sm.  &  G.  353     ....       42 
1.54  Ky.  571      .     .     .    128,  128  i 

(52  N.  Y.  535 272 

22  N.  D.  396     .     355,  590  c,  629 

6  Mass.  449 (i9() 

102  Fed.  70 220 

3  Camp.  376 398 

10  N.  Y.  68       .     .     .     291, 463, 

467,  468,  472 

8  Met.  301 113 

67  App.  Div.  466  .     .     .     .     559 

40  Hun  297 440  B 

3  Mason  505     ..     .     98,  n.  10, 
156,  157,  158,  171 
12  Leg.  News  75  (Biss.) 

II.  257  c 

7  Eastern  Rep.  786    ..     .     434 
183  Mass.  495  .     .  329,  337,  458 


.  ...  191 
.  .  II.  230  (I 
298,  675  o,  694 
....     690 


Willard  Mfg.  Co.  v.  Merchants'  Nat. 

Bank 

Willetts  V.  Paine 


V.  Phoenix  Bank 


47  Vt.  546    . 

44  Ind. 298  . 

91  S.  C.  163 

142  Ga.  458 

12  Sm.  &  Mar.  669    ..     .     267 

3  Barn.  &  Cr.  428      .      476,  488 

1  Str.  648 463 

130  N.  C.  609  .     .     .     .      II.  52 

43  111.  433    ..     .     9,  n.  9,  312, 

421,  n.  10 

2  Duer  121  .     .     .     .      155,  370. 

414,  n.  11,  418,  443 


Willey    V.    Crocker-Woolworth    Nat. 

Bank 

William  Deering  &  Co.  v.  Kelso      .     . 
Williams  v.  Amer.  Bank 


V.  Araer.  Nat.  Bank 
V.  Brady  .... 
V.  Brewster  .     .     . 
V.  Cheney 
V.  Cobb    .... 


72  Pac.  832  . 
74  Minn.  41 
185  Fed.  66 

115  Fed.  793 
85  Fed.  376  . 
221  Fed.  118 
117  Wis.  370 
3  Gray  215  . 
219  Fed.  663 


Cox 


V.  Darrier 
V.  Everett 
p.  Gillraan 
V.  Griffith 


97  Tenn.  567 
99  Tenn.  403 
135  Pa.  St.  445 
14  East  582 
3  Green  276 
5  M.  &  W.  300 


.  .  439 
.  532  A 
679,  684, 
II.  212  b 
.  II.  84 
.  .  750 
.  II.  253 
.  . 128  a 
.  .  565 
.  .  679, 
686,  II.  2(;3 
.  .  573 
.  . 629  a 
.  .171  Q 
398,  493 
.  .  424 
.     .     327 


cxlii 


TABLE   OF   CASES 


Williams  v.  Hadley  .... 

V.  Hasshagen 

V.  Hood 

V.  Johnson     .... 

V.  Kelsey       .... 

V.  Mechanics'  Bank    . 

V.  Meloy 

V.  Moulton    .... 

V.  Park 

V.  Riley 

V.  Rogers       .... 

V.  Rose 

V.  State 

V.  Union  Bank  . 

V.  Van  Norden  Tr.  Co. 

V.  Weaver     .... 

V.  Williams   .... 

WilUamson  v.  Amer.  Bank 

V.  Johnson     .... 

V.  Williamson    . 

Willing  V.  Consequa 
Willis  &  Co.  V.  Finley   .     .     . 
Willius  V.  Albrecht   .... 
— — — ■  V.  Mann 


59 


Willoughby  v.  Weinberger      .     . 

Wilmot  V.  Hurd 

Wilson  V.  Baker  Clothing  Co.     . 

— —  V.  Book 

V.  Carhnville  Nat.  Bank 

V.  Craven 

■ — ■ V.  Dawson 

V.  Farmers'  Nat.  Bank    . 

V.  First  State  Bank    .     , 


V.  Foree    .     .     . 

V.  Goodwin   . 

■ — V.  Holmes 

V.  McEachern    . 

V.  Pauly    . 

— — ■ — ■  V.  Smith   .     .     . 

V.  Wysar  . 

Winchester  v.  Howard  . 
Winchester   Milling    Co. 


8  East  378  .  . 
166  Cal.  386     . 

1  Phil.  205   .     . 

50  Mont.  7  .  . 
6  Ga.  365  .  . 
5  Blatchf.  C.  C. 
97  Wis.  561 

186  Mass.  402  . 
63  Neb.  747  . 
34  N.  J.  Eq.  398 

14  Bush  788  . 
218  Fed.  898  . 

51  Neb.  630   . 

2  Humph.  339  . 
144  App.  Div.  25 
75  N.  Y.  30       . 
55  Wis.  300       . 
115  Fed.  793     . 

1  Barn.  &  Cr.  149 
L.  R.  7  Eq.  542 

I  Pet.  301  . 
173  Pa.  St.  28 
100  Minn.  436 
91  Minn.  494 

15  Okla.  222 

II  Wend.  584 
25  Idaho  378 
13  Wash.  676 

187  lU.  222  . 
8  M.  &  W.  584 

52  Ind.  513  . 
176  Mo.  App.  73 
77  Kan.  589 


V.   Bank   of 


Winchester 


Wineock  v.  Turpin 

Winfield  Nat.  Bank  v.  R.  R.  etc.  Sav. 

Ass'n        

Wing  V.  Merchant 

Wingate  v.  Mechanics'  Bank      .     .     . 

V.  Orchard 


6  Johns.  110 
Wright  (Ohio) 
5  Mass.  543 
9  Ga.  App.  584 
72  Fed.  129 

3  How.  763  . 

4  Taunt.  288 
130  Cal.  432 

120  Tenn.  225 

96  m.  135  . 


219 


71  Kan.  .584 
57  Me.  383  . 
10  Barr  104 


Wingert  v.  First  Nat.  Bank 


Winklebleck  v.  Butler  Co.  Bank 


75  Fed.  241 
223  U.  S.  670 
115  Fed.  739 
151  Mo.  App.  9 


250 


244 


II. 


.  751 

106,  166 

.  422 

.  617 

.  295 

701,  709 

.  693 

.  610 

.  265 

.  173 

.  289 

338,  691 

II.  259 

14 

.629  a 

II.  241  r 

.     604 

84,  212  b 

439 

292 

113 

424 

678 

687,  688,  690 

589,  589  b 

.  .  335 

.  .  624 

687,  696 

.  .  236 

.  .   29 

186,  207,  562 

289  a,  324 

.  14,  15, 

178,  622  A 

.  .  289 

.  .  553 

217,  593 

.  .  389 

.  .  146  i 

,  272,  591,  599 

.  .  .  743 

125,  128,  617 

.  236,  236  a 

,  247,  274,  586 
692 


...   52 

...  608 

.  .  :  218, 

252,  283,  295 

...  691 

.  .  .  74  o 
.  .  .  74  a 
.   342,  459 


TABLE   OF   CASES 


cxliii 


Winkler  v.  Citizens'  State  Bank 
Winsor  v.  Lafayette  Co.  Bank    . 

Winston  v.  Gordon 

Winter  v.  Bank  of  N.  Y 

V.  Belmont 

V.  Drury 

V.  State 

V.  Williamsburg  Sav.  Bank 

V.  Winter 

Winters  v.  Armstronj? 

Winthrop  Sav.  Bank  v.  Jackson 

Winton  v.  Little 

Wirebaeh  v.  First  Nat.  Bank      .     . 

Wisconsin  ISIarine  &  Fire  Ins.  Co. 

Bank  of  British  North  America  . 

Wise  V.  Williams 

Wisner  v.  First  Nat.  Bank 

V.  Sehopp 

Wiswell  V.  Starr 

Withers  v.  Edmonds 

Witte  V.  Vincenot 

Witters  v.  Sowles 

Wittkowski  v.  Smith 


Witzel's  Case 

Wolfe  V.  Simmons 

Wolff  V.  State 

Wolstenholm  v.  Sheffield  Union  Bank- 
ing Co 

Wolverton  v.  Exch.  Nat.  Bank  .     .     . 
Wood  V.  Amer.  Nat.  Bank     .     .     .     . 


V.  Boylston  Nat.  Bank 
V.  Conn.  Sav.  Bank    . 


V.  Dummer 

V.  Green 

V.  Merchants'  Sav.,  Loan,  & 


Tr.  Co.    .     .     . 

V.  Wallace 

V.  Warner 

V.  Wood    . 


Woodhouse  v.  Crandall 


Woodin  V.  Frazee 

Woodman  u.  Thurston 

Woodruff  V.  Erie  R.  R.  Co 

V.  Hill 

V.  Merchants'  Bank    .     .     .     . 

V.  Munroe 

V.  Plant 

Woods  V.  Legg 

■  V.  People's  Nat.  Bank  of  Pitts- 
burg    


89  Kan.  279   .  . 

.  .  .  458 

18  Mo.  App.  GG5  . 

...  109 

115  Va.  899   .  . 

.  120,  130  o 

2  Caines  337 

...  181 

53  Cal.  428  ..  . 

...  710 

1  Seld.  525  .  .  . 

.   493,  523 

03  Fla.  53  .  .  . 

...  394 

08  App.  Div.  193 

.  .  .  020  6 

101  Eng.  C.  L.  997 

.  .  .  (J08 

37  Fed.  508   .  . 

...  070 

07  Me.  570  .  .  . 

.  .  .  335 

94  Pa.  St.  04  .  . 

.  144,  n.  13 

97  Pa.  St.  543  .  . 

...  392 

21  Upper  Canada  Q.  B.  284  225 

102  Fed.  101  .  . 

.  II.  250  A 

220  Pa.  St.  21  .  . 

...  409 

34  App.  Div.  199  . 

...  540 

48  Me.  401  .  .  . 

.   093,  090 

20  Tex.  Civ.  App. 

189  .  .  150 

43  Cal.  325  .  .  . 

...  290 

32  Fed. 130   . 

130,  100,  080 

84  N.  C.  071  .  . 

...  230 

2  Bradf.  380   .  . 

...  010 

75  Miss.  539  .  . 

...  132 

79  Ala.  200  .  . 

.  .  .317a 

54  Law  T.  R.  740 

...  325 

77  Wash.  94   . 

.  .  II.  230 

100  Va.  300   .  . 

.  .   289  a. 

311,  458,  459 

129  Mass.  358  . 

.  .320,  597 

81  Conn.  341  . 

.  .    500, 

017,  020,  020  b,  020  c,  020  d 

3  Mason  C.  C.  308  ..  .  093 

131  Tenn.  583  . 

.  .  77,298 

41  111.  207  .  . 

...  577 

24  Ind.  220  .  . 

.  .  .  500 

15  N.  J.  Eq.  81 

■  .  .  12,  n.  7 

1  Car.  &  P.  59  . 

.  .  9,  n.  4 

197  m.  104  .  . 

.  289  a,  508, 

589,  590  c,  030 

99  m.  App.  552 

...  ISO 

38  N.  Y.  Sup.  Ct. 

190  .  .  421 

8  Cush.  157   . 

.  ...  425 

93  N.  Y.  018  . 

.  ...  730 

110  Mass.  310  . 

.  .   12,  n.  13 

25  Wend.  073  . 

.  .  .  9,  n.  9, 

380,  381,  387 

33  Md.  158  .  . 

.  .   4()4,  408 

41  Conn.  344  . 

.  .   421,  425 

91  Ala.  513  .  . 

.  .  .  .317a 

83  Pa.  St.  57  . 

.  .  .  II.  228 

cxliv 


TABLE  OF  CASES 


Woods  V.  Sehroeder 

V.  State    

V.  Thiedeman 

Woodsville   Guaranty    Sav.    Bank   v. 

Rogers 

Woodworth  v.  Old  Second  Nat.  Bank 
Woolen  V.  N.  Y.  &  Erie  Bank    .     .     . 
Woolfolk  V.  Bank  of  America      .     .     , 
WooUey  v.  Louisville  Banking  Co. 
Worcester  Co.  Bank  v.  Dorchester  etc. 

Bank 

Work  V.  Tatman 

Wray  v.  Tuskegee  Ins.  Co 

Wright  V.  Boyd 

V.  Douglas 

V.  Field 

V.  First  Nat.  Bank  of  Greens- 
burg    

V.  Georgia  R.  R.  &  Banking  Co. 

V.  Gurley 

V.  Laing 

V.  Merchants'  Nat.  Bank    .     . 

V.  Reed 

V.  Russell 

V.  Stewart 

V.  Wilcox 

Wrigley  v.  Farmers  etc.  Bank     .     .     . 

Wroten  v.  Armat 

Wulff  V.  Roseville  Tr.  Co 

Wyckoff  V.  Anthony 

V.  Riverside  Bank       .... 

Wyer  v.  Dorchester,  etc.  Bank  .     .     . 

WyUe  V.  Comm.  etc.  Bank     .     .     .     . 

V.  Northampton  Bank     .     .     . 

Wyman  v.  Citizens'  Nat.  Bank  .     .     . 

V.  Colo.  Nat.  Bank     .     .     .     . 

V.  Hallowell  &  Augusta  Bank 


V.  Wallace 


Wynn  v.  Tallapoosa  Co.  Bank 


4Har.  &  J.  276  .  '~ .  .'  393 
10  Mo.  698 19 

1  H.  «&  C.  478  .     .  225,  474,  557 

86  Vt.  121 96 

154  Mich.  459  ....  708  A 
12  Blatehf .  359  ....  224 
10  Bush  504 485 

87  Ky.  527 325 

10  Cush.  488 652 

2  Houst.  304 383 

34  Ala.  58 666 

3  Barb.  523 170 

10  Barb.  97 76 

7  Ind.  376 693 

18  Alb.  L.  J.  115  .     .     .    II.  230 

34  Ga.  330 89 

132  La.  745 706 

3  Barn.  &  Cr.  165  ...  327 
3  Cent.  Law  J.  351    .     .    II.  246 

3  T.  R.  554 637 

2  Black  934 27 

130  Fed.  905     ...     .       102  k 

19  Wend.  343   ..     .      102,  n.  9 

76  Neb.  862 402 

31  Gratt.  228  ...  .  II.  228 
164  App.  Div.  399      .     .  632  A  / 

90  N.  Y.  442 325 

135  App.  Div.  400     .     98  k,  101 

11  Cush.  51 652 

63  S.  C.  406 311 

19  U.  S.  .361      ....   56,  202 

29  Fed.  734 754 

5  Colo.  30 594 

14  Mass.  58       .     .   89,  98,  n.  22, 

102,  n.  29,  765 

201  U.  S.  230    .     .      48,  63,  496, 

696,  II.  83  A,  84 

168  Ala.  469     ..     .      101,  172, 

173,  324,  334,  358 


Yankton  Nat.  Bank  v.  Benson 
Yarborough  v.  Banking  etc.  Co. 
Yardley  v.  Wilgus     .     .     . 
Yates  V.  Jones  Nat.  Bank 


V.  Stapelhurst  Bank 
V.  Utica  Bank    . 


Yeaton  v.  Bank  of  Alexandria 
Yellowstone  Co.  v.  First  Tr.  etc.  Bank 
York  R'y  Co.  v.  Hudson 


33  S  D  399  .  . 

.   14 

142  N.  C.  377  . 

.  463 

56  Fed  965 

.  679 

74  Neb.  734   . 

132  b, 

II.  253 

206  U.  S.  734  . 

132  b, 

II.  253 

74  Neb.  734   . 

II.  253 

206  U.  S.  181  . 

. 

II.  253 

6  Craneh  49 

.  220 

46  Mont.  439  . 

186 

a,  590  c 

19  Eng.  L.  &  Eq.  361 


125 


TABLE   OF   CASES 


cxlv 


Youmans  v.  Blaekshear  Bank     .     .     .  141  Ga.  357 23(3 

V.  State 7  Ga.  App.  101      .     .  622,  622  A 

Young  V.  Adams 6  Mass.  182      .     .   289,  464,  659 

V.  Axtell 24  Black  242 131 

V.  Bank  of  Princeton       ...  97  Mo.  App.  576  ....     451 

V.  Godbe 15  Wall.  562 12 

V.  Grote 4  Bing.  253        480 

V.  Hudson 99  Mo.  102 159  ri 

V.  Teutonia  Bank  etc.  Co.  .     .  134  La.  879  .     .  248,  248  a,  590  ri 

V. 135  La.  66 248 

Youngs  i;.  Lee 18  Barb.  187     ..     .      557,  599 


Z 

Zander  v.  N.  Y.  Security  etc.  Co.    .     .  178  N.  Y.  208  . 

Zantzingers  v.  Gunton 19  Wall.  32  .     . 

Zelle  V.  German  Sav.  Inst 4  Mo.  App.  401 

ZeUer  v.  Jordan 105  Cal.  143      . 

Zilke  V.  Woodley 36  Wash.  84      . 

Zimmerman  v.  Rote 75  Pa.  St.  188  . 

Zinck  V.  Walker 2  W.  Bl.  1154   . 

Zinn  V.  Baxter 65  Ohio  St.  341 


.  306 
IL  250 
329 
548 
248 
480 
325 
IL  253 


BANKS   AND   BANKING 


CHAPTER    I 

PRELIMINARY 

§  1.    Scope  of  the  Book. 

Definitions. 
§  2.        General  definition  and  essentials. 
§  3.        Savings  Bank. 
§  4.        United  States  tax  definition. 
§  5.        State  and  National  Banks. 

Sources  of  the  Law  of  Baxkixg. 
§  6.    Charter. 

n.  1.  Articles  of  association  equivalent  to. 

n.  2.  When  invalid. 

n.  3.  State  cannot  alter  or  repeal,  unless  power  is  reserved. 

n.  4.  Bank  has  no  powers  beyond  those  given  by  the  charter,  and 
their  incidents. 
§  7.    Statute  Law. 

State  Bank  and  United  States  statutes. 

State  Bank  and  State  statutes. 

National  Bank  and  State  statutes. 

National  Bank  and  United  States  statutes. 
§  8.    Common  Law. 
§  9.   Usage,  and  what  is  necessary  to  make  it  legally  binding. 

(a)  Great  care  is  necessary  in  relj-ing  on  usage. 

(b)  The  real  question  is,  what  is  it  fair  to  presume  the  parties  in- 

tended. 

(c)  Valuable  rights  not  waived  without  assent. 

(d)  Usages  in  the  nature  of  contract  between  other  parties  are  ex- 

trinsic, unless  clearly  intended  to  govern  the  transaction. 

(e)  Relation  of  the  parties,  as  selecting  the  bank  and  taking  ad- 

vantage of  its  facilities,  or  merely  brought  into  contact  A\ith 

it  by  act  of  another.      §  9,  n.  19,  20. 
Foreseeing  that  the  bank  will  be  a  factor  in  the  transaction. 
No  one  is  bound  by  a  usage,  who  has  no  reason  to  contemplate 

that  he  will  be  brought  within  its  operation.      §  9  c ;    §  243. 
Mode  of  dealing  between  the  parties. 
Actual  knowledge  of  a  usage. 
General  usage  of  the  banks  of  a  city. 

VOL.  I  —  1  1 


PRELIMINARY 

Usage  of  a  single  bank.     § 9,  n.  21 ;  § 9  c ;  §9,  n.  19  ;  § 9  A  to  F. 

Change  of  usage.      §  9,  n.  1  c. 

Distinction  between  binding  usage  and  a  series  of  courtesies. 

§  9,  n.  1  c ;    §  583. 
Louisiana  definition  of  usage.      §  9,  n.  1. 
Proof  of  usage.     §  9,  n.  1  b,  and  n.  13 ;    §  222. 
A  usage  cannot  be  built  up  out  of  a  series  of  acts,  each  done 

under  special  authority.      §  97  (7). 
In  this  it  bears  a  resemblance  to  prescription ;    authority  by 
usage  is  authority  by  a  sort  of  prescription. 
Effect  of  Usage.     See  §  221. 

As  against  one  ignorant  of  the  usage.      §  9,  n.  3. 

As  in  favor  of  one  ignorant  of  the  usage.      §  9,  n.  3. 

Generality  of  usage  only  affects  the  question  of  knowledge.     §  9, 

n.  18. 
A  usage  to  perform  an  act  is  not  equivalent  to  performance.      §  9, 

n.  17. 
A  usage  may  determine  the  question  of  negligence.     §  9,  n.  16. 
Usages  Varying  Rules  of  Law.     §  9,  n.  9. 
Held  illegal  if  against  the  rules. 

(1)  demand  paper  has  grace. 

(2)  bank  must  pay  depositors  in  good  money. 

(3)  recovery  on  one  half  of  bank  bill. 

(4)  over-due  paper  subject  to  equities. 

(5)  money  paid  by  jnistake  can  be  recovered. 
Held  legal,  though  against  rules. 

(1)  as  to  demand,  §  231,  notice,  §  233,  -protest,  §  231. 

(2)  as  to  powers  of  bank  officers  and  agents. 

(3)  that  collecting  bank  cannot  receive  anything  but  money. 

(4)  that  a  banker  must  know  the  signature  of  his  customers. 

(5)  as  to  negotiabihty  of  paper. 

(6)  as  to  what  constitutes  delivery. 

(For  other  examples  of  Usage,  see  Index,  Usage.) 
The  essential  principles  in  the  matter  of  Usage  are  three. 

(1)  Contemplation. 

The  usages  of  a  bank  or  gi-oup  of  banks,  contemplated  as  a 
factor  in  the  agreement  at  the  time  of  contract,  form  a 
part  of  it.  But  if  an  institution  or  set  of  institutions  not 
within  the  contemplation  of  the  parties  at  the  time  of 
contracting  as  entering  into  the  agreement,  or  having 
any  part  to  perform  in  connection  with  it,  the  usages 
of  such  institution  or  institutions  form  no  part  of  said 
contract.  As  regards  the  usages  of  a  single  bank,  how- 
ever, this  principle  must  be  received  in  connection  v.dth 
two  others  following. 

(2)  Adoption. 

One  who  makes  use  of  the  facilities  of  a  bank  must  be  held 
by  its  usages,  particular  and  general ;  he  adopts  the 
bank,  usages,  and  aU  ;  he  cannot  expect  to  act  otherwise 
than  in  its  own  accustomed  manner,  and,  knowing  that 
banks  are  apt  to  have  their  special  methods  of  business, 
it  is  his  own  fault  if  he  does  not  inquire  into  them  before 
selecting  the  bank.  One  who  voluntarily  goes  on  board 
of  a  ship  bound  upon  its  usual  course  cannot  complain 
if  it  does  not  take  him  to  the  port  he  wished  ;  he  should 


PRELIMINARY 

have  inquired  of  tho  proper  authorities  whither  it  was 
going. 
(3)  Adverse  Position. 

Where  A.  contracts  with  B.,  the  usages  of  B.  or  of  his 
agents  cannot  affect  A.,  unless  he  has  knowledge  of  them 
at  the  time  of  contract,  or  they  are  so  general  that  A. 
must  be  presumed  to  know  them.     In  respect  to  banks, 
the  usages  general  among  those  of  a  particular  locality 
are  presumed,  under  this  principle,  to  be  known,  but 
not  the  special  usage  of  each  single  bank.     So  that,  in 
any  dealing  between  third  parties,  if  the  bank  can  be 
placed  distinctly  on  one  side  of  the  agreement,  its  par- 
ticular usages  -will  not  bind  the  other  side  unless  known 
to  it. 
For  example,  when  A.  takes  a  check  from  B.  upon  the  bank 
with  which  B.  deals,  B.  is  bound  by  the  special  usages  of 
the  bank,  under  principle  (2),  but  A.  is  not,  for  to  him 
(3)  applies.     So,  if  a  note  is  payable  at  bank  C,  the 
usages  of  C.  in  collecting  affect  the  maker,  under  (2) ; 
but  if  a  note  is  drawn  generally,  not  as  payable  at  a 
particular  bank,  and  the  holder  puts  it  in  bank  C.  for 
collection,  the  holder  is  bound  by  the  usages  of  C, 
particular  as  well  as  general,  but  the  maker  is  only 
bound  l)y  the  general  usages,  even  though  he  knows  the 
special  usages ;   for  although  the  group  of  banks  in  the 
place  where  the  note  was  payable  was  contemplated  as 
a  probable  factor  in  the  collection,  the  special  bank  C. 
was  not  contemplated,  and  its  peeuUar  usage  did  not 
enter  the  agreement  at  the  time  of  contract. 
In  brief,  if  I  employ  a  bank  to  act  for  me,  or  authorize  you 
to  employ  it  to  act  against  me,  I  am  bound  by  its  usage, 
whether  known  to  me  or  not. 
But,  in  other  cases,  where  I  come  in  contact  with  the  bank, 
merely  because  I  have  a  demand  against,  or  it  has  a  de- 
mand against  me,  I  will  not  be  bound  by  its  usage,  un- 
less at  the  time  of  entering  into  the  contract  from  which 
the  claim  arises,  (1)  The  bank  was  contemplated  as  a 
factor,  and  (2)   I  either  knew  its  custom,  or  it  is  just  to 
presume  knowledge,  because  it  was  my  duty  to  inquire  ; 
and  this  last  question  will  always  depend  for  its  answer 
upon  the  facts  of  each  new  class  of  cases  as  they  arise, 
and  the  judge's  sense  of  what  is  fair  and  just  under  the 
circumstances  and  knowledge  will  not  be  presumed  so 
as  to  take  away  the  substance  of  valuable  legal  rights 
without  actual  consent,  but  only  where  the  effect  of  the 
usage  is  confined  to  varying  the  formal  law.      §  223. 
10.    Conflict  between  State  and  Federal  Courts. 
Force  of  State  decisions. 

Federal  courts  are  free  on  questions  of  general  commer- 
cial   law,  construction    of    contracts,    extra-territorial 
matters,  and  from  State  decisions  that  are  clearly  unjust. 
Discharge  under  foreign  bankruptcy,  n.  4. 

Whether  the  bank  is  a  holder  for  value  of  a  note  is  a 
question  of  general  commercial  law,  upon  which_State 
decisions  do  not  conclude  the  Federal  courts,  n.  7. 

3 


I  1  PRELIMINAKY 

§§11  and  12.     Conflict  of  the  Laws  of  different  Sovereignties. 
Remedy  is  governed  by  the  Lex  Fori. 

Practice,  Pleading,  Admissibility  of  Evidence,  Burden 
of  Proof,  Latent  or  Patent  Ambiguity,  Competency 
of  Witnesses,  Hearsay,  Parol  to  affect  writing,  and 
what  facts  the  admitted  evidence  proves;  but  the 
legal  effect  of  such  facts  proved  may  depend  on  other 
law,  as  that  of  the  place  of  performance,  n.  2. 

Statute  of  Limitations,  n.  2. 

Statute  of  Frauds,  n.  2. 

Interpretations  of  Documents,  n.  3. 

Realty,  the  effect  of  contracts  upon,  n.  4. 

Distinction  between  the  contract  as  a  contract,  and  its 
effect  on  property,  n.  5. 

One  domiciled  in  State  E.  may  be  estopped  in  another 
State  to  oppose  a  transaction  valid  by  the  law  of  E., 
n.  8,  9. 
Movables,  effect  of  contract  upon,  n.  9,  10. 

(5)  Capacity  to  contract. 

(6)  Form  of  contract. 

(7)  Place  of  performance  governs  the  construction  and  validity 

of  a  contract. 
Place  of  payment  decides  usually. 

Seat  of  a  continuous  business  governs  the  obligations  of 
him  who  carries  on  the  business  arising  in  the  course  of 
the  business. 
Of  two  possible  laws,  that  most  favorable  to  the  contract  is 

applied. 
Seat  of  a  casual  contract. 

Place  where  a  contract  is  made  is  its  seat,  when  this  is  not 
otherwise  determinable,  and  the  place  of  delivery,  not  the 
place  of  signing  or  dating,  is  the  place  of  making,  except 
as  to  bona  fide  parties  without  notice. 
The  law  governing  bills  and  notes,  liability  of  maker, 
drawer,  indorser,  acceptor,  grace,  demand,  protest,  notice. 
(Note  7)  Equity  will  compel  a  good  contract  to  be  made  in  some 

cases. 
(Note  15)  Interest  may  be  governed  by  the  law  of 
the  place  of  payment, 
the  place  of  maldng  the  contract, 
the  place  of  using  the  money. 

the  place  of  suit  as  to  interest  recovered  as  damages. 
In  some  States,  the  Lex  Fori  governs  as  to  this  kind  of 
interest. 

§  1.  Scope  of  the  Book.  — The  subject  of  this  vohime  is  that 
portion  of  Substantive  ^  Law  which  relates  to  Banks  and 
Banking. 

In  its  narrowest  sense  this  would  include  only  such  part  of  the 

1  §  1.  With  procedure  we  have  little  to  do  except  incidentally  in  the 
notes,  the  windows  of  the  book  through  which  we  may  look  upon  the 
world  of  law  beyond  its  limits. 

4 


A    BANK  §  2 

law  as  owes  its  existence  to  Banks  and  Banking.  We  sliould  con- 
sider those  combinations  of  fact  in  which  a  bank  is  an  essential  ^ 
element,  and  by  comparing  the  consequences  attached  In-  the 
law  to  the  facts  in  such  cases,  derive  by  induction  the  law  peculiar 
to  banking. 

In  its  widest  sense  our  subject  would  include  all  law  applicable 
to  banks,  and  we  should  ha\e  to  note  the  legal  consequences 
linked  to  every  combination  of  circumstances  into  which  a  bank 
could  enter  as  a  factor. 

While  the  first  method  would  be  the  proper  one  if  the  book 
were  part  of  a  complete  and  connected  treatment  of  the  whole 
law,  it  would  exclude  very  much  that  is  of  every-day  use  in  bank- 
ing, and  of  which  a  text-book  intended  to  be  used  by  itself  should 
speak.  Yet,  if  the  book  were  written  upon  the  second  plan,  it 
would  be  a  cyclopoedia  of  law.  The  sensible  plan  seems  to  be,  to 
group  in  one  volume  the  law  peculiar  to  banks,  and  such  further 
matter  as  is  of  frequent  application  in,  or  has  a  very  important 
bearing  upon,  their  business. 

This  we  shall  do,  first  defining  our  terms  and  noting  the  sources 
of  banking  law,  then  considering  the  law  of  Banks  and  Banking 
in  general,  and  finally  giving  our  attention  in  Part  II.  to  the 
national  banking  laws  and  their  construction. 

Definitions 

General  definition  of  a  Commercial  Bank §  2. 

Definition  of  Savings  Bank §  3. 

United  States  tax  definition  of  a  Bank §  4. 

State  Banks  and  National  Banks  defined §  5. 

Bank  defined  by  Federal  Reserve  Act II,  §  85. 

General  Definition  of  a  Commercial  Bank 

§  2.  A  Bank  is  an  institution,  usually  incorporated,  with 
power  to  issue  its  promissory  notes  intended  to  circulate  as  money 
(known  as  bank  notes) ;  or  to  receive  the  money  of  others  "  on 
general  deposit  (§  288),  to  form  a  joint  fund  that  shall  be  used 

2  Essential  =  necessary  to  the  consequence ;  the  cause  or  a  part  cause 
of  the  legal  consequence  belonging  to  the  combination  of  facts  into  which 
it  enters,  in  such  sense  that  if  it  were  absent,  or  replaced  in  the  combina- 
tion by  any  fact  outside  of  banking,  the  consequence  would  not  be  the 
same. 

5 


§  2  PRELIMINARY 

by  the  institution  for  its  own  benefit,  for  one  or  more  of  the  pur- 
poses (§  46  A)  of  making  temporary  loans  and  discounts,  of  deal- 
ing in  notes,  foreign  and  domestic  bills  of  exchange,  coin,  bullion, 
credits,  and  the  remission  of  money ;  or  with  both  these  powers, 
and  with  the  privileges,  in  addition  to  these  basic  powers,"  of 
receiving  special  deposits,  and  making  collections  for  the  holders 
of  negotiable  paper,  if  the  institution  sees  fit  to  engage  in  such 
business."" 

(Historically,  receiving  special  deposits  is  the  root  of  the  bank- 
ing business,  but  it  is  now  of  little  importance  compared  with  the 
great  tree  that  looms  against  the  sky  of  nineteenth-century 
civilization.) 

a.  "Others  on  deposit."  A  man  using  his  own  funds  to  dis- 
count business  paper,  or  to  buy  exchange,  is  not  a  banker  in  any 
proper  sense ;  nor  is  he  any  more  a  banker  because  he  borrows 
money  from  another,  and  uses  it  in  the  same  way ;  it  is  essential 
that  there  should  be  a  place  ivhere,  as  a  regular  business,  the  money 
of  others  is  received  on  general  deposit.  There  must  be  a  com- 
bination of  moneys,  a  joint  fund,  as  a  primary  condition  of  the 
existence  of  a  bank  or  banker,  or  the  transaction  of  a  banking 
business."* 

Practically,  a  bank  is  a  place  where  deposits  are  received  and 
paid  out  on  checks,  and  money  is  loaned  on  security ."""  If  the 
institution  has  the  additional  power  of  issuing  its  promissory 
notes  to  circulate  as  money,  it  is  called  a  "bank  of  issue." 

Generally,  the  bank  must  hold  itself  ready  at  any  time  to  pay 
the  amount  of  a  deposit  to  a  depositor  or  his  order,  but  this  may 
be  varied  by  agreement,  (as  to  give  one  or  more  days'  notice,  or 
not  to  draw  for  a  certain  time,  or  to  leave  always  a  certain  sum 
to  the  depositor's  credit,)  and  is  not  an  essential  to  the  definition."'^ 

"  §  2.  Dealing  in  notes,  bills  of  exchange  and  credits.  State  v.  Corning 
Savings  Bank,  139  la.  338,  115  N.  W.  937  (1908). 

""  Dunn  V.  State,  13  Ga.  App.  314,  79  S.  E.  170  (1913) ;  Hamilton 
National  Bank  v.  American  Loan  etc.  Co.,  66  Neb.  67,  92  N.  W.  189 
(1902). 

'»>  MacLaren  v.  State,  141  Wis.  577,  124  N.  W.  667,  135  Am.  St.  Rep.  55 
(1910). 

^'^  But  a  foreign  corporation  which  makes  loans  upon  security  of  real 
estate  and  pledges  its  own  stock  is  not  a  "banldng  corporation"  under 
Oregon  statutes.  Pacific  Building  Co.  v.  Hill,  40  Or.  280,  67  Pac.  103,  56 
L.  R.  A.  163  (1901). 

«''  State  V.  Franklin  County  Sav.  etc.  Co.,  74  Vt.  246,  52  Atl.  1069 
(1902). 

6 


A    BANK  §  2 

But  it  is  essential  that  the  fund  should  be  used  in  prosecuting 
some  of  the  functions  recognized  l)y  long  usage,  or  by  explicit 
statutory  enactment,  or  both,  as  l)elonging  to  the  business  of 
banking.  If  simply  used  to  make  investments  of  other  kinds, 
the  depositary  resembles  a  trustee  or  a  speculator  rather  than  a 
banker. 

The  definitions  of  the  words  Bank,  Banker,  and  Banking,  in 
Worcester's  Dictionary,  are  too  deficient  in  precision  to  be  of  any 
use  for  legal  purposes.  Those  given  by  \Yebster  are  likewise 
certainly  open  to  criticism. 

Bouvier"''  says,  "  A  bank  is  an  institute,  generally  incorporated, 
authorized  to  receive  deposits  of  money,  to  lend  money,  and  to 
issue  promissory  notes  (usually  known  as  bank  notes),  or  to  per- 
form some  one  or  more  of  these  functions." 

This  is  clearly  faulty :  an  institution  may  have  power  to  lend 
money  and  not  be  a  bank ;  e.g.  a  partnership,  or  a  loan  and  trust 
company. 

United  States  General  Definition 

In  Oulton  V.  Savings  Institution,^  Clifford,  J.  said:  "Banks  in 
the  commercial  sense  are  of  three  kinds,  —  of  deposit,  of  discount, 
and  of  circulation.  Originally  the  banking  business  consisted 
in  receiving  deposits,  such  as  bullion,  plate,  and  the  like,  for  safe 
keeping,  until  the  depositor  should  see  fit  to  withdraw.  Later, 
bankers  began  to  loan  by  discounting  bills  and  notes,  or  on  mort- 
gage, pawn,  or  other  security.  And,  at  a  still  later  period,  to  issue 
notes  of  their  own,  intended  to  circulate  as  money  instead  of  gold 
and  silver.  JModern  banks  frequently  exercise  any  two,  or  even 
three,  of  those  functions ;  but  it  is  still  true  that  an  institution 
prohibited  from  exercising  any  more  than  one  of  them  is  a  bank 
in  the  strictest  sense." 

Now  this,  as  to  the  second  function  considered  alone,  is  open 
to  the  same  objection  as  Boiivier's  definition,  and  the  Judge's 
language  is  more  sweeping  than  the  case  called  for,  as  the  question 
before  him  was  whether  an  institution  having  the  first  power  was 
a  bank.2 

""  See,  however,  Bouvier,  Tliird  Revision. 

>  Oulton  V.  Savings  Institution,  17  Wall.  109-118,  21  L.  ed.  618.  See 
Dunn  ?;.. State,  13  Ga.  App.  314,  79  S.  E.  170  (1913);  American  Na- 
tional Bank  v.  Morey,  113  Kv.  857,  69  S.  W.  759,  101  Am.  St.  Rep.  379, 
58  L.  R.  A.  956  (1902) ;  MacLaren  v.  State,  141  Wis.  577,  124  N.  W.  667, 
135  Am.  St.  Rep.  .55  (1910). 

^  A  loan  association  organized  under  special  charter  with  power  to  re- 


§  3  PRELIMINARY 

§  3.  A  Savings  Bank  ^  is  an  institution  in  the  nature  of  a  bank, 
but  differing  as  follows  :  — 

First.  The  fund  formed  by  the  deposits  is  not  used  in  discount- 
ing and  loaning  on  personal  security,  etc.,  except  to  a  limited 
amount  to  the  depositors,  or  as  a  means  of  investing  surplus 
moneys,  but  in  mortgages,  bonds,  and  stocks,  designated  in  the 
statute  2  under  which  the  bank  is  organized. 

Second,    and   chiefly.     The   deposits   must   be   invested  for   the 

ceive  deposits,  loan  money,  discount  notes,  etc.,  is  a  corporation,  within 
§  12  of  the  IlUnois  Banking  Act.  Henderson  Loan  Association  v.  People, 
163  111.  196,  45  N.  E.  141.  But  see  Nash  v.  Brown,  165  Mass.  384,  43  N. 
E.  180;  In  re  Purl,  147  Mo.  App.  105,  125  S.  W.  849  (1910). 

To  buy  and  sell  commercial  paper,  to  make  and  negotiate  loans,  to 
receive  money  to  be  transferred  to  and  paid  at  other  places,  to  buy  and 
sell  exchange  upon  other  cities  in  this  and  foreign  countries,  to  receive  money 
on  deposit,  and  to  pay  the  same  out  upon  checks  or  orders,  are  each  bank- 
ing functions,  and  a  corporation  which  exercises  many  if  not  all  of  these 
is  a  bank  within  the  meaning  of  Sec.  7,  Art.  11  6  of  the  Nebraska  Consti- 
tution. Hamilton  National  Bank  v.  American  Loan  etc.  Co.,  66  Neb.  67, 
92  N.  W.  189  (1902).  One  engaged  in  the  business  carried  on  by  banks 
of  deposit  or  of  discount  or  of  circulation  is  doing  a  banking  business.  So 
a  department  store  which  maintains  a  "deposit"  piirchase  department 
where  persons  may  make  deposits,  bearing  interest  against  the  amount  of 
which  the  depositor  may  purchase  goods,  or  which  he  may  withdraw  at  any 
time  in  cash,  is  doing  a  banking  business.  MacLaren  v.  State,  141  Wis.  577, 
124  N.  W.  667,  135  Am.  St.  Rep.  35  (1910).  But  when  a  priest  who  is  the 
treasurer  of  a  church  makes  a  practice  of  borro^dng  small  simis  from  his 
parishioners  and  giving  the  church's  notes  therefore  bearing  interest,  the 
church  is  not  doing  a  banldng  business.  Martin  v.  St.  Aloysius  Church, 
38  R.  I.  339,  95  Atl.  768  (1915).  See  also  on  the  definition  of  banking,  Davis 
V.  West,  127  Ga.  407,  56  S.  E.  403  (1907) ;  Commercial  National  Bank  v. 
First  National  Bank,  97  Tex.  536,  80  S.  W.  601,  104  Am.  St.  Rep.  879 
(1904) ;  Weed  v.  Berge,  141  Wis.  569,  124  N.  W.  664,  25  L.  R.  A.  (n. 
s.)  1217  (1910) ;  Chase  etc.  Co.  v.  National  Trust  etc.  Co.,  215  Fed.  633 
(1914). 

1  §  3.  See  Huntington  v.  Savings  Bank,  96  U.  S.  388,  24  L.  ed.  777. 
"A  savings  bank  is  defined  to  be  an  institution  in  the  nature  of  a  bank, 
formed  or  established  for  the  purpose  of  receiving  deposits  of  money  for 
the  benefit  of  the  persons  depositing,  to  accumulate  the  produce  of  so 
much  thereof  as  shall  not  be  required  by  the  depositors,  their  executors 
or  administrators,  at  compound  interest,  and  to  return  the  whole  or  any 
part  of  such  deposit,  and  the  produce  thereof,  to  the  depositors,  their 
executors  or  administrators,  —  deducting  out  of  such  produce  so  much  as 
shall  be  required  for  the  necessary  expenses  attending  the  management 
of  such  institution,  but  deriving  no  benefit  whatever  from  any  such  deposit 
or  the  produce  thereof."  Grant  on  Banking,  4th  ed.,  262.  See  Barrett 
V.  Bloomfield  Sav.  Inst.,  64  N.  J.  Eq.  425,  54  Atl.  543  (1903),  affirmed  in 
66  N.  J.  Eq.  431,  57  Atl.  1131.  See  Bank  Commissioners  v.  Watertown 
Savings  Bank,  81  Conn.  261,  70  Atl.  1038  (1908) ;  Colorado  Savings 
Bank  v.  Evans,  12  Colo.  App.  334,  56  Pac.  981. 

2  See  for  Massachusetts  law,  R.  L.  c.  113,  §  26. 


UNITED    STATES   DEFIXITIOX    FOR    PURPOSES    OF   TAXATION        §  4 

benefit,  not  of  the  })ank,  but  of  the  depositors;  this  is  the  canHnal 
distinction.  Money  deposited  in  a  bank,  unless  agreed  to  the 
contrary,  becomes  the  property  of  the  bank,  to  be  used  for  its 
profit,  and  if  lost  it  is  the  bank's  loss ;  but  money  deposited  in  a 
savings  bank  remains  the  property  of  the  depositor,  and  the  in- 
crease is  his,  the  bank  having  no  claim  except  for  the  expense  of 
management,  and  if  lost  it  is  the  depositor's  loss,'  unless  occasioned 
by  the  negligence  of  the  bank. 

Third.  A  bank  pays  out  deposits  on  checks,  while  the  usual 
method  with  savings  institutions  is  to  pay  only  to  the  person  pro- 
ducing the  pass-book. 

Whether  a  bank  is  actually  a  savings  bank  or  not  must  be  de- 
termined, not  by  its  name,  but  by  considering  if  its  charter  *  gives 
it  the  characteristics  above,  the  second  being  essential.  A  savings 
bank  is  simply  a  trustee ;  all  moneys  received  under  the  charter 
are  trust  moneys,  and  the  depositors  stand  in  the  same  relation 
to  the  bank  as  the  stockholders  of  an  ordinary  bank.  This  fact 
is  of  cardinal  import  in  cases  of  insolvency.^ 

§  4.  United  States  Definition  for  Purposes  of  Taxation.  R.  S. 
3407.  —  In  186(3,  the  Congress  of  the  United  States  thus  defined 
a  bank  or  banker  :  — 

"Every  incorporated  or  other  bank,  and  every  person,  firm,  or 
company  having  a  place  of  business  where  credits  are  opened  by  the 
deposit  or  collection  of  money  or  currency,  subject  to  be  paid  or  re- 
mitted upon  draft,  check,  or  order,  or  where  money  is  advanced  or 
loaned  on  stocks,  bonds,  bullion,  bills  of  exchange,  or  promissory  notes, 
or  where  stocks,  bonds,^  bullion,  bills  of  exchange,  or  promissory  notes 
are  received  for  discount  or  for  sale,  shall  be  regarded  as  a  bank  or 
banker." 

This  enactment  docs  away  with  the  necessity  of  a  joint  stock, 
and  of  the  combination  of  funds  through  the  medium  of  general 
deposits.  It  would  in  most  cases  render  private  money-lenders 
bankers.  Its  intent,  however,  is  not  to  have  this  force  generally, 
but  only  for  the  specific  and  narrow  purpose  of  taxation.  Every 
money-making  occupation  is  to  be  taxed ;  a  few  broad  lines  are 
drawn,  and  the  whole  community  is  marshalled  into  the  various 

3  Osborn  v.  Byrne,  43  Conn.  155. 

*  That  any  one  whose  deposit  roaches  SlOO  may  at  his  option  have  it 
converted  into  stock,  does  not  prove  the  institution  a  savings  bank. 
State  V.  Lincoln  Savings  Bank,  14  Loa  (Tenn.)  42. 

*  Stockton  V.  Mechanics  etc.  Bank,  32  N.  J.  Eq.  1G3. 

9 


§  4  PRELIMINARY 

areas  by  means  of  this  and  similar  imperative  definitions.  The 
act  does  not  say  a  private  money-lender  is  a  banker,  but  simply 
that  he  shall  be  taxed  as  such ;  probably  for  the  reason  that  his 
business  is  more  nearly  akin  to  banking  than  to  anything  else. 
But  for  purposes  of  strict  legal  construction,  in  all  questions  aris- 
ing beyond  the  control  of  the  provisions  of  this  act,  these  arbitrary 
boundary  lines  are  valueless.  A  private  money-lender  could  not 
have  been  taxed  as  a  banker  in  the  absence  of  this  express  legis- 
lation ;  and  it  was  to  remedy  this  that  the  legislation  was  deemed 
necessary. 

In  construing  this  statute,  the  Supreme  Court  of  the  United 
States  adopt  the  definition  of  a  banker  therein  given  (Act  1864, 
§79),  and  say  generally:  "Having  a  place  of  business  where 
deposits  are  received  and  paid  out  on  checks,  and  where  money  is 
loaned  upon  security,  is  the  substance  of  the  business  of  a  banker."  ^ 
It  will  be  observed  that  the  statute  uses  the  disjunctive  and  the 
court  the  conjunctive  particle.  The  statute  says :  "  Where 
credits  are  opened  by  deposit  .  .  .  or  where  money  is  advanced", 
etc.  The  court  speak  of  the  depositing  "and  "  loaning.  For  all 
general  purposes,  beyond  the  artificial  influence  of  the  act,  the 
court  is  clearly  the  more  correct. 

R.  S.  3407  applies  to  a  Chicago  branch  of  a  Canada  bank,^  but 
not  to  a  corporation  whose  business  is  confined  to  investment  of 
its  capital  in  bonds  secured  by  mortgage  on  real  estate,  and  to 
negotiation,  sale,  and  guaranty  of  them.^ 

§  5.  State  and  National  Banks.  —  A  State  Bank  is  one  organ- 
ized under  State  law,  or  a  charter  granted  by  a  State  legislatvire, 
and  derives  its  power  from  State  sovereignty. 

A  National  Bank  is  one  organized  under  the  national  banking  laws, 
and  derives  its  existence  and  powers  from  the  Federal  sovereignty.^ 

1  §  4.     Warren  v.  Shook,  91  U.  S.  704,  23  L.  ed.  421. 

2  United  States  v.  Bank  of  Montreal,  21  Fed.  236. 

^  The  company  did  not  receive  deposits  of  money  to  be  paid  or  re- 
mitted on  draft  or  check,  nor  make  discounts,  nor  issue  notes  (clause  1)  ; 
nor  does  it  come  under  clause  2,  for  the  loan  is  really  on  the  mortgage  of 
real  estate,  and  the  bond  is  only  evidence  of  the  debt ;  nor  under  elavise 
3,  for  not  those  who  keep  their  own  stocks  and  bonds  for  sale  are  bankers 
(if  so  nearly  all  companies  are),  but  those  receiving  bonds,  stock,  or  bills 
helonging  to  others,  for  discount  or  sale,  the  company  being  only  the  agent 
of  the  owner,  while  in  this  case  when  the  company  took  the  bonds  they 
became  its  property.  It  could  sell  or  not ;  if  it  sold,  it  sold  its  own,  and 
not  another's,  as  a  bank  does.  Selden  v.  Equitable  Trust  Co.,  94  U.  S. 
419,  24  L.  ed.  249. 

1  §  5.     "Regularly  organized  bank  ",  as  used  in  a  city  ordinance,  con- 

10 


THE    CHARTER  §  6 

Sources  of  the  Law  of  our  Subject 

§  G.  The  Charter/  or  act  of  incorporation,  or  the  general  law 
under  which  the  bank  is  organized,  so  far  as  valid,^  is  its  supreme 
law,^  within  which  it  is  secure,  l)eyond  ''  which  it  cannot  go. 

templates  a  bank  organized  under  State  law,  or  an  aet  of  Congress,  but 
not  a  private  bank  owned  by  an  individual.  City  of  Du  Quoin  v.  Kelly, 
176  111.  21.S,  ryl  X.  K.  919. 

A  "  chartered,  bank  "  under  Georgia  law  is  a  corporation  clothed  with  the 
powers  usuallv  exercised  by  banldng  institutions.  Dunn  v.  State,  13  Ga. 
App.  :J14,  79  S.  E.  170  (1913). 

1  §  G.  This  word  is  often  used  as  equivalent  to  "organic  law",  though 
the  bank  may  be  organized  under  a  g(>neral  statute. 

The  articles  of  association  of  a  national  bank,  v/hich  specify  the  objects 
of  the  association,  and  may  contain  any  provisions  for  the  conduct  of  its 
business  that  are  not  inconsistent  with  law,  when  signed  by  the  persons 
forming  the  company,  and  approved  by  the  comptroller,  are  in  the  nature 
of  a  charter. 

2  It  is  invaHd  if  it  conflicts  with  the  United  States  Constitution  (as 
it  may  do  by  infringing  on  former  grants  to  others),  or  with  the  laws  of 
Congress  valid  under  it,  or  if  it  is  beyond  the  powers  of  the  granting 
sovereignty  under  the  State  constitution ;  or  if  it  is  in  derogation  of  the 
essential  powers  of  future  legislatures,  as  those  of  poUce  regulation, 
eminent  domain,  and  perhaps  the  power  to  tax. 

Eminent  Domain.  The  right  of  a  State  to  take  the  property  of  a 
citizen  when  necessary  for  pubUc  use,  on  payment  of  its  value,  is  inherent 
in  sovereignty,  and  no  legislature  can  take  it  out  of  the  people,  or  give  it 
away,     3  Parsons  on  Contracts,  8th  cd.  *  539. 

Police  Regulation  and  Taxation.  The  best  opinion  is,  that  the  power 
of  taxation  is  an  essential,  and  that  no  legislature  has  power  to  surrender 
or  limit  it  so  as  to  control  or  abridge  future  legislation  under  it.  The 
legislature  may  exercise  the  power  of  taxing  or  not,  but  cannot  give  it 
away.  Piseataqua  Bridge  i-.  New  Hampshire  Bridge,  7  X.  H.  69  ;  Debolt 
V.  Ohio  Life  Ins.  &  Trust  Co.,  1  Ohio  St.  563. 

The  Federal  doctrine  is,  "the  relinquishment  of  such  a  power  is  never 
to  be  assumed.  We  will  not  say  a  State  may  not  relinquish  it ;  that  a 
consideration  sufficiently  valuable  to  induce  a  partial  release  of  it  may 
not  exist."     Providence  Bank  v.  Billings,  4  Peters  561,  7  L.  ed.  956. 

And  in  State  of  New  Jersey  v.  Wilson,  7  Cranch  164,  3  L.  ed.  303,  an 
agreement  that  the  lands  "shall  not  hereafter  be  subject  to  any  tax"  was 
held  valid ;  but  the  right  of  the  legislature  to  exempt  from  taxation  so 
as  to  bind  succeeding  legislatures  was  not  raised,  and  is  not  relevant  to 
the  case,  for  the  transaction  was  in  the  nature  of  a  treaty  with  the  Indians, 
rather  than  a  contract  between  a  State  and  its  citizens. 

3  See  Central  R.,  etc,  Co.  v.  Farmers'  L.  &  T.  Co.,  114  Fed.  263  (1902) ; 
State  V.  Bankers'  Trust  Co.,  157  Mo.  App.  5.57,  138  S.  W.  669  (1911); 
Sturdevant  v.  Farmers'  etc.  Bank,  69  Neb.  220,  95  N.  W.  819  (1903)  ; 
Gause  v.  Commonwealth  Trust  Co.,  196  N.  Y.  134,  89  N.  E.  476,  24 
L.  R.  A.  (n.  s.)  967  (1909) ;  State  v.  German  Sav.  Bank.  103  ]Md.  196, 
63  Atl.  481  (1906)  ;  Arkansas  Valley  etc.  R.  Co.  v.  Farmer's  etc.  Bank,  21 
Okla.  322,  96  Pac.  765,  129  Am.  St.  Rep.  782  (1908).  Unless  there  is  an  ex- 
press reservation  of  the  right  in  the  charter,  or  in  general  statute  existing 

11 


§  7  PRELIMINARY 

§  7.  Statute  Law,  so  far  as  not  inconsistent  with  valid  ^  charter 
rights,  controls  the  bank.^" 

State  Banks  are  absolutely  subject  to  all  applicable  laws  of 
Congress  valid  under  the  Constitution,  even  though  passed  after 
the  charter  was  granted ;  the  State  and  all  its  acts  are  controlled 
by  such  laws,  and  charter  rights  are  valid  only  when  in  accord 
with  them.  But  a  State  may  grant  charter  rights  inconsistent 
with  its  oivn  existing  statutes,  or  may  pass  laws  subsequent  to  the 
charter  and  conflicting  with  it ;  in  these  cases  subject  to  the  above 
limitations,^  the  State  statutes  must  give  way  to  the  charter. 

National  Banks  are  the  creatures  of  the  National  Banking  x\ct, 
which  may  be  amended,  altered,  or  repealed  at  any  time.  They 
are  under  the  entire  control  of  Congress,  and  their  rights  cannot 
be  determined  by  State  legislation,  except  where  Congress  has  so 
ordered,-  or  allowed.^ 

at  the  time  the  charter  is  granted  (and  therefore  applying  to  it  unless  the 
charter  is  expressly  put  out  of  its  control),  the  legislature  cannot,  without 
consent  of  the  bank,  repeal  or  modify  the  rights  and  franchises  granted, 
except  in  the  way  of  police  regulation,  eminent  domain,  or  other  power 
inherent  in  the  nature  of  government,  which  are  really  not  exceptions, 
but  the  boundary  lines  of  the  rights  granted,  implied  reservations  in  every 
contract  made  by  the  State ;  e.g.  if  a  bank  has  charter  power  to  sell  and 
transfer  negotiable  paper,  a  law  taking  away  this  power  is  void,  as  im- 
pairing the  obligation  of  contracts.  Planters'  Bank  v.  Sharp,  6  How. 
301,  12  L.  ed.  447;  Claghorn  v.  Cullen,  13  Pa.  St.  133;  People  v.  Man- 
hattan Co.,  9  Wend.  (N.  Y.)  351. 

But  Mechanics  and  Traders'  Bank  v.  Debolt,  1  Ohio  St.  591,  holds  that 
a  charter  is  riot  a  contract,  but  a  laio  subject  to  amendment  and  repeal, 
and  that  a  bank  is  a  public  institution,  appointed  solely  for  public  uses, 
and  subject  to  public  control  by  enlargement  or  limitation  of  its  powers 
and  duties,  or  withdrawing  its  franchise  entirely.  This,  of  course,  will 
not  weigh  against  the  decisions  of  the  United  States  Supreme  Court  on 
this  question  arising  under  the  Constitution.     See  §  10. 

4  A  corporation  is  a  creature  of  the  law,  and  possesses  only  those  prop- 
erties which  the  charter  of  its  creation  confers  upon  it.  Marshall,  C.  J., 
in  Trustees  of  Dartmouth  College  v.  Woodward,  4  Wheat.  636,  4  L.  ed.  659. 

National  Banks  have  no  powers  except  such  as  are  given  them  ex- 
pressly or  by  necessary  implication  by  the  acts  of  Congress  passed  in 
relation  to  that  subject.  Hansford  v.  National  Bank,  10  Ga.  App.  270, 
73  S.  E.  405  (1911),  citing  Logan  County  National  Bank  w.  Townsend,  139 
U.  S.  67,  35  L.  ed.  107,  11  Sup.  Ct.  496. 

^  §  7.     See  §  0,  notes. 

1"  The  statute  should  be  strictly  construed.  Commercial  Banking  etc. 
Co.  V.  Citizens'  Trust  etc.  Co.,  153  Ky.  566,  156  S.  W.  160,  1915  C.  Ann. 
Cas.  166,  n.,  45  L.  R.  A.  (n.  s.)  950.  A  state  bank  cannot  establish  a 
branch  bank  unless  authorized  by  statute.  Brunner  v.  Citizens'  Bank, 
134  Ky.  283,  120  S.  W.  345  (1909). 

2  See  as  to  interest.  Part  II.  §  30. 

^E.g.  Congress  could  prohibit  the  States  from  taxing  national  banks, 

12 


A    USAGE 


§9 


§  8.    The  Common  Law  supplies  the  law  we  seek,  where  not 

superseded  by  charter  or  statute.  Especially  do  the  principles 
relating  to  Usage,  Conflict  of  Laws,  Principal  and  Agent,  and 
Contracts  in  general,  concern  us.^ 

§  9.  A  Usage  ^  that  is  applicable,^  known  ^  actually  or  construe- 
but  if  it  does  not  exert  this  power  they  are  not  exempt.  See  Part  11. 
§  41.  If  a  State  could  bind  national  banks  further  than  above,  it  could 
legislate  them  out  of  existence,  as  by  a  discriminating  tax,  making  State 
law  supreme,  instead  of  P\'deral  law,  as  the  Constitution  provides. 

1  §  8.  The  principles  of  Contract  and  Agency  are  so  woven  into  the 
very  tissue  of  banking  law  that  to  state  them  as  preliminary  would  be 
almost  to  make  banking  law  preliminary  to  itself,  but  Usage  and  Conflict 
can  with  great  advantage  to  clearness  be  dwelt  upon  slightly  before  pass- 
ing to  the  main  subject. 

1  §  9.  (a)  The  Louisiana  Code  defines  customs  as  follows  :  "Customs 
result  from  a  long  series  of  actions  constantly  repeated,  which  have  by 
such  repetition,  and  l)y  uninterrupted  acquiescence,  acquired  the  force  of 
a  tacit  and  common  consent."     Art.  3,  ch.  1. 

(b)  Proof.  The  proof  of  a  usage  must  be  by  instances,  not  opinion, 
and  generally  one  witness  is  not  enough  ;  several  should  testify  to  what 
is,  by  their  observation,  the  uniform  manner  among  themselves  and  others. 
Usage  proved  by  Parol  Testimony.  —  The  custom  or  usage  of 
banks  generally,  or  of  an  individual  bank,  may  be  sufficiently  proved  by 
parol  testimony.  Renner  v.  Bank  of  Columbia,  9  Wheat.  587,  0  L.  ed. 
166 ;  Mills  v.  Bank  of  United  States,  11  id.,  431,  6  L.  cd.  512.  Indeed,  in 
a  large  proportion  of  the  cases  cited  in  this  chapter,  parol  evidence  has 
been  admitted  without  objection.  It  is  not  necessary  that  the  witnesses 
who  are  relied  upon  should  be  experts  in  the  banking  business,  or  in  any 
manner  engaged  in  the  same,  or  connected  with  any  bank  whose  indi\idual 
usage  is  to  be  shown.  If  they  have  had  any  dealings  which  have  brought 
the  custom  or  usage  within  their  observation  and  cognizance,  so  that  they 
actually  know  it  as  a  matter  of  fact,  they  are  competent  to  testify  to  it, 
and  it  may  be  established  by  their  testimony  alone.  Griffin  v.  Rice,  1 
Hilt.  (N.  Y.)  184. 

It  is  a  question  for  the  jury  how  uniform,  how  long,  where,  when,  be- 
tween whom,  and  if  actually  knov/n. 

For  the  court,  whether  given  facts  estabUshed  a  custom,  and  whether 
it  is  reasonable  and  not  contrary  to  law,  or  to  expressed  intent  of  parties, 
see  note  5. 

Change  of  usage  is  proper,  if  not  arbitrary.  Changing  a  usage  is  creating 
a  netv  one,  and  is  governed  by  the  same  rides. 

(c)  Usage  ha\-ing  been  once  found  and  sanctioned  by  the  courts,  evi- 
dence to  disprove  its  existence  becomes  thereafter  inadmissible.  But  this 
refers  only  to  its  existence  at  that  time  at  which  the  decision  found  the 
fact  of  its  existence.  For  a  usage  is  sustained  l>y  the  court,  not  because 
it  is  in  itself  law,  but  generally  in  spite  of  the  fact  that  in  itself  it  is  not  law, 
and  because  it  is  the  uniform  practice  of  the  community  which  the  ju- 
diciary from  motives  of  policy  will  refrain  from  interfering  "^vith.  But 
if  at  any  time  it  ceases  to  become  the  practice  of  the  community,  it  will 
no  longer  be  judicially  recognized  as  binding.  For  all  transactions  occur- 
ring during  the  jjeriod  that  it  remained  unchanged  it  must  always  be  law, 
but  transactions  occurring  after  the  change  will  not  be  affected  by  it. 

1o 
O 


§  9  PRELIMINARY 

Evidence  of  the  fact  of  a  change  is  therefore  admissible  to  show  that  the 
previous  decisions  have  ceased  to  be  controlhng  precedents,  and  to  indicate 
the  true  rule.     Cookendorfer  v.  Preston,  4  How.  317,  11  L.  ed.  992. 

Arbitrary  Alteration   by   a   Bank   of   its   Usages   or   Rules. 

The  law  favors  foresight,  and  one  who  acts  on  the  basis  of  uniformity  in 
the  past  {the  only  foundation  for  foresight),  shall  not  be  prejudiced  by  a 
sudden  change  of  usage  of  which  he  has  no  notice,  unless  the  uniform  acts  were 
merely  courtesies.     A   hundred  gifts  build  no  right  to  another. 

A  bank  cannot,  by  an  arbitrary  change  in  any  of  its  rules  or  usages, 
injuriously  affect  the  rights  or  interests  of  any  dealer  with  it,  who  has  pre- 
viously had  knowledge  of  such  rules  and  usages,  without  bringing  home  to 
him  positive  notice  of  the  change.  Until  he  has  been  sufficiently  notified  to 
the  contrary,  he  has  the  right  to  expect  the  ordinary  course  of  dealing 
to  be  continued.  Barnes  v.  Ontario  Bank,  19  N.  Y.  152 ;  Gumming  v. 
Shand,  5  Hurl.  &  N.  95,  29  L.  J.  Exeh.  129.  But  to  enable  the  customer 
to  take  advantage  of  this  doctrine,  he  must  show  that  the  alteration  has 
taken  place  in  an  actual  rule  or  bona  fide  usage,  in  the  legal  sense  of  the 
latter  phrase,  of  the  bank.  The  usage  need  not  be  a  general  usage  of  the 
bank ;  it  may  be  one  which  is  only  good  as  between  himself  and  the  bank. 
For  usages  of  this  limited  nature  may  exist,  and  a  bank,  by  its  course  of 
dealing  with  a  single  customer,  may  assume  special  obUgations  towards 
him  individually  which  do  not  bind  it  as  towards  anybody  else.  Hotchkiss 
V.  Artisans'  Bank,  42  Barb.  (N.  Y.)  517. 

In  the  cited  ease  of  Gumming  v.  Shand,  the  bankers  had  taken  up  cer- 
tain bills  for  a  customer  upon  the  security  of  the  proceeds  to  be  expected 
from  certain  consignments ;  at  the  same  time,  they  had  been  accustomed 
to  let  him  continue  his  drafts  upon  his  deposit  account,  or  account  current, 
with  them.  It  appearing  that  this  was  the  established  course  of  deahng 
between  them  and  this  customer,  it  was  held  that  they  could  not  suddenly, 
without  express  notice  to  him,  interfere  with  this  course,  charge  him  with 
the  amount  of  advances  before  the  proceeds  from  the  consignments  could 
be  realized,  and  so  cause  his  account  to  appear  overdrawn. 

But  it  must  be  supposed  that  there  is  a  difference  between  an  established 
course  of  dealing  of  such  a  character  that  the  customer  is  entitled  to  de- 
mand its  continuance  until  due  notice  has  been  given  him  of  an  intention 
to  discontinue,  and  a  mere  gratuitous  habit  on  the  part  of  the  bank  to 
allow  privileges  or  favors  of  such  a  character  that  the  customer  ought  to 
be  aware  that  they  are  concessions  purely  voluntary,  and  revocable  at  any 
time,  at  the  bank's  convenience  and  option.  In  other  words,  there  is  a 
distinction  between  a  usage  involving  an  implied  agreement,  and  a  habit 
of  frequently  extending  a  courtesy  or  favor  altogether  without  consideration. 

It  is  of  course  impossible  to  draw  an  accurate  line  of  demarcation  be- 
tween the  usages  of  the  former  class  and  the  habits  which  fall  within  the 
latter  description.  In  each  instance  the  appropriate  character  will  be  con- 
ferred by  a  combination  of  all  the  many  minute  circumstances  which  can 
be  adduced  to  interpret  the  true  nature  of  the  transactions. 

2  Pertaining  to  the  business,  relating  to  the  transaction.  A  usage  of 
weavers  is  not  applicable  to  banking,  nor  does  a  usage  in  banking  to  do 
an  act  for  one  purpose  apply  to  sustain  doing  the  act  for  a  different  pur- 
pose. To  the  nicety  of  organization  of  which  banking  admits  is  due  the 
great  strictness  and  accuracy  with  which  banking  customs  must  be 
proved,  and  will  be  construed.  So  far  from  its  being  permissible  to 
make  the  slightest  approach  to  a  generalization  or  to  an  argument  from 
the  closest  of  analogies,  the  tendency  of  the  courts  has  iieen  to  trim  the 
usage  to  its  very  narrowest  proportions,  and  to  require  the  most  perfect 

14 


A    USAGE  §  9 

tively,  certain/ uniform,^ established,  continuous,^ peacable/ reason- 
adaptation  of  the  facts  of  the  case  to  these.  That  two  acts  are  essen- 
tially dependent  for  their  lawful  exercise  upon  power  of  precisely  the  same 
description,  that  one  is  a  natural  corollary  of  the  other,  that  one  is  con- 
veniently exercised  in  conjunction  with  the  other,  will  not  suffice  to  au- 
thorize the  doing  of  the  second  when  the  right  to  do  the  first  is  dependent 
upon  a  custom.  Even  power  to  do  a  certain  act  ari.sing  from  a  custom  to 
do  it  for  a  particular  purpose  or  under  particular  circumstances,  does  not 
imply  or  include  power  to  do  the  same  act  for  a  very  slightly  different 
purpose  or  under  very  slightly  different  circumstances.  Supporting  an 
act  upon  proof  of  a  banking  usage  is  a  matter  of  very  delicate  and  minute 
accuracy.     INIussey  v.  Eagle  Bank,  9  Met.  (Mass.)  30G. 

^  As  in  Favor  of  one  Ignorant.  Xo  one  can  take  advantage  of  a  usage  of 
which  he  was  ignorant  at  the  time  of  contract,  for  he  did  not  contract  in 
reference  to  it.  Fowler  v.  Pickering,  119  ISIass.  33  ;  Konotuck  Silk  Co.  v. 
Fair,  112  Mass.  354.  But  this  of  course  cannot  apply  to  usage  that  has 
become  fl.xed  as  a  part  of  the  common  law,  and  it  may  be  doubted  if  it 
can  apply  without  limitation  to  other  usages  ;  for  if  D.  employs  a  banker 
or  physician,  and  injury  results  by  reason  of  neglect  of  customary  pre- 
cautions, D.  could  surely  take  advantage  of  the  usage  indirectly  as  bearing 
on  the  question  of  negligence. 

Against  one  Ignorant.  One  who  actually  knows  of  a  particular  bank's 
usages,  and  is  reasonably  aware  that  the  bank  will  be  a  factor  in  the 
transaction,  is  bound  by  them ;  but  one  who  is  in  fact  ignorant  will  not 
be  bound  by  a  usage  peculiar  to  the  bank,  unless  he  employs  the  bank  to 
act  for  him,  though,  as  to  a  usage  general  to  the  banks  of  a  given  city,  every 
one  who  enters  into  a  transaction  which  involves  a  dealing  with  or  through 
the  banks  of  that  place  is  held  to  have  notice ;  if  he  is  in  fact  ignorant  of 
it,  and  loses  thereby,  it  is  his  own  loss,  and  he  can  hold  the  bank  to  the 
same,  and  will  not  be  affected  disadvantageously  by  a  different  special 
custom  of  a  particular  bank,  unless  he  employs  that  bank  or  actually 
knows  its  habit.  Of  course  no  one  can  allege  ignorance  of  usage  that  has 
become  law. 

The  law  presumes  k-nowledge  of  ancient,  general,  widely  known  usage. 
Loud  V.  Hall,  106  Mass.  404 ;  Ober  v.  Carson,  62  IMo.  209.  A  person 
entering  into  a  contract  is  not  bound  by  the  usage  of  a  particular  business, 
unless  he  actually  knew  of  it,  or  it  is  so  general  as  to  furnish  a  presump- 
tion of  knowledge.     Stevens  v.  Reeves,  9  Pick.  (INIass.)  198. 

A  usage  of  the  factories  of  a  neighborhood,  that  all  employed  shall  bo 
held  to  work  a  fortnight  after  they  give  notice  of  intent  to  quit,  does  not 
bind  one  who  did  not  know  of  the  custom.  "The  usage  is  a  particular 
one,  and  not  a  general  custom,  and  it  should  have  appeared  that  the  de- 
fendant knew  of  the  usage  when  he  entered  on  the  work,  or  before  lu>  left 
it.  It  is  so  with  the  usage  of  banks,  and  all  other  usages  not  of  so  general 
a  nature  as  to  furnish  a  presumption  of  knowledge."  Parker,  C.  J.,  in 
Stevens  v.  Reeves,  9  Pick.  (Mass.)  19S. 

*  Not  vague  and  indefinite.  Oelricks  v.  Ford,  23  How.  49,  16  L.  ed.  534  ; 
Bassett  v.  Lederer,  1  Hun  (N.  Y.)  274.  A  usage  to  return  goods  sent  for 
inspection,  some  saying  within  three  days,  others  within  a  week  or  a  month, 
is  not  certain  and  uniform  enough  to  be  binding.  Wood  v.  Wood,  1  Car. 
&  P.  59. 

5  Not  fluctuating  and  occasional.  Cope  i'.  Dodd,  13  Pa.  St.  33  ;  United 
States  )'.  Buchanan,  S  How.  83.  102,  12  L.  ed.  997. 

What  lapse  of  time,  or  how  many  instances  actually  occurring,  are 

15 


§  9  PRELIMINARY 

able,Snot  contrary  to  enacted  laWj^nor  well-settled  principles  of  mo- 
requisite  to  establish  a  custom,  is  one  of  those  questions  attended  with  such 
an  intrinsic  and  essential  indefiniteness  as  prevents  the  possibility  of  any- 
accurate  answer.  Certainly  a  usage  must  have  a  beginning.  But,  in  its 
early  stages,  it  is  no  more  a  complete  usage  in  the  eye  of  the  law,  having 
the  legal  attributes  thereof,  than  a  boy  in  his  nonage  is  a  man,  having  the 
legal  rights  of  a  man.  Twenty-one  years  is  the  arbitrary  limit  which 
distinguishes  the  legal  infant  from  the  legal  man.  But  no  number,  either 
of  years  or  of  recurrent  acts  and  instances,  can  be  arbitrarily  set  to  mark 
accurately  the  transition  period  when  the  usage  ceases  to  be  embryonic  and 
becomes  perfect.  The  understanding,  arrangement,  or  directions  of  bank 
officers,  that  a  certain  method  shall  thereafter  be  observed  as  the  usage  of 
the  bank  for  the  transaction  of  a  certain  class  of  acts,  does  not  render  this 
method  a  legal  usage  of  the  bank  as  towards  any  outside  party,  until  time 
and  practice  shall  suffice  to  give  it  that  character  which  it  does  not  and 
cannot  derive  from  the  intention  of  the  officials.  But  time  and  practice 
bring  in  their  train  acquiescence  and  notoriety,  and  from  these  the  law 
will  draw  the  inference  of  knowledge  on  the  part  of  the  public,  if  the 
usage  is  that  of  the  banks  generally ;  or  on  the  part  of  the  parties  dealing 
with  the  bank,  if  the  usage  is  that  of  an  individual  bank  only.  Especially, 
if  the  custom  is  in  derogation  of  the  common  law,  a  short  time  and  a  few 
instances  of  practice  under  it  will  be  insufficient  to  obtain  its  recognition. 
Duvall  V.  Farmers'  Bank,  9  Gill  &  J.  (Md.)  31 ;  Adams  v.  Otterback,  15 
How.  539,  14  L.  ed.  805.  But  a  single  instance  of  practice  under  a  usage, 
though  it  would  be  utterly  worthless  to  establish  the  fact  of  the  custom,  is 
yet  amply  sufficient  to  bring  home  notice  of  the  existence  of  an  already 
established  custom  to  the  persons  deaUng  with  the  bank  and  having  knowl- 
edge of  such  single  instance.  Dorchester  &  Milton  Bank  v.  New  England 
Bank,  1  Cush.  (Mass.)  177. 

6  See  note  5. 

^  A  custom  must  be  generally  acquiesced  in  (not  disputed  at  law  or 
otherwise)  by  persons  acting  within  the  scope  of  its  operations.  Where 
it  is  the  subject  of  contention,  and  only  submitted  to  under  protest,  and 
to  avoid  Htigation,  it  does  not  have  that  basis  of  common  consent  upon 
which  the  authority  of  usage  is  built.  Arthur  v.  Bokenham,  11  Mod.  161 ; 
Strong  V.  Grand  Trunk  R.  Co.,  15  Mich.  206 ;  McMasters  v.  Pennsylvania 
R.  Co.,  69  Pa.  St.  374 ;  Dixon  v.  Dunham,  14  111.  324.  But  though  a 
usage  must  be  generally  assented  to,  as  well  as  asserted,  it  need  not  receive 
universal  consent.  Desha  v.  Holland,  12  Ala.  513.  There  must  be  oppo- 
sition before  or  at  the  time  of  the  transaction,  and  not  merely  the  sub- 
sequent denial  of  the  defendant,  to  break  the  current  of  acquiescence. 

« A  custom  must  be  reasonable,  which  is  not  the  ease  if  it  is  such  as 
honest  and  right-minded  men  would  deem  unfair  and  unrighteous ;  as  to 
put  all  the  good  berries  on  top,  and  bad  at  the  bottom,  or  to  charge  the 
original  cost  of  articles  used  at  a  funeral,  though  the  same  may  be  used  at 
other  funerals.  Paxton  v.  Courtnay,  2  Fost.  &  Fin.  131.  General  usage 
is  strong  proof  of  reasonableness.  Pi'udent  men  would  not  otherwise  con- 
tinue it,  or  allow  others  to,  without  protest.  A  custom  of  banks  to  honor 
occasional  overdrafts  of  customers  whose  standing  is  good  is  reasonable. 
Lancaster  Bank  v.  Woodward,  18  Pa.  St.  357.  And  so  a  usage  not  to 
rectify  mistakes  unless  discovered  before  leaving  the  room.  Gallatin  v. 
Bradford,  1  Bibb  (Ky.)  209.  And  so  a  custom  to  appoint  discount  and  ex- 
amining committees  to  attend  to  the  details  and  management  of  the  busi- 
ness. Stone  V.  Rottman,  183  Mo.  552,  82  S.  W.  76  (1904).  It  is  not  a 
16 


A    USAGE  §  9 

reasonable  usage  to  send  a  draft  (which  the  bank  has  for  collection)  to  the 
drawee,  to  collect  for  himself.  Chapman,  C.  J.,  Whitney  v.  Esson,  99 
Mass.  308.  Nor  can  a  local  custom  give  validity  to  a  forged  cheek. 
Morris  v.  Beaumont  National  Bank,  37  Tex.  Civ.  App.  97,  S3  S.  W.  36 
(1904). 

»  A  usage  must  not  be  contrary  to  enacted  law,  morality,  religion,  or 
settled  principles  of  justice  and  public  policy ;  but  portions  of  the  com- 
mon law  that  are  not  founded  on  justice  and  poUcy  directly,  but  are  formal, 
and  originated  in  usage  and  convenience,  may  be  changed  by  usage. 

No  custom  can  iuHuence  the  construction  of  a  contract,  or  vary  the 
rights  of  parties,  if  the  custom  is  illegal,  as  if  it  is  contrary  to  religion, 
morahty,  or  public  policy  ;  Barnard  v.  Kellogg,  10  Wall.  383,  390,  19  L.  ed. 
987  ;  Collender  r.  Dinsmore,  55  N.  Y.  200-208  ;  or  if  it  is  opposed  to  a  well- 
settled  rule  of  law ;  Greene  v.  Tyler,  39  Pa.  St.  361  ;  as  if  the  words  have 
received  a  judicial  interpretation,  it  is  not  competent  to  show  a  contrary' 
meaning  by  usage.  So  a  usage  for  a  factor  to  pledge  generally  liis  prin- 
cipal's goods  is  bad,  as  opposed  to  settled  law.  Newbold  v.  Wright,  4  Rawle 
(Pa.)  195.  So  a  usage  to  take  usurious  interest  is  bad.  Greene  v.  Tyler, 
39  Pa.  St.  361.  So  where  a  bank  posted  a  notice  that  all  indorsers  of  notes 
to  it  would  be  required  t.o  waive  demand  and  notice,  and  D.,  for  several 
years  a  customer  of  the  bank,  indorsed  to  it  without  any  waiver  written 
on  the  note,  it  was  held  that  parol  evidence  of  the  usage  of  the  bank  and 
assent  of  the  indorser  could  not  be  received  to  change  the  settled  rule  of 
law  on  the  indorsement.    Piscataqua  Exchange  Bank  v.  Carter,  20  N.  H .  246. 

Usage  cannot  be  shown  to  absolve  a  bank  from  a  positive  and  essential 
duty.  The  omission  of  any  material  portion  of  a  transaction  which  it 
undertakes  to  perform  cannot  be  excused  on  the  ground  of  a  custom  to 
omit  such  portion.  What  the  bank  undertakes  to  do,  it  must  do  ;  it  is  only 
the  manner  of  the  doing,  not  the  doing  itself,  that  can  be  the  proper  subject 
of  a  custom.     Borup  v.  Nininger,  5  Minn.  523. 

No  act  which  practically  amounts  to  a  wrongful  appropriation  or  an 
improper  use  of  the  corporate  funds  can  be  sanctioned  by  a  usage.  Thus, 
a  usage  to  honor  the  occasional  overdrafts  of  customers,  whose  general 
standing  and  repute  is  good,  is  bad  at  lav\^.  Proof  of  such  a  usage  will  not 
protect  the  corporation,  or  any  of  its  officers  concerned  in  the  transaction, 
from  the  natural  and  ordinary  results  of  its  wrongfulness.  Lancaster 
Bank  v.  Woodward,  18  Pa.  St.  357. 

Laws  regulating  legal  tender  cannot  be  affected  by  any  local  usages  to 
disregard  them  prevailing  among  banldng  houses.  Marine  Bank  Cases, 
27  111.  525 ;  28  id.,  90,  463  ;   29  id.,  248. 

It  is  a  matter  of  ordinary  occurrence  for  persons  using  printed  blanks 
for  checks  to  cancel  some  portion  of  the  printed  matter  which  does  not 
suit  their  temporary  convenience ;  and  banks  are  wont  to  disregard  the 
fact  of  such  cancellation  as  matter  of  suspicion,  and  to  assume  that  it  uras 
done  by  the  proper  and  authorized  person.  But  the  banks  do  this  at  their 
peril,  and  are  not  to  ])e  saved  from  a  consequent  loss  simply  because  they 
can  show  a  custom  on  their  part  to  regard  erasures  of  printed  matter  as 
no  evidence  of  unauthorized  alteration,  when  the  same  erasure  of  written 
matter  would  be  so.  Such  a  custom,  said  the  court  in  Connecticut,  has 
not  existed  so  long,  or  become  so  general,  as  to  be  a  part  of  the  law  mer- 
chant, and  no  person  will  be  affected  by  it  unless  he  be  positively  showni 
to  have  had  knowledge  of  such  a  usage  on  the  part  of  the  bank  and  to 
have  acquiesced  in  it.  Mahaiwe  Bank  ;•.  Douglass,  31  Conn.  170.  The 
habit  is  certainly  somewhat  older  now  than  it  was  when  that  decision  was 
rendered  ;  but  mere  age  will  hardly  give  it  authority  in  the  courts.  It  is 
VOL.  I  —  2  17 


§  9  PRELIMINARY 

a  usage  containing  intrinsic  objections,  which  may  very  probably  prevent 
it  from  ever  receiving  recognition  except  upon  proof  of  direct  assent  to  it 
by  the  parties  concerned. 

Usage  contrary  to  statute.  It  is  a  general  principle,  that  no  custom  among- 
banks,  however  universal,  or  long  estabhshed,  or  uniform  it  may  appear 
to  be,  can  give  vaUdity  to  any  transaction  upon  their  part  which  conflicts 
with  a  positive  statutory  enactment.  But  though  the  doctrine  in  this 
shape  is  clearly  sound,  it  has  been  thus  far  illustrated  only  by  cases  arising 
under  the  usury  laws.  Banks  have  often  sought  to  evade  the  restrictions 
of  these  laws  under  cover  of  a  customary  course  of  deaUng.  But  all  such 
efforts  at  evasion  have  thus  far  been  rigorously  defeated  by  the  courts. 
Niagara  County  Bank  v.  Baker,  15  Ohio  St.  68 ;  Protection  Ins.  Co.  v. 
Harmer,  2  id.,  452 ;  New  York  Firemen's  Ins.  Co.  v.  Ely,  2  Cow.  (Is .  Y.) 
707  ;  Dunham  v.  Gould,  16  Johns.  (N.  Y.)  367,  per  Chancellor  Kent.  An 
apparent  exception  to  this  statement  might  be  supposed  to  be  found  in 
the  custom  of  banks,  when  discounting,  to  deduct  the  interest  in  advance^ 
thereby  securing  to  themselves  interest  upon  this  interest  for  the  period 
for  which  the  discounted  paper  runs,  and  so  actually  receiving  a  fraction 
of  one  per  cent  more  than  the  regular  rate.  But  this  should  be  regarded 
rather  as  an  express  power  conferred  by  charter  or  organic  law,  than  as 
an  exception  based  solely  upon  usage.  Power  "to  discount"  is  usually  in 
terms  given  in  all  such  charters  and  laws.  If  not  given,  it  must  be  regarded 
as  one  of  the  essential  elements  of  the  banking  business,  which  must  be 
enjoyed  by  every  banking  institution  by  virtue  of  its  general  character 
and  the  objects  for  which  it  exists.  Now  "discounting"  means  a  loan  of 
money  upon  business  paper  where  the  interest  is  thus  "counted  off"  or 
deducted  beforehand  ;  the  deduction  in  this  shape  is  a  part  of  the  defini- 
tion of  the  word,  an  essential  element  in  the  transaction  itself.  Fleckner 
V.  Bank  of  the  United  States,  8  Wheat.  338,  5  L.  ed.  631 ;  Niagara  County 
Bank  v.  Baker,  15  Ohio  St.  69 ;  Farmers  &  Mechanics'  Bank  v.  Baldwin, 
23  Minn.  198.  A  corporation  therefore  entitled  to  conduct  the  general 
business  of  banking,  a  fortiori  a  corporation  especially  empowered  "to 
discount,"  has  legislative  authority  to  compute  interest  in  this  peculiar 
manner.  The  habit  of  doing  so  must  unquestionably,  in  its  origin  in  time 
past,  have  been  recognized  as  a  usage.  But  since  then  it  has  come  to  be 
an  inherent  part  of  the  transaction  of  discounting,  and  whenever  dis- 
counting is  done  under  legislative  permission,  this  computation  may  be 
made  by  virtue  of  the  same  permission  and  as  part  thereof.  The  excep- 
tion to  the  usury  laws  is  not,  therefore,  based  on  the  solitary  fact  of  a 
usage,  but  of  a  usage  incorporated  into  and  sanctioned  by  legislative 
enactment,  and  it  is  the  latter,  not  the  former,  ground  that  must  be  relied 
upon  as  really  authorizing  the  taking  of  usurious  interest.  McLean  v. 
Lafayette  Bank,  3  McLean  587. 

Usage  contrary  to  morality.     Customs  must    be    moral ;     a    usage    of 
"bundUng,"  i.e.  for  those  courting  to  sleep  together,  will  not  excuse  con- 
nivance of  a  father  in  an  action  by  him  for  his  daughter's  seduction. 
Seagar  v.  Sligerland,  2  Caines  (N.  Y.),  219. 
Usages  against  legal  rules  rejected :  — • 

1.  The  rule  that  negotiable  paper  not  payable  on  demand  is  entitled  to 
grace,  otherwise  not ;  a  usage  in  opposition  to  this  would  overturn  the 
whole  law  as  to  bills  of  exchange.  Woodruff  v.  Merchants'  Bank,  25 
Wend.  (N.  Y.)  673. 

2.  The  rule  that  bank  must  pay  depositor  an  equal  sum  in  good  money. 
Willetts  V.  Paine,  43  111.  433. 

3.  The  rule  that,  where  the  holder  of  a  bank  bill  has  cut  it  in  two  to 

18 


A    USAGE  §  9 

send  by  mail,  if  one  part  is  lost,  he  can  recover  the  full  value  by  presenting 
one  half  and  showing  loss  of  the  other;  contrary  custom  rejected.  Bank 
of  the  U.  S.  V.  Sill,  5  Conn.  106. 

4.  The  rule  that  the  purchaser  of  overdue  negotiable  paper  takes  it 
subject  to  the  equities  against  the  party  he  takes  it  from.  Vermilye  v. 
Adams  Express  Co.,  21  Wall.  139,  22  L.  ed.  009. 

5.  The  rule  that  money  paid  under  mistake  of  fact  can  be  recovered. 

A  bank  cannot  arbitrarily  make  by-laws  or  institute  usages  which  shall 
injuriously  affect  the  rights  of  third  parties.  If  any  person  dehberately 
assents  to  such  by-laws  or  usages,  it  becomes  a  different  matter,  and  there- 
after, as  a  mutual  understanding  or  agreement,  the  bank  might  doubtless 
enforce  it  as  towards  tliis  indi\'idual.  But  such  assent,  implying  the 
waiver  of  valuable  rights,  ^\ill  never  be  presumed  simply  because  the  bank 
has  insisted  upon  laying  down  the  rule  for  its  own  conduct.  Thus,  a  by- 
law or  usage  requiring  all  errors  in  payments  over  the  counter,  or  in  receipts 
or  entries  in  a  depositor's  bank-book,  to  be  corrected  by  the  party  before 
leaving  the  banldng-rooms,  are  absolutely  devoid  of  anj'  effect  whatsoever. 
That  as  a  matter  of  fact  the  party  did  count  his  money,  or  did  examine 
the  writing  or  entry  before  he  left  the  rooms,  and  that  he  then  made  no 
objection  to  the  accuracy  of  the  transaction,  might  be  admissible  in  e\i- 
dence  to  sustain,  so  far  as  it  could,  the  presumption  of  correctness.  But 
it  would  be  strictly  as  circumstantial  evidence ;  and  the  further  and 
independent  fact  that  it  was  the  law  or  usage  of  the  bank  to  refuse  to 
make  any  adjustment  unless  this  process  was  observed  would  have  noth- 
ing whatsoever  to  do  with  the  matter,  and  would  doubtless  not  be  ad- 
mitted in  evidence,  by  reason  of  its  entire  impertinence.  Neither  can 
this  power,  which  the  directors  could  not  claim  at  common  law,  be  asserted 
by  virtue  of  the  authority  given  them  by  legislative  enactment  to  regulate 
the  conduct  of  the  business  and  affairs  of  the  bank.  Such  authority  does 
not  empower  them  to  make  rules  which  shall  WTongfuUy  affect  the  rights 
of  outside  dealers  with  the  corporation.  Farmers  &  JNIechanics'  Bank  v. 
Smith,  19  Johns.  (N.  Y.)  115;   Gallatin  v.  Bradford,  1  Bibb  (Ky.)  209. 

Banking  and  other  usages  altering  legal  rules  have  been  admitted:  — 

1.  The  general  rules  of  law  as  to  the  time  and  place  and  mode  of  mak- 
ing demand  and  gi\'ing  notice  of  bills  and  notes,  as  notice  by  mail  where  a 
party  lives  in  the  same  town ;  Chicopee  Bank  v.  Eager,  9  Met.  (Mass.) 
584 :  Grinman  v.  Walker,  9  Iowa  420  ;  or  notice  on  a  daj'  earlier  or  later 
than  the  legal  day  ;  Peirce  v.  Butler,  14  Mass.  303  ;  or  demand  on  fourth 
day  of  grace ;  Bank  of  Washington  v.  Triplett,  1  Pet.  25,  7  L.  ed.  37  ;  or 
on  a  day  pre\'ious  to  what  is  not  a  legal,  but  only  a  customary  holiday. 
City  Bank  v.  Cutter,  3  Pick.  (Mass.)  414. 

2.  The  rule  that  a  bank  reeei\'ing  a  check  for  collection  has  till  the 
close  of  banking  hours  on  the  next  business  day  in  which  to  present  it. 
Rickford  r.  Ridge,  2  Camp.  537 ;  Mohawk  Bank  v.  Broderick,  13  Wend. 
(N.  Y.)  133. 

3.  The  rule  that  a  bank  to  whom  a  note  is  sent  for  collection  need  not 
notify  all  the  indorsers.     Smedes  v.  Bank  of  Utica,  20  Johns.  (N.  Y.)  372. 

4.  Commencement  day  at  Harvard  College  (situated  three  miles  from 
Boston)  is  not  a  legal  holiday,  upon  which  by  statute  the  Boston  banks 
would  be  authorized  to  close.  But  it  has  long  been  their  usage  to  do  no 
business  upon  that  day,  and  to  make  demand  and  give  notice,  etc.  upon 
commercial  paper  upon  the  day  preceding,  in  like  manner  as  in  case  of 
Sundays  and  the  like.  The  courts  of  Massachusetts  have  recognized  the 
custom  as  good.     City  Bank  v.  Cutter,  3  Pick.  (Mass.)  414. 

5.  A  country  bank  in  the  State  of  New  York  was  wont  to  send  paper 

19 


§  9  PRELIMINARY 

rality,  justice,  and  policy,  nor  to  the  clearly  expressed  or  implied  in- 
tent ^°  of  the  parties,  nor  extrinsic"  {i.e.  so  aside  that  one  of  ordi- 

left  with  it  for  collection  in  New  York  City  by  the  captain  of  a  steamboat 
plying  to  the  city,  instead  of  sending  by  mail.  It  was  also  wont  to  send 
only  once  a  week,  except  in  cases  of  an  unusual  accumulation  of  paper. 
The  steamer  arrived  in  the  city  early  in  the  evening  of  the  same  day  on 
which  it  started.  The  court  held  that  the  custom  was  not  inoperative  as 
being  unreasonable,  or  as  wanting  any  of  the  requisites  of  a  good  custom  ; 
and  that,  at  least  as  towards  all  persons  affected  with  knowledge  of  it,  it 
was  valid  and  binding.     Bridgeport  Bank  v.  Dyer,  19  Conn.  136. 

6.  Rules  of  law  as  to  the  powers  of  bank  officers  and  agents  are  affected 
by  usage,  as  where  the  usage  is,  that  in  the  absence  of  the  cashier  the 
president  signs  drafts  and  cheeks,  the  president's  signature  under  such  cir- 
cumstances binds  the  bank.     Palmer  v.  Yates,  3  Sandf.  Super.  (N.  Y.)  137. 

7.  Paper  not  negotiable  by  general  law  may  be  so  by  custom  of  a 
locality.     Rindskoff  v.  Barrett,  11  Iowa  172. 

8.  The  rule  that  collecting  bank  has  no  right  to  receive  anything  but 
money.     Levi  v.  National  Bank,  7  Cent.  L.  J.  (Mo.)  247.     See  note  19  a. 

9.  The  rule  that  a  banker  must  Iniow  the  signature  of  his  customer, 
and  pays  a  forged  check  at  his  peril.  As  where  it  was  customary  for  a 
bank  receiving  a  cheek  on  another  bank  to  make  inquiries  as  to  the  gen- 
uineness of  the  signature,  the  drawee  bank  receiving  the  check  from  such 
bank  is  protected  as  to  it  in  assuming  that  such  inquiries  have  been  made. 
ElHs  V.  Ohio  Life  Ins.  &  Trust  Co.,  4  Ohio  St.  628. 

10.  A  custom  of  common  carriers  and  messengers  to  leave  parcels  or 
notices  directed  to  a  particular  officer  of  the  bank  at  some  especial  desk, 
or  with  some  officer  other  than  the  one  named,  may  be  shown  ;  and  deliv- 
ery made  in  accordance  with  such  custom  will  be  a  sufficient  discharge  of 
his  duty  on  the  part  of  the  carrier  or  messenger.  Hotchldss  v.  Artisans' 
Bank,  42  Barb.  (N.  Y.)  517. 

11.  An  established  custom  that  notices  intended  for  the  directors 
shall  be  left  upon  the  cashier's  desk,  will  bind  any  director  whose  own 
notes  may  happen  to  come  into  the  bank.     Weld  v.  Gorham,  10  JNIass.  366. 

"  No  usage  can  be  set  up  against  the  clear  intent  of  the  parties.  The 
whole  idea  of  the  law  is,  that  when  the  parties  say  nothing  about  the 
manner  in  which  the  contract  is  to  be  performed,  or  the  precise  meaning 
they  attach  to  the  terms  employed,  or  acts  done,  their  meaning  and  intent 
may  be  arrived  at  by  looking  to  the  usual  manner  of  doing  such  business, 
and  the  usual  meaning  and  obligations  attached  to  such  words  and  acts. 

The  theory  is  that  the  parties  knew  the  custom,  and  acted  in  reference 
to  it,  but  if  they  express  a  contrary  intent  the  theory  fails.  Barnard  v. 
Kellogg,  10  Wall.  383,  19  L.  ed.  987  ;  CoUender  v.  Dinsmore,  55  N.  Y.  200. 

^1  A  usage  of  a  bank  cannot  bind  a  party  who  has  no  occasion  to  be- 
lieve he  will  be  brought  within  its  operation.  Mohawk  Bank  v.  Broderiek, 
13  Wend.  (N.  Y.)  133. 

If  there  is  no  intimation  whatsoever  upon  a  note,  that  the  maker  in- 
tended or  expected  that  it  would  be  negotiated  at  a  particular  bank,  he 
is  not  bound  by  the  fact  that  he  has  positive  knowledge  of  the  usage  of 
such  bank  in  regard  to  notice,  etc.  upon  such  notes.  For  it  does  not 
appear  that  he  anticipated  that  his  note  would  ever  come  into  this  bank, 
and  therefore  that  this  usage  would  be  applied  to  this  particular  note. 
The  case  of  the  Lime  Rock  Bank  v.  Hewett,  52  Me.  531,  furnishes  an 
unusually  excellent  illustration  of  this  doctrine.     Two  notes  were  sued 

20 


A    USAGE  §  9 

nary  prudence  and  foresight  would  not  contemplate  it  as  a  factor  in 
the  transaction),  binds ^^  the  parties,  on  the  theory  that  they  con- 
tracted in  reference  to  it. 

upon  in  that  case,  and  the  same  person  was  an  indorser  upon  each.  One 
of  them  was  made  payable  at  the  bank,  and  was  indorsed  over  bj'  him 
to  the  bank.  The  other  was  not  made  payable  at  the  bank,  and  was  in- 
dorsed by  him  generally ;  indeed,  there  were  subsequent  indorsers  before 
the  note  came  into  the  possession  of  the  bank.  The  indorser  was  shown 
to  be  personally  conusant  of  a  usage  of  the  bank  in  notifying.  Upon 
the  first  note  it  was  held  that  he  was  bound  by  this  usage ;  that  the  cir- 
cumstances constituted  a  conclusive  presumption  of  his  assent,  and  would 
have  been  equally  conclusive  of  his  knowledge  had  this  not  been  other- 
wise expressly  shown.  But  upon  the  second  note  he  was  held  not  bound 
by  the  usage.  For  thought  he  knew  it,  yet  it  was,  as  regarded  this  note, 
a  mere  abstract  fact,  there  being  nothing  whatsoever  to  show  that  he 
ever  contemplated  that  the  note  should  pass  into  the  possession  of  this 
especial  bank,  or  be  subjected  to  the  effect  of  any  of  its  usages.  A  usage 
cannot  directly  affect  parties  between  whom  there  is  no  privity  of  contract. 
Daun  V.  City  of  London  Brewery  Co.,  L.  R.  8  Eq.  155.  But  it  is  hardly 
correct  to  say  it  cannot  affect  them  indirectly;  there  being  no  contract 
between  those  parties,  it  cannot  take  effect  as  part  of  such  a  contract. 

But  contracts  and  usages  between  A.  and  B.  are  far  from  being  without 
effect  on  the  rights  of  C.  and  B.,  though  the  latter  have  not  contracted 
with  each  other.  For  example,  a  by-law  or  usage  of  a  bank,  securing  a 
lien  on  shares  of  a  stockholder,  S.,  may  affect  S.'s  assignee  in  insolvency, 
or  an  attaching  creditor. 

A  by-law  of  a  bank,  or  even  its  usage,  if  the  usage  be  known  to  the 
stockholders,  of  refusing  to  allow  any  stockholder  to  transfer  his  stock  so 
long  as  he  is  indebted  to  the  bank,  is  valid  and  binding.  The  bank  has 
a  lien  upon  the  shares  for  the  amount  of  its  claim,  at  least  as  against  the 
shareholder  himself,  or  against  his  assignees  under  a  voluntary  assign- 
ment for  the  benefit  of  creditors.  Morgan  v.  Bank  of  North  America,  8 
Serg.  &  R.  (Pa.)  73;  McDowell  v.  Bank  of  Wilmington,  1  Harr.  (Del.) 
369  ;  Child  v.  Hudson's  Bay  Co.,  2  P.  Wms.  207.  But  whether  or  not  the 
lien  of  the  bank  would  be  good  as  against  an  assignee  in  bankruptcy,  or 
an  attaching  or  execution  creditor,  is  a  different  question,  which  might 
perhaps  receive  a  different  answer.  In  Massachusetts  the  point  has  been 
considered  doubtful.  Nesmith  v.  Washington  Bank,  6  Pick.  (Mass.)  329  ; 
Plymouth  Bank  v.  Bank  of  Norfolk,  10  id.,  454.  So  usage  bears  on  negli- 
gence. 

In  the  Daun  case,  A.  and  B.  contracted.  A.  afterward  contracted  with 
C,  subject  to  his  contract  with  B.  B.  attempted  by  usage  to  hold  A.'s 
funds  as  against  C.  to  a  greater  amount  than  the  express  terms  of  the  agree- 
ment between  A.  and  B.  warranted.  Such  a  usage  might  affect  A.,  but 
was  too  remote  to  be  reasonably  presumed  within  C.'s  contemplation. 

12  Usage  may  explain  doubtful  words,  or  even  add  terms  to  a  contract. 
Carter  v.  Phil.  Coal  Co.,  77  Pa.  St.  280 ;  Lyon  v.  Culbertson,  83  111.  33 ; 
Miller  v.  Burke,  68  N.  Y.  615 ;  Stevens  v.  Reeves,  9  Pick.  (ISIass.)  198. 
A  contract  for  excavation  of  certain  lots  was  silent  as  to  who  should  have 
the  sand,  etc.  taken  out,  and  an  established  usage  giving  such  materials 
to  the  excavator  was  allowed  to  add  this  term  to  the  contract.  Cooper 
V.  Kane,  19  Wend.  (N.  Y.)  386. 

"Where  parties  have  not  entered  into  any  express  and  specific  con- 

21 


§  9  PRELIMINARY 

It  is  sometimes  said  a  usage  must  be  general.  See  note  18  c. 
Change  of  usage.     See  note  1  h. 

(a)  The  greatest  care  must  be  taken  in  each  case  to  examine  the 
usage  in  reference  to  each  of  the  requisites,  and  in  the  Hght  of 
decided  cases  in  the  State  to  whose  law  the  matter  is  subject ;  for 
the  courts  do  not  agree/^  the  cases  are  not  reducible  to  harmony. 
This  is  where  the  law  is  growing,  and  the  crystals  are  nearer  com- 
pletion in  those  States  whose  social  life  is  most  saturated  with  com- 
merce. 

(6)  The  question  always  to  be  answered  is.  What  is  it  fair  to 
presume  the  parties  intended?  The  business  must  be  done  in 
some  way,  and  it  is  more  probable  they  intended  a  usual  than  an 
unusual  method.     See  note  12. 

(c)  But  the  law  will  not  presume  an  intention  to  waive  valuable 
rights  ^^  unless  there  is  an  agreement  or  understanding  to  that 
effect,  nor  will  it  ever  enforce  a  usage  that  is  unreasonable  or  con- 
trary to  positive  law. 

{d)  And  if  the  usage  is  in  the  nature  of  a  contract  between 
other  parties,  as  in  the  case  of  clearing-house  ^^  usages  and  by-laws,^^ 
it  will  not  enter  into  any  transactions  except  those  of  members 
or  parties  to  the  usage,  unless  it  is  shown  that  the  contract  was 
actually  with  reference  to  such  usage. 

One  who  employs  a  member  of  the  clearing-house  cannot  claim 
the  advantage  of  such  usage  nor  be  prejudiced  by  it.  It  is  deemed 
extrinsic  unless  brought  in  by  the  parties. 

tract,  a  presumption  nevertheless  arises  that  they  meant  to  contract  and 
to  deal  according  to  the  general  usage,  practice,  and  understanding,  if  any 
such  exists,  in  relation  to  the  subject  matter."  2  Stark.  Ev.  §  258,  259 ; 
1  Phil.  Ev.  420,  421.  But  if  the  usage  is  narrow,  the  presumption  may  be 
rebutted  by  proof  of  one  party  that  he  was  ignorant  of  it,  and  did  not 
imphedly  assent  to  it.  Sawtelle  v.  Drew,  122  Mass.  228;  Farmers  & 
Mechanics'  Bank  v.  Sprague,  52  N.  Y.  605  ;  Walls  v.  Bailey,  49  N.  Y.  464. 

Two  banks  entering  into  a  contract  must  be  presumed  to  do  so  with 
the  expectation  and  implied  agreement  that,  in  the  transaction  of  the 
business  provided  for  by  that  contract  each  will  act  according  to  well 
known  and  established  rules  and  customs  in  such  business.  Bank  v. 
Davis,  114  N.  C.  .345,  19  S.  E.  280;  Bank  v.  Bank,  75  id.,  534;  Marino 
Bank  v.  Fulton  Bank,  2  Wall.  252,  17  L.  ed.  785. 

13  Some  judges  are  incUned  to  follow  the  early  English  decisions,  others 
the  later  ones,  which  are  far  more  liberal  in  admitting  evidence  of  usage 
than  the  former.  At  first,  usage  was  permitted  to  explain  doubtful  terms, 
afterward  it  was  further  conceded  power  to  add  terms  to  contracts  though 
in  writing,  i.e.  usage  in  reference  to  which  the  contract  is  presumably 
made  is  a  part  of  the  contract. 

"  See  note  9. 

"  See  note  11  and  §  346.     See  By-laws,  §  43  h. 
22 


A    USAGE  §  9 

So  with  by-laws  and  usages  of  the  bank  for  its  internal 
affairs. 

Though,  of  course,  in  such  cases,  third  parties  may  be  indirectly  ^^ 
affected,  as  in  respect  to  the  question  of  authority  of  bank  officers. 
And  usage  often  affects  parties  between  whom  there  is  no  contract, 
by  determining  the  question  of  negligence. ^^ 

A  usage  to  do  a  thing  cannot  have  the  same  effect  as  a  perfor- 
mance,^^ if  in  fact  the  thing  was  not  done. 

(e)  When  there  are  several  methods  of  different  degrees  of 
usualness,  it  often  becomes  difficult  to  decide  which  shall  control 
the  transaction.  In  such  cases,  the  relation  of  the  jmrties,  and 
their  actual  knowledge,  are  of  importance  in  determining  whether 
the  more  special  usage  shall  outweigh  the  more  general. 

Law  Merchant 

A  general  usage  of  merchants,  judicially  ascertained  and  estab- 
lished, becomes  a  part  of  the  common  law  that  all  are  held  to 
know,  whether  they  do  or  not ;  but  in  the  case  of  usages  peculiar 
to  a  single  bank,  or  to  the  banks  of  a  city  or  locality,  the  above 
points  must  be  regarded. 

16  See  note  11. 

Judge  Story  says  in  his  work  on  Bailments,  §  11,  that  in  every  com- 
munity negUgence  is  to  be  judged  of  by  the  actual  state  of  society,  the 
habits  of  business,  the  general  usages  of  life,  and  the  dangers  as  well  as 
the  institutions  pecuUar  to  the  age. 

A  hotel  guest  leaves  the  key  in  his  door.  The  usage  of  guests  at  that 
hotel  is  relevant  to  the  question  of  negligence.  Berkshire  Woollen  Co. 
V.  Proctor,  7  Cush.  (Mass.)  417. 

So  drivers  of  horses  and  wagons  on  the  highwaj^s,  and  masters  and 
pilots  of  boats,  not  passing  each  other  in  the  usual  way,  are  negligent, 
unless  there  is  good  reason  for  the  variance.  Turlej'  v.  Thomas,  8  Car.  & 
P.  104 ;   The  City  of  Washington,  92  U.  S.  31,  23  L.  ed.  600. 

1'  Piseataqua  Exchange  Bank  v.  Carter,  20  N.  H.  246,  and  Central  Bank 
V.  Davis,  19  Pick.  (Mass.)  373,  rest  on  the  ground  that  a  usage  for  an  in- 
dorser  to  waive  demand  and  notice  is  not  equivalent  to  a  waiver,  if  he  in 
fact  does  not  in  a  given  transaction  waive  it.  If  a  by-law  requires  a  person 
having  a  certain  transaction  \vitli  a  bank  to  perform  a  certain  act,  and  he  in 
fact  does  not  perform  it,  he  cannot  be  affected  with  the  legal  consequences 
of  a  performance  on  the  ground  that  it  was  a  usage  of  the  bank  to  require 
performance,  that  he  know  the  usage,  and  must  be  assumed  to  have  in- 
tended to  conform  to  it.  It  was  said,  that  the  usage  claimed,  if  proved, 
would  be  only  a  usage  for  the  customer  to  make  sucli  an  agreement.  By 
strict  construction,  therefore,  it  woidd  not,  even  if  fully  shown,  have  any 
effect  upon  a  transaction  in  which  the  agreement  was  distinctly  not 
made. 

23 


§  9  PKELIMINARY 

Mode  of  Dealing  between  the  Parties 

A  coul'se  of  dealing  ^^  between  the  bank  and  a  single  person 
may  establish  obligations  as  to  its  continuance,  and,  if  nothing 
is  provided  to  the  contrary,  will  govern  subsequent  transactions, 
of  the  same  nature,  between  them. 

Habit  Peculiar  to  One  Bank 

The  usage  of  a  single  bank  will,  by  reason  of  the  relation  of 
the  parties,  bind  all  who  select  ^^  that  bank  to  act  for  them,  as  one 

18  (a)  Hotehkiss  v.  Artisans'  Bank,  42  Barb.  (N.  Y.)  517. 

(6)  Presumptions  Established  by  Course  of  Dealing.  —  The 
course  of  dealing  between  two  banks  may  be  given  in  evidence  for  the 
purpose  of  raising  a  presumption  from  it.  This  is  not  precisely  a  usage ; 
that  is  to  say,  it  is  not  always  necessary  that  it  should  bind  the  banks  as 
an  arbitrary  rule  for  the  conduct  of  their  affairs  with  each  other.  There- 
fore the  inference  based  upon  it  is  not  absolutely  conclusive,  but  is  capable 
of  being  rebutted  by  proof  that  the  habitual  course  of  dealing  had,  in  the 
particular  instance,  been  departed  from.  It  is  strictly  as  a  habit,  which 
gives  rise  to  certain  natural  suppositions,  not  as  a  legal  usage  which  impera- 
tively establishes  those  suppositions  as  facts,  that  such  evidence  is  admitted. 
Thus,  that  two  banks  are  wont  to  exchange  accounts  at  short  intervals,  and 
each  promptly  to  object  to  the  account  rendered  by  the  other,  if  it  claims 
any  error  therein,  —  and  that  such  accounts  have  been  rendered  covering 
a  point  subsequently  disputed,  but  not  objected  to  within  the  usual 
time,  —  are  acts  admissible  in  evidence,  as  going  to  show  actual  correct- 
ness, and  that  the  correctness  has  been  acknowledged.  But  the  same 
evidence  would  be  incompetent  to  establish  a  usage  between  the  banks  of 
objecting  promptly,  which  should  have  the  effect  of  estopping  the  bank 
which  had  failed  so  to  object  from  afterwards  claiming  the  correction  of 
the  error.     Union  Bank  t'.  Planters'  Bank,  9  Gill  &  J.  (Md.)  439. 

(c)  It  is  only  as  affecting  the  question  of  notice  that  the  generality  of 
a  usage  is  material ;  for  a  practice  may  exist  between  two  only,  and  yet 
bind  them  in  all  subsequent  dealings,  unless  abrogated  by  both.  Hotch- 
kiss  V.  Artisans'  Bank,  42  Barb.  (N.  Y.)  517. 

19  (a)  Boston  Bank  v.  Hodges,  9  Pick.  (Mass.)  420 ;  Bank  of  Columbia 
V.  Magruder,  6  Har.  &  J.  (Md.)  172 ;  Lincoln  &  Kennebec  Bank  v.  Page, 
9  Mass.  155  ;  Cohea  v.  Hunt,  2  Sm.  &  M.  (Miss.)  227  ;  Smith  v.  Whiting, 
12  Mass.  8  ;  Mills  v.  Bank  of  the  United  States,  11  Wheat.  431,  6  L.  ed.  512  ; 
Chicopee  Bank  v.  Eager,  9  Met.  (Mass.)  584  ;  Lime  Rock  Bank  v.  Hewett, 
52  Me.  531  ;  Gindrat  v.  Mechanics'  Bank,  7  Ala.  325.  In  Mills  v.  Bank 
of  the  United  States  it  was  ruled  that,  where  a  note  is  made  for  the  pur- 
pose of  being  negotiated  at  a  bank  whose  custom  it  is  to  demand  payment 
and  give  notice  on  the  fourth  day  of  grace,  that  custom  binds  the  parties 
whether  they  knew  of  it  or  not.  By  implication  they  agree  to  be  governed 
by  the  usage  of  the  bank  at  which  they  have  chosen  to  make  the  security 
negotiable.  A.  sent  a  note  to  bank  C.  to  collect ;  D.,  the  debtor,  paid  a 
certificate  of  deposit  of  C.  to  it  to  satisfy  the  note.  A.  was  held  bound 
by  the  custom  of  C.  to  take  its  certificates  of  deposit  in  lieu  of  cash,  and  D. 
was  discharged,  although  the  bank  became  insolvent,  and  never  remitted 

24 


A    USAGE  §  9 

who  is  a  customer  of  the  bank,  or  making  use  of  the  facihties  it 
hokls  out.  A  depositor  in  a  bank,  or  one  who  gives  a  note  to  a 
l)ank  to  collect,  or  makes  his  notes  payable  there,  is  properly  held 
imperatively  to  an  implied  knowledge  of  its  legal  usage  in  dealing 
with  depositors,  collecting  or  paying  such  notes.  So  an  indorser 
of  a  note  payable  at  the  bank,  for  he  selects  or  adopts  as  to  sub- 
sequent parties,  and  as  to  the  bank. 

I3ut  the  holder  of  a  check  on  the  bank,  or  payee  of  a  note  payable 

to  A.,  and  in  spito  of  the  rule  of  law  that  an  agent  can  take  nothing  but 
money.  British  &  Anieriean  Mortgage  Co.  v.  Tibballs,  63  Iowa  468,  19 
N.  W.  319,  Ueed,  J.,  dissenting. 

In  Bank  of  Utica  ;-.  Smith,  18  Johns.  (N.  Y.)  230,  a  note  payable  at 
the  Mechanics'  Bank  was  presented  fifteen  minutes  after  bank  hours  for 
other  business;  but  it  appeared  that,  according  to  the  usual  course  of 
business  at  this  liank,  such  presentments  were  made  at  this  "time,  and  the 
defendant  should  have  informed  liiraself  of  it. 

(6)  But  the  fact  that  one  is  the  holder  of  a  check  drawn  upon  a  bank, 
or  the  debtor  upon  a  note  held  by  it  for  collection,  or  is  the  payee  of  paper 
made  payable  at  its  office,  does  not  bring  such  person  \vithin  either  the 
reason  or  the  language  of  these  decisions.  He  is  not  a  customer,  nor,  in 
the  sense  in  which  the  word  is  used  in  these  cases,  is  he  one  dealing  with 
the  bank.  He  is  therefore  held  to  no  knowledge  of  any  peculiar  habit  of 
this  indi^^dual  bank.  He  must  assume,  unless  he  has  positive  knowledge 
to  the  contrary,  that  it  conducts  its  transactions  like  the  other  banks  in  the 
same  place ;  and  its  usage  to  conduct  them  differently  in  any  respect  must 
be  specially  brought  homo  to  him  before  it  can  affect  him  disadvanta- 
geously.  But  the  custom  of  the  single  bank,  once  known,  enters  into  all 
subsequent  contracts  and  dealings  -with  it.  Patriotic  Bank  v.  Farmers' 
Bank,  2  Craneh  (C.  C.)  560 ;  Renner  v.  Bank  of  Columbia,  9  Wheat.  .582, 
6  L.  ed.  166  ;  City  Bank  v.  Cutter,  3  Pick.  (Mass.)  414  ;  Bridgeport  Bank 
V.  Dyer,  19  Conn.  136.  The  doctrine  is  very  clearly  put  by  Mr.  Justice 
Story  in  Mills  v.  Bank  of  United  States.  If  a  note  is  made  payable  at  a 
particular  bank,  there  is  no  ground  for  demanding  that  the  bank  shall 
depart  from  "general  commercial  usage"  for  any  other  purpose  than  that 
of  conforming  to  its  own  individual  usages.  Evidence  of  the  usage  of  any 
number  of  other  banks  not  amounting  to  "general  commercial  usage"  is 
inadmissible  to  fix  the  duties  of  this  especial  bank,  unless  conformity  to 
this  particular  usage  and  adoption  of  it  can  also  be  brought  home  to  this 
bank.  It  cannot  be  supposed  that  "the  particular  usage  of  other  banks  not 
mentioned  in  the  contract "  ever  fell  within  the  contemplation  of  the  parties 
to  that  contract.     Camden  v.  Doremus,  3  How.  515,  11  L.  ed.  705. 

(c)  Usages  of  a  bank  actually  known  ])ind  dealers  with  it.  Lincoln  & 
Kennebec  Bank  v.  Page,  9  Mass.  155 ;  Jones  v.  Fales,  4  Mass.  252.  If 
there  is  a  general  usage  applicable  to  a  business,  one  employing  an  indi- 
vidual of  that  profession  contracts  in  reference  to  the  usage.  Walls  r. 
Bailey,  49  N.  Y.  464;  P^ord  v.  Tirrell,  9  Gray  (Mass.)  401;  Lowe  v. 
Lehman,  15  Ohio  St.  179  ;  Carter  v.  Philadelphia  Coal  Co.,  77  Pa.  St.  286 ; 
Sewell  V.  Corp,  1  Car.  &  P.  392.  The  fact  that  a  depositor  in  a  savings 
bank  was  illiterate,  and  could  not  read  th(>  rules  in  his  bank-book,  did  not 
e.xeuse  his  non-compliance  with  a  reasonal)le  rule  requiring  notice  of  loss 
of  the  book.     Burrill  v.  Dollar  Savings  Bank,  92  Pa.  St.  134  (1879). 

25 


§  9  PRELIMINARY 

there,  or  debtor  on  a  note  held  by  it  for  collection,  did  not  choose 
that  bank  to  act  for  him,  and  has  a  right  ^°  to  assume  that  it  trans- 
acts its  affairs  like  other  banks  in  the  same  place,  unless  he  has 
actual  knowledge  of  its  peculiar  custom ;  then  he  is  bound  by  it, 
if  the  bank  entered  as  a  factor  into  the  transaction  within  the  con- 
templation of  the  parties. 

No  one,  however,  is  held  to  a  bank's  usage,  though  he  knows  it, 
if  that  bank  was  not  contemplated  as  connected  with  the  business. 
Such  knowledge  is  extrinsic.     See  note  11. 

It  might  be  thought  that,  whenever  a  person  enters  into  a  trans- 
action in  which  he  is  reasonably  aware  a  particular  bank  will 
enter  as  a  factor,  he  should  be  held  by  its  customs,  known  to  him 
or  not ;  but  though  this  principle  is  recognized  in  regard  to  usages 
one  degree  superior  in  generality,  the  above  distinction  breaks 
in  upon  it  in  respect  to  single  usage. 

General  Usage 

The  general  usage  of  all  or  a  majority  of  the  banks  in  a  place, 
town,  city,  or  county,  is  held  to  be  known  to  all  in  the  particular 
community,  and  all  who,  though  dwelling  elsewhere,  enter  into 
transactions  which  they  must  be  presumed,  as  men  of  ordinary 
foresight,  to  know  will  involve  a  dealing  wdth  or  through  the  banks 
of  said  place.2^ 

A.  Cases  on  Usage.  —  The  usage  of  a  bank,  known  to  persons 
dealing  with  it,  binds  them.^^ 

20  It  is  very  proper  that  one  who  deliberately  employs  a  bank  should 
be  held  to  adopt  it,  usages  and  all,  so  far  as  they  are  legal  and  reasonable, 
etc. ;  and  also  that  one  who,  like  the  holder  of  a  check,  has  nothing  to  do 
with  choosing  the  bank,  and  for  whom  the  bank  is  not  acting,  should  be 
held  to  less  diligence  in  informing  himself  of  its  usages ;  and  in  case  of  a 
debtor  on  a  note  the  bank  holds  for  collection,  it  may  often  occur  that  the 
debtor  had  no  reason  to  suppose  that  particular  bank  would  transact  the 
business.     See  note  19  h. 

21  Generally  speaking,  it  cannot  be  presumed  that  a  person  is  acquainted 
with  the  customs  of  doing  business  which  obtain  among  the  banks  of  any 
place  distant  from  that  in  which  he  himself  lives  and  deals.  But  if  he 
enters  into  any  transaction  which  he  is  aware  must  reasonably  be  expected 
to  involve  a  dealing  with  or  through  the  banks  of  the  distant  place,  his 
knowledge  of  and  assent  to  their  customs  will  be  imphed.  This  is  only 
a  slight  extension  of  the  principle  which  declares  every  person  dealing 
with  a  bank  to  be  affected  with  knowledge  of  its  usages,  and  is  supported 
by  the  cases  which  assert  that  doctrine.  Bank  of  Washington  v.  Triplett, 
1  Pet.  25,  7  L.  ed.  37. 

22  Lincoln  &  Kennebec  Bank  v.  Page,  9  Mass.  155 ;  Taylor  v.  First 
National  Bank,  119  Minn.  525,  138  N.  W.  783,  1914A  Ann.  Cas.  1302,  n. 

26 


CASES   ON    USAGE  §  9 

A  usage  known  to  the  defendant  is  proper  evidence  for  the  jury 
as  to  the  contract  of  the  parties.-'' 

The  common  law  and  the  general  hiw  merchant  are  in  many 
cases  controlled  by  usage.^^ 

Time  of  Forwarding  Check 

In  Connecticut,  D.,  the  holder  of  a  check,  got  it  cashed  at  the 
B.  Bank,  whose  custom  it  had  been  for  years  to  send  checks  to 
New  York  (where  this  was  payable)  by  the  captain  of  a  boat,  once 
a  week,  instead  of  })y  mail.  The  jury  found  that  D.  knew  of  this 
usage,  and  the  court  held  him  bound  by  it."'' 

Time  of  Demand  and  Notice 

So,  where  an  indorser,  for  whom  a  note  was  discounted  by  the 
City  Bank,  knew  of  its  custom  to  regard  Harvard  Commencement 
as  a  holiday,  he  was  bound  by  the  usage.^'' 

B.  Those  who  deal  with  a  bank  by  drawing  and  indorsing 
notes  payable  at  the  bank,  and  negotiating  notes  for  discount 
there,  are  bound  by  its  usages  known  to  them.^^  In  this  case  an 
indorser  of  a  note  payable  to  himself  at  the  L.  and  K.  Bank  was 
held  by  its  particular  customs  known  to  him.^^ 

C.  Where  a  note  was  payable  in  the  District  of  Columbia,  the 
general  usage  of  the  banks  there  being  to  make  demand  on  the 
fourth  day  after  the  time  limited  in  the  note  for  its  payment,  and 
a  bank  there  discounted  it,  the  indorser,  who  knew  of  the  custom, 
was  bound  by  it.~^ 

Where  a  note  was  payable  to  Mills,  at  the  United  States  Bank, 
and  ]\Iills  indorsed  it,  he  was  bound  by  the  usage  to  make  demand 
on  the  fourth  day,  though  he  had  no  knowledge  of  it.  The  court 
said :  "  Upon  the  principles  and  reasoning  of  the  former  case 
(Renner's)  we  have  come  to  the  conclusion  that,  when  a  note  is 
made  payable  or  negotiable  at  a  bank  whose  invariable  usage  it 

23  Jolms  V.  Fales,  4  Mass.  252. 

=^  Halsev  v.  Brown,  3  Day  (Conn.)  346. 

26  Bridgeport  Bank  v.  Dyer,  19  Conn.  136  (1848). 

26  City  Bank  v.  Cutter,  3  Pick.  (Mass.)  418  (1826). 

27  Lincoln  &  Kennebec  Bank  v.  Page,  9  Mass.  155  (1812) ;  Smith  i'. 
Whiting,  12  Mass.  8. 

28  Renner  v.  Bank  of  Columbia,  9  Wheat.  582,  6  L.  ed.  166  (1824).  A 
strong  case. 

27 


§  9  PRELIMINARY 

is  to  demand  payment  and  give  notice  on  the  fourth  day  of  grace, 
the  parties  are  bound  by  that  usage,  whether  they  have  a  personal 
knowledge  of  it  or  not.  In  the  case  of  such  a  note,  the  parties  are 
presumed  by  implication  to  agree  to  be  governed  by  the  usage  of 
the  bank  at  which  they  have  chosen  to  make  the  security  itself 
negotiable."  ^^ 

Notice  by  Mail 

D.  In  Alabama,  it  was  held,  following  11  Wheaton,  that,  where 
a  bill  appears  on  its  face  to  be  payable  at  a  particular  bank,  the 
particular  usage  of  such  bank,  of  giving  notice  through  the  mail, 
instead  of  personally,  though  the  party  is  in  the  same  place,  binds 
the  parties  liable  on  such  bill  (indorsers  in  this  case),  though  the 
usage  was  unknown  to  them.^° 

E.  Where  it  was  the  custom  of  a  particular  bank  to  devote 
fifteen  minutes,  after  the  close  of  banking  hours  for  the  general 
business,  to  paying  notes  made  payable  at  that  bank,  and  a  note 
so  payable  was  presented  in  those  fifteen  minutes,  it  was  held  a 
good  presentment.  The  indorser  of  the  note  payable  at  the  bank 
should  have  informed  himself  of  its  usages.^^ 

F.  Evidence  of  usage  is  not  considered  as  breaking  in  on  the 
rule  that  parol  shall  not  be  admitted  to  var\^  a  written  contract. 
The  usage  is  considered  as  a  part  of  the  contract,  and  the  evidence 
is  admitted  to  explain  the  meaning  of  the  parties.^^ 

Usage.     Specific  Deposits 

G.  The  head-note  to  an  Illinois  case  would  seem  to  break  in 
on  the  views  advanced  in  the  analysis  at  the  head  of  this  chapter. 
It  says :  "  The  fact  that  the  city  bank,  which  was  not  the  cor- 
respondent of  the  home  bank,  in  pursuance  of  instructions  from 
that  bank,  and  in  the  line  of  custom  of  the  city  banks,  deposited 
the  money  (left  with  it  for  transmission  to  the  home  bank)  with 
another  city  bank  which  was  the  correspondent  of  the  home  bank, 
will  not  exempt  it  from  liability,  where  the  original  depositor  is 
unacquainted  with  such  custom  and  instructions." 

The  fact  was,  that  the  court  said :    "  It  is  not  necessary  in  this 

=9  Mills  V.  Bank  of  the  United  States,  11  Wheat.  438,  6  L.  ed.  514  (1826). 

30  Giudrat  v.  Mechanics'  Bank,  7  Ala.  333  (1845). 

31  Bank  of  Utiea  w.  Smith,  18  Johns.  (N.  Y.)  230  (1820). 

32  Halsey  v.  Brown,  3  Day  (Conn.)  346 ;  Renner  v.  Bank  of  Colum- 
bia, 9  Wheat.  582,  6  L.  ed.  166. 

28 


CONFLICTS   AS   TO    COMMERCIAL   QUESTIONS  §  10 

case  to  determine  the  effect  to  be  given  to  that  general  usage 
among  city  banks." 

The  decisive  consideration  was,  that  the  depositary  bank  sent  the 
money  to  the  correspondent  of  the  home  bank  without  any  notice 
of  the  true  ownership,  so  that  it  was  apphed  on  the  debt  of  the 
home  bank  to  said  correspondent,  and  lost  to  the  depositor,  the 
home  bank  being  insolvent.^^ 

Where  it  is  the  general  custom  or  usage  of  banks  to  withhold 
and  refuse  payment  of  checks  when  notified  to  do  so  before  they 
are  presented  for  payment  it  becomes  in  the  nature  of  a  law  per- 
taining thereto  to  which  checks  drawn  and  deposited  are  subject, 
at  least  while  they  are  in  the  hands  of  the  payee. ^' 

§  10.  Conflict  between  State  and  Federal  Courts  as  to  Com- 
mercial Questions.  —  Under  the  Judiciary  Act,^  except  where 
the  Constitution,  treaties,  or  statutes  of  the  United  States  other- 
wise provide,  the  laws  of  the  several  States  shall  be  regarded  as 
rules  of  decision  in  trials  at  common  law  in  the  United  States 
courts,  in  cases  where  they  apply. 

But  this  has  no  application  to  questions  of  the  validity  -  or  i7)i- 
pairment  of  contracts,  or  of  general  commercial  law,^  or  any  extra- 
territorial ■*  matter,  nor  does  it  compel  the  United  States  courts 
to  enforce  manifest  injustice.  The  United  States  Supreme  Court 
is  the  highest  authority  on  all  questions  of  general  commercial  law. 

Intra-territorial  Matters.     Limitations 

The  rule  is  confined  to  matters  strictly  intra-territorial  by  the 
law  of  nations,  local  statutes,  and  usages,  as  those  affecting  only 

"  Drovers'  National  Bank  r.  O'Hare,  18  Brad.  (111.)  360  (1887). 
^'  Taylor  v.  First  National  Bank,  119  Minn.  525,  138  N.  W.  7$3,  1914A 
Ann.  Cas.  1302,  n. 

1  §  10.     1789,  c.  20,  §  34. 

2  If  a  contract  is  valid  under  the  decisions  of  the  State  at  the  time  of  the 
contract,  it  •mil  be  held  good  in  the  Federal  courts,  althou.trli  a  subsequent 
decision  of  the  State  declares  the  former  judgment  erroneous  and  the 
contract  bad.     Gelpeeke  r.  Dubuque,  1  Wall.  176,  17  L.  ed.  520. 

'  2  Story  on  the  Constitution,  551  ;  The  Gloucester  Ins.  Co.  v.  Younger, 
2  Curt.  338.  In  Austen  v.  IMiller,  5  McLean  1.54,  a  certificate  of  deposit 
was  held  a  promissory  note,  in  spite  of  a  contrary  Ohio  decision,  it  being 
a  question  of  general  commercial  law. 

*  A  discharge,  under  Rhode  Island  bankrupt  laws,  from  all  debts  and 
contracts,  does  not  affect  a  contract  to  be  executed  in  a  foreign  country. 
Van  Reimsdyk  v.  Kane,  1  Gall.  371.  "1  apprehend  a  limitation  of  the 
rule  giving  effect  to  State  decisions  must  arise  whenever  the  subject  mat- 
ter is  e.xtra-territorial." 

29 


§  10  PRELIMINARY 

citizens  of  the  State,  or  real  estate,  and  interests  of  a  fixed  and 
permanent  nature,^  and  the  decisions  of  the  State  court  of  last 
resort  upon  such  matters,  and  the  construction  of  such  statutes,  will 
be  binding  on  the  Federal  courts,  subject  to  two  limitations :  1st. 
No  State  decision  on  general  commercial  law,^  nor  as  to  what  is 
a  valid  contract,  or  what  is  impairing  the  obligation  of  a  contract, 
binds  the  United  States  courts.^  If  it  did,  the  States  could  set 
at  naught  the  constitutional  prohibition  against  destruction  of 
contract  rights.  2d.  State  judgments  are  only  rules  of  decision, 
not  exclusive  or  peremptory  injunctions,^  and  will  not  be  followed 
in  the  face  of  justice  and  good  faith. 

Extra-territorial  Matters 

State  statutes  or  decisions  affecting  rights  which  are  neither 
between  citizens  of  the  State  and  derived  under  that  State,  nor 
are  governed  by  the  lex  rei  sitce  under  the  law  of  nations,^  do  not 
control  the  Federal  courts,  though  recognized  as  entitled  to  respect- 
ful consideration. 

General  Commercial  Law.     Construction  of  Contract 

Further,  on  questions  of  general  commercial  law,  i.e.  commercial 
questions  not  dependent  on  local  statutes  or  local  usage,  but  which 
must  be  decided,  in  whatever  court  thej^  arise,  on  the  general 
principles  ^  to  the  commercial  law  and  the  custom  of  merchants, 

5  Van  Reimsdyk  v.  Kane,  1  Gall.  371 ;  Bragg  v.  Meyer,  1  McAU.  411. 
If  applied  beyond  this,  it  would  enable  the  State  legislature  to  dry  up  the 
sources  of  Federal  jurisdiction. 

6  The  words  of  Story  in  1  Gall.  371,  saying  further,  "If  a  State  were 
to  declare  that  no  action  would  lie  on  a  contract  between  a  citizen  thereof 
and  a  foreigner,  or  a  citizen  of  another  State,  under  any  circumstances, 
or  were  to  say  that  interest  reserved  on  such  a  contract,  though  good  at 
the  place  of  contract,  should  be  void,  it  would  hardly  be  binding  on  the 
United  States  courts."  This  language  applies  only  to  extra-territorial 
matters  by  its  terms ;  but  the  whole  tone  of  the  Federal  decisions  is,  that 
they  will  not  enforce  manifest  injustice  in  any  case,  merely  because  a  State 
court  has  sanctioned  it. 

7  Story  in  Swift  v.  Tyson,  16  Pet.  1,  10  L.  ed.  865.  And  see  Robinson  v. 
Commonwealth,  3  Sum.  220.  In  Brooklyn  City,  etc.,  R.  R.  Co.  v.  National 
Bank  of  Republic,  22  Albany  L.  J.  189,  a  note  was  given  as  collateral  on  a 
pre-existing  debt,  to  a  bank  in  New  York  by  a  citizen  of  New  York. 
The  question  was  if  the  bank  was  a  holder  for  value.  New  York  de- 
cisions said  no  ;  but  the  United  States  court  remarked  that  it  was  a  ques- 
tion arising  out  of  the  usage  of  the  commercial  world,  and,  not  having  been 

30 


CONTRACTS  §  12 

the  Federal  courts  are  not  bound  by  State  decisions.  "  When  the 
State  courts  are  called  on  to  perform  the  like  functions  as  ourselves, 
i.e.  to  determine  on  general  reasoning  and  legal  analogies  what  is 
the  true  exposition  of  the  contract,  or  what  is  the  just  rule  furnLshed 
by  the  principles  of  commercial  law  to  govern  the  case,  the  rule 
of  the  Judiciary  Act  does  not  apply."  ^ 

§  11.  The  Conflict  of  Laws.  —  It  would  not  be  proper  to  at- 
temi)t  any  complete  statement  of  the  principles  of  private  Inter- 
national law  in  a  work  of  this  kind,  but  a  few  points  of  cliief  interest 
to  us  may  be  noted,  and  a  caution  entered,  never  to  omit  in  any 
transaction  either  of  the  questions,  "  By  what  system  of  law  Ls 
this  matter  controlled?  "  and,  "  What  has  that  law  to  say  on  the 
subject  ?  "  In  banking  and  all  mercantile  business  that  continually 
runs  its  roots  and  branches  beyond  State  and  national  lines,  it  is 
of  the  utmost  import  to  keep  in  mind  the  efi'ect  of  the  various  and 
often  conflicting  laws  that  may  apply  to  the  transaction. 

§  12.    Contracts^  are  governed,  — 

1.   As  to  remedy,-  by  the  lex  fori. 

modified  by  local  statute,  the  Federal  courts  had  equal  powers  with  the 
State  courts  to  determine  such  questions. 

1  §  12.  For  the  law  of  this  subject  reference  must  be  made  to  the 
works  of  Wharton  and  Story,  from  which  it  is  chiefly  derived  by  an  in- 
tellectual process  of  condensation.  The  indexes  of  those  books  will 
enable  any  point  to  which  no  reference  is  here  attached  to  be  verified 
as  well  as  if  all  the  many  sections  bearing  upon  it  were  quoted  by  me. 
For  a  later  and  well-arranged   treatise,   see  INIinor's  Conflict  of   Laws. 

*  The  law  of  the  court  in  which  suit  is  brought  governs  in  all  that  relates 
to  practice,  pleading,  burden  of  proof,  admissibility  of  evidence  (including 
the  competency  of  witnesses,  and  the  great  rules  of  exclusion,  as  those 
regarding  hearsay,  parol  evidence  to  affect  written  contracts  or  explain 
patent  ambiguities,  involving,  of  course,  the  determination  of  what  in  a 
patent  ambiguity),  and  the  determination  of  the  question  what  facts  are 
proved  by  the  CAadence  admitted.  But  the  legal  effect  of  the  facts  proved 
by  the  evidence  admitted  may  depend  on  other  law,  to  which  tlie  construc- 
tion of  the  contract  is  subject.     See  text,  Nos.  3,  4,  7. 

If  a  Statute  of  Limitation  of  a  State  (1.)  only  says  no  action  shall  be 
brought  for  the  goods  or  debt  after  a  certain  period  (P.),  it  belongs  to  the 
remedy,  and  an  action  may  be  brought  in  another  State  (where  the  period 
is  longer)  for  the  debt  or  goods,  though  the  parties  both  lived  in  1.  the  full 
time  (P.).  But  if  the  statute  of  I.  changes  the  title,  or  extingvitihes  the  debt, 
then  as  to  debts  due  citizens  domiciled  in  L,  and  as  to  property  within  its 
territory,  the  statute  once  taking  effect  will  not  be  disturbed  elsewhere. 

If  a  Statute  of  Frauds  of  a  State  (I.)  merely  provides  that  no  a^-tion 
shall  be  brought  on  certain  contracts  unless  in  writing  or  conforming  to 
other  requirements,  it  is  of  the  remedy,  and  such  a  contract  (though  made 
in  a  foreign  country,  F.,  where  it  is  valid  and  enforceable,  there  being  no 
such  law  there),  will  not  be  enforced  in  1. ;  but  such  contract  made  in  1. 
may  be  enforced  in  F.     If,  however,  l.'s  statute  of  frauds  makes  the  con- 

31 


§  12  PRELIMINARY 

2.  As  to  the  interpretation/  by  the  law  and  usage  the  parties 
had  in  contemplation. 

Personam  Rem  Distinction 

3.  As  to  direct  *  action  upon  real  estate  (as  in  all  other  matters 
touching  immovables,  even  to  the  question  what  property  is  real), 
the  lex  rei  sites  controls.*  But  the  word  direct  is  very  important 
in  this  connection,  for  there  is  a  clear  distinction  ^  between  the  effect 

tract  void,  it  acts  on  the  contract  itself,  and  not  the  remedy ;  and  in  such 
case,  so  far  as  the  statute  of  frauds  is  concerned,  a  contract  vaUd  where 
made  is  vaUd  everywhere,  and  invalid  where  made  is  invalid  everywhere, 
except  that  (1)  the  lex  situs  controls  the  forms,  etc.,  of  the  transfer  of 
property  with  few  exceptions,  and  (2)  contracts  made  casually  in  I.,  and 
not  in  accord  with  its  law,  are  not  thereby  void  in  the  domicil  of  the  parties, 
or  the  country  where  the  contract  is  to  be  performed.     See  text,  Nos.  6,  7. 

3  Any  court  that  has  to  interpret  a  document,  i.e.  discover  the  meaning 
of  the  parties,  will  look  for  that  purpose  to  any  law  or  usages,  as  well  as 
any  facts,  the  author  or  parties  are  shown  to  have  had  in  mind.  Usually 
the  parties  think  and  speak  in  the  terms  of  the  place  where  the  contract 
is  made ;  but  if  only  casually  there  (as  travellers  on  a  railroad  or  persons 
coming  to  a  half-way  point  to  negotiate),  it  is  more  Ukely  they  contem- 
plate the  law  and  usage  of  their  domicil,  or  of  the  place  of  performance. 

In  case  of  a  contract  by  correspondence,  the  usage  of  the  place  of  the 
writer  who  first  employs  controverted  terms  decides  their  meaning,  for  he 
is  supposed  to  use  them  in  the  sense  with  which  he  is  familiar,  and  the 
other  accepts  that  meaning  by  adopting  the  words. 

It  is  to  be  distinctly  noted,  however,  that  the  question  whether  any 
evidence  at  all  of  the  meaning  of  the  parties  concerning  the  point  in  dis- 
pute is  to  be  received,  is  a  preliminary  question  for  the  lex  fori;  and  also 
that,  if  there  is  conflict  between  what  the  author  really  meant  and  the 
meaning  attached  to  the  words  he  has  used  by  the  law  to  which  the  con- 
struction of  the  document  is  subject,  the  latter  controls. 

■^  Titles  by  prescription,  grant,  devise,  descent,  marriage ;  easenients, 
servitudes  ;  liens  ;  incumbrances  ;  assignments  for  benefit  of  creditors  ; 
forms  of  conveyance  and  devise,  and  their  construction  ;  legitimacy  of  one 
claiming  as  heir ;  capacity  to  acquire  or  convey  in  any  way.  _  Realty  can- 
not be  touched,  transferred,  or  incumbered  in  any  way  except  in  conformity 
to  the  lex  situs ;  but  it  is  a  general  principle  of  the  lex  situs  in  all  civilized 
countries  to  give  effect  to  acts  done  in  other  sovereignties  and  valid  there, 
unless  they  are  contrary  to  the  positive  law,  or  the  ideas  of  morality,  jus- 
tice, and  public  pohcy  existing  in  the  situs. 

The  title  of  a  bank  to  land  must  be  determined  by  the  law  of  the  state 
in  which  the  land  is  situated,  and  if  a  mortgage  to  it  is  not  made  in  good 
faith  by  the  State  law,  the  bank  gets  no  title.  Chipman  v.  McCleilan, 
159  Mass.  3G3,  .34  N.  E.  379  (1893). 

5  The  vaUdity  of  a  mortgage  as  a  Hen  on  the  land  is  controlled  by  Aie 
lex  situs;  but  the  legality  of  the  contract  to  wliich  the  mortgage  is  collat- 
eral is  determined  by  the  law  of  the  place  where  the  contract  is  made, 
unless  it  is  to  be  performed  elsewhere,  then  by  that  law. 

A  contract  illegal  by  the  law  of  its  place  is  inoperative,  though  secured 

32 


CONTRACTS  §  12 

of  a  contract  as  creating  a  lien  or  transferring  title  to  specific 
property,  and  its  efi'ect  considered  simply  as  creating  obligations 
between  the  parties.  For  example,  a  conve\ance  not  in  accord 
with  the  law  of  Illinois,  where  the  land  is,  but  valid  by  the  law  of 
Massachusetts  where  it  is  executed,  though  it  does  not  of  itself 
change  the  title  to  the  land,  and  an  Illinois  creditor  of  the  assignor 
or  vendor  attaching  the  land  after  the  conveyance  will  hold  against 
the  conveyee;  yet  as  between  vendor  and  vendee  the  transaction 
may  base  a  judgment  for  damages  ^  against  the  vendor  if  he  refuses 
to  make  a  truly  valid  deed,  or  for  a  decree  of  the  chancellor "  to 
compel  him  to  do  so. 

Estoppel  by  Dojnicil 

Further  it  must  be  remembered  that  a  person  domiciled  in  Mas- 
sachusetts would  be  estopped,^  as  it  were,  to  deny  the  validity  of  a 
transaction,  good  by  the  laws  of  that  State,  unless  ^  the  reason  for 

"by  a  mortgage  on  land  in  a  State  where  such  a  contract  would  have  been 
good ;  Pine  v.  Smith,  11  Gray  (Mass.)  38 ;  and  if  the  contract  is  good  by 
its  law,  it  is  not  invalid  because  the  mortgage  is  subject  to  the  law  of  a 
State  by  which  such  contract  would  be  bad  against  creditors.  Iloyt  v. 
Thompson,  19  N.  Y.  207. 

When  a  Kentucky  Bank  took  a  transfer  in  Ohio  of  notes  to  secure  a 
debt  in  Ohio  the  transaction  is  governed  by  the  laws  of  Ohio,  and  if  good 
there  will  be  enforced  in  Kentucky  even  though  such  a  transaction  would 
have  been  invalid  in  Kentucky  because  done  in  contemplation  of  insol  vencv. 
Faweett  v.  Mitchell,  133  Ky.  361,  117  S.  W.  956  (1909). 

6  See  Wharton,  Confl.  of  Laws,  §  377;  Minor,  Confl.  of  Laws,  §  11, 
p.  31. 

^  Where  there  is  an  equity  between  the  parties,  a  court  of  chancery  (if 
the  defendant  is  domiciled  in  its  jurisdiction,  or  the  contract  is  perform- 
able  there,  and  relief  can  be  obtained  by  the  personal  obedience  of  the  par- 
ties, without  direct  action  on  the  property,  and  justice  cannot  otherwise 
be  done),  will  compel  the  party  to  take  specific  action  in  regard  to  the 
foreign  property,  as  to  deed  the  land  in  conformity  to  the  law  of  the  situs. 
But  no  bill  can  be  entertained  which  calls  for  direct  action  on  the  land,  as 
for  partition,  or  settlement  of  boundary.  Wharton,  Confl.  of  Laws,  §  288  ; 
Story,  Confl.  of  Laws,  §  545;  Minor,  Confl.  of  Laws,  §  11,  p.  32;  Me- 
Curdy's  App.,  65  Pa.  St.  291 ;  Wood  v.  W^arner,  15  N.  J.  Eq.  81 ;  Muller 
V.  Dows,  94  U.  S.  444,  24  L.  ed.  207. 

*  An  assignment  in  New  York,  good  there,  is  valid  against  a  subse- 
quent attachment  by  a  citizen  of  New  York  of  property  in  Massachusetts, 
though  such  assignment,  as  against  creditors  resident  elsewhere  than  at 
the  place  of  domicil  of  the  assignor,  would  have  been  invalid  in  Massa- 
chusetts.    Burlock  V.  Taylor,  16  Pick.  (Mass.)  335. 

9  Green  v.  Van  Busk-irk,  7  Wall.  139,  19  L.  ed.  109.  The  owner,  mort- 
gagee, and  attaching  creditor,  D.,  were  all  domiciled  in  New  York.  D. 
attached  the  property  (iron  safes)  in  Illinois.  The  United  States  Supreme 
Court  hold  the  attachment  good  against  the  mortgagee,  though  New  York 
VOL.  1  —  3  33 


§  12  PKELIMINAKY 

holding  the  act  invahd  in  IHinois  appHes  to  the  case  of  such  a 
person,  as  well  as  to  that  of  a  citizen  of  Illinois. 

4.  As  respects  direct  action  upon  movables,  the  forms  of  transfer 
and  creating  liens  ^  positively  prescribed  by  the  lex  situs  must  be 
conformed  to,  and  all  claims  of  the  lex  situs  ^°  satisfied,  in  order  to 
sustain  a  right  to  the  property  in  the  courts  of  the  situs,  subject 
to  the  same  distinctions  personam  rem,  and  estoppel  by  domicil, 
as  above. 

5.  Capacity  of  dealing  with  realty  is  determined  by  the  lex  situs; 
capacity  of  doing  business  is  determined  by  the  law  of  the  place  of 

had  held  the  contrary.  The  parties  to  the  mortgage  had  not  conformed 
to  the  registry  laws  of  Illinois,  and  the  reason  for  holding  that  an  incum- 
brance invalid  in  such  a  way  has  no  effect  against  one  without  notice  ap- 
plies strongly  to  every  case,  whether  the  creditor  attaching  be  a  citizen  of 
the  locus,  or  of  the  State  T^rhere  the  contract  was  made,  or  of  a  third  State ; 
namely,  the  great  uncertainty,  confusion,  and  insecurity  that  would  result 
if  the  record  title  where  tangible  property  is  located  could  not  be  de- 
pended on.  If  a  purchaser  had  to  search  the  records  of  every  State  in 
which  the  owner  may  have  dwelt  or  made  a  contract,  it  would,  to  say  the 
least,  make  the  obtaining  of  a  clear  title  somewhat  expensive,  and  men 
would  probably  give  their  land  away  rather  than  undertake  to  make  a 
good  title.  It  seems  very  doubtful  if  the  mere  fact  of  domicil  is  ever  a 
solid  reason  in  any  of  these  cases  for  refusing  what  would  otherwise  be 
admitted  justice.  The  argument  that  by  choice  of  domicil  a  party  (D.) 
submits  himself  to  its  law,  is  not  more  weighty  than  the  counter  claim,  or 
rather  has  its  true  limits  disclosed  by  the  counter  proposition,  that  he 
submits  to  that  law  so  far  as  it  extends,  but  does  not  contemplate  its  reach- 
ing an  arm  between  him  and  the  measure  of  justice  secured  to  men  in 
general  under  the  law  of  another  State  where  he  may  be,  or  where  property 
he  claims  is  situated.  If  the  law  of  the  situs  rests  on  reasons  of  abstract 
justice  and  general  convenience,  D.  should  have  the  benefit  of  it.  If  the 
provisions  of  the  situs  are  merely  defensive,  only  for  self-preservation,  by 
preferring  the  claims  of  citizens  to  those  of  foreigners,  D.  does  not  fall 
■within  the  reason  of  the  law. 

If  a  lien  attaches  to  a  vessel  in  England,  valid  there,  but  invalid  by 
Louisiana  law  as  not  giving  possession  to  the  mortgagee,  and  the  vessel 
afterwards  comes  to  New  Orleans,  where  persons  without  notice  supply 
materials  to  the  ship,  the  Louisiana  courts  hold  the  lien  of  the  latter  prior 
to  the  English  incumbrance.  Wharton,  Confl.  of  Laws,  §§  323,  345,  357  ; 
Minor,  Confl.  of  Laws,  §  6,  p.  10. 

But  under  United  States  statutes  a  duly  recorded  mortgage  on  a  vessel 
has  priority  over  a  lien  under  the  law  of  one  of  the  States  where  the  vessel 
may  subsequently  be,  for  materials  and  supplies  furnished  it.  Harrison 
V.  Sterry,  5  Cranch  298,  3  L.  ed.  106. 

1"  Such  as  taxes,  and  the  claims  of  local  creditors  in  case  of  foreign 
bankruptcy. 

The  situs  of  a  debt,  so  far  as  concerns  its  taxability,  is  the  domicil  of 
the  creditor,  for  there  the  fund  will  go ;  and  also  so  far  as  concerns  its 
assignability,  for  it  is  a  personal  right,  and  governed  by  his  personal 
law.  Wharton,  Confl.  of  Laws,  §§  363,  394  ;  Minor,  Confl.  of  Laws,  §  123, 
p.  281. 

34 


CONTRACTS  §  12 

the  transaction  plus  the  law  of  the  domicil  of  the  actor,  whiche\er 
most  favors  the  capacity  and  so  sustains  the  transaction. 

6.  The  form  "  of  contracts  depends  on  the  lex  situs  of  property 
to  be  affected,  so  far  as  it  has  positi\e  provisions,  in  other  respects 
on  the  lex  loci  actus,  so  far  as  imperative  and  applicable,  and 
beyond  both  these  lines  on  the  law  of  the  situs,  actus,  domicil, 
place  of  performance,  or  other  law  with  reference  to  which  it  can 
be  shown  the  parties  acted. 

7.  In  all  respects,  not  covered  bj^  the  above,  the  law  of  the 
"  seat  "  of  the  obligation,  i.e.  its  place  of  performance,  controls, 
as  being  the  law  the  parties  presumably  had  in  mind,  and  if  there 
is  more  than  one  obligation  in  a  contract,  to  be  performed  in  dif- 
ferent places,  each  is  governed  by  its  own  distinctive  law.^- 

"  Form  of  Deeds,  Contracts,  etc.  —  So  far  as  the  direct  effect  on 
property  is  concerned,  the  positive  provisions  of  the  lex  situs  must  be  fol- 
lowed. When  the  lex  situs  is  silent;  or  if  we  look  at  the  contract  apart 
from  its  direct  effect  upon  property  ;  or  if  the  contract  is  personal :  — 

a.  Provisions  of  the  lex  loci  actus  that  are  imperative  {i.e.  made  by  that 
law  essential  to  the  validity  of  the  document)  must  be  conformed  to,  ex- 
cept that  our  courts  will  not  hold  Americans  contracting  in  China,  or  other 
uncivilized  country,  bound  to  conform  to  its  law.  And  when  parties  casu- 
ally in  a  State  execute  a  contract  there,  in  accord  with  the  law  of  their 
domicil,  or  of  the  place  of  performance,  or  lex  situs,  it  will  be  sustained. 

b.  The  forms  of  the  lex  fori  must  be  looked  to  when  they  are  condi- 
tions of  bringing  suit. 

c.  Where  the  lex  sitiis  and  lex  loci  are  not  imperative,  and  the  lex  fori 
does  not  require  a  certain  form  to  sustain  suit,  it  is  sufficient  if  the  docu- 
ment is  such  that  an  intent  to  give  it  legal  effect  can  be  inferred.  It  is  a 
natural  presumption  from  the  omission  of  the  forms  usual  where  the 
business  is  done,  that  the  instrument  is  not  intended  to  be  final,  but  only 
a  preliminary  informal  draft.  If  it  can  be  shown  that  the  parties  have- 
actually  conformed  to  the  forms  usual  in  their  domicil,  or  in  the  place  of 
performance,  or  other  place  clearly  in  their  contemplation,  the  above  pre- 
sumption is  rebutted,  the  substantial  requisite  fulfilled,  and  the  contract 
should  be  sustained. 

'-  In  the  case  of  bills  and  notes  the  contract  of  the  maker  or  acceptor 
is  governed  by  the  place  of  payment,  which,  unless  some  other  is  named, 
is  the  place  where  the  contract  is  made,  usually  the  place  of  delivery.  See 
notes  15  and  18. 

If  a  blank  indorsement  in  France  does  not  pass  the  property  to  holder, 
such  an  indorsee  cannot  recover  in  England,  though  he  could  sue  in 
England  if  the  indorsement  had  been  made  in  England.  Trimbey  v. 
Vignier,  1  Bing.  N.  C.  151. 

A  parol  acceptance  by  B.  of  a  bill  drawn  in  Michigan  on  B.,  in  Chi- 
cago, was  good,  though  the  laws  of  Michigan  require  an  acceptance  to  be 
in  writing.     Mason  v.  Dousay,  35  111.  424. 

If  a  note  payable  in  Massachusetts  is  indorsed  in  another  State,  the 
maker's  liabilitv  to  the  indorsee  is  ruled  by  Alassachusetts  law.  Wood- 
ruff V.  Hill,  llGMass.  310;  Hunt  v.  Hunt,  16  N.  Y.  Sup.  Ct.  622 ;  Evans 
V.  Anderson,  78  111.  558. 

35 


§  12  PRELIMINARY 

The  construction,  nature/^  mode,  and  legality  of  a  contract 
depend  on  the  law  of  its  seat. 

But  the  contract  between  the  immediate  parties  to  an  indorsement  is 
subject  to  the  law  of  the  place  where  the  indorsement  is  made,  unless  an- 
other be  named  by  the  indorser.  National  Bank  of  Michigan  v.  Green, 
33  Iowa  140. 

The  working  of  these  principles  leads  to  some  curious  results  :  — 

The  liability  of  an  indorser  or  drawee  is  determined  by  the  UabiUty  of 
the  maker  or  acceptor  at  their  contract  seat ;  but  when  the  indorser's  lia- 
bility is  once  fixed,  the  law  as  to  payment  in  a  suit  against  the  indorser 
is  governed  by  the  law  of  the  place  of  indorsement.  Freese  v.  Brownell, 
35  N.  J.  L.  285  ;  Ripka  v.  Geddis,  23  Pa.  St.  140. 

If  a  bill  or  note  is  defective  in  formal  matters  at  the  place  where  made, 
but  good  at  the  place  of  indorsement,  the  indorsement  may  bind  the 
indorsers,  though  not  the  original  parties;  otherwise,  if  the  defect  is 
substantial.     Wharton,  Confl.  of  Laws,  §  458. 

So  a  transfer  defective  where  made,  but  valid  by  the  law  to  which 
the  maker  or  acceptor  is  subject,  binds  him,  though  not  the  indorser. 
Wharton,  Confl.  of  Laws,  §  459. 

Each  holder  has  the  same  rights  against  the  acceptor  or  maker  as  the 
original  payee,  if  the  transfer  to  the  holder  was  good  by  the  law  of  the 
place  of  the  maker's  or  acceptor's  contract,  though  bad  by  the  law  where 
the  indorsement  was  made,  for  the  maker's  obligations  are  governed  by 
his  law.     Robertson  v.  Burdekin,  1  Ross,  Lead.  Cases,  812. 

On  the  other  hand,  if  the  indorsement  is  bad  by  the  original  law. 
though  good  by  its  own  law,  the  maker  or  acceptor  is  not  bound  by  it, 
except,  it  is  said,  if  the  maker  use  words  that  in  another  State  (Y.)  give 
negotiabiUty,  though  not  in  his  own,  he  will  be  held  on  the  suit  of  D. 
(to  whom  the  note  was  indorsed  in  Y.)  in  the  courts  of  Y.,  though  not  in 
the  courts  of  his  own  State  perhaps.  Lodge  v.  Phelps,  1  Johns.  Cas. 
(N.  Y.)  139. 

Grace.  Days  of  grace  are  allowed  according  to  the  law  of  the  place 
of  payment.     Pomeroy  v.  Ainsworth,  22  Barb.  (N.  Y.)  118. 

Demand.  Protest.  Notice.  That  demand  and  protest  are  governed 
by  the  law  of  the  place  of  payment  the  authorities  are  agreed, 
and  the  better  opinion  is  that  notice  is  equally  controlled  thereby. 
The  nature  and  extent  of  the  HabiHty  of  the  drawer  or  indorser, 
when  once  tLxed,  are  settled  by  the  law  of  his  own  obUgation ;  but 
the  fixing  of  his  liabiUty  is  another  thing,  that  should  be  controlled 
by  the  law  of  the  place  of  payment  by  acceptor  or  maker,  since  it  is 
only  by  such  conduct  toward  the  maker  or  acceptor  as  is  required  by 
the  latter  law  that  said  UabiUty  can  be  fixed ;  and  though  notice  is  not  a 
part  of  the  conduct  toward  maker  or  acceptor,  it  is  an  act  done  in  that 
place,  and  the  principle  locus  regit  actus,  and  the  security  and  convenience 
of  business,  require  that  it  should  be  placed  in  the  same  class.  It  would 
be  very  confusing  to  have  to  conform  to  the  law  of  four  or  five  different 
countries,  in  which  successive  indorsements  may  have  been  made,  in  order 
to  charge  all  the  indorsers.  There  are,  however,  authorities  that  hold  the 
notice  to  drawer  or  indorser  must  conform  to  the  law  of  the  place  where 
the  drawing  or  indorsement  occurred.  See  Daniell  on  Neg.  Inst.,  §  910. 
When  the  UabiUty  of  an  indorser  is  once  fixed,  the  notice  he  must  give  to 
his  indorser  is  of  course  governed  by  the  law  of  their  special  contract. 
National  Bank  of  Michigan  v.  Green,  33  Iowa  140. 

13  That  is,  whether  it  is  joint,  or  several,  or  joint  and  several ;  abso- 
36 


CONTRACTS  §  12 

What  is  the  place  of  performance,  or  seat  of  the  contract,  is  a 
question  of  the  mutual  intent  of  tlie  parties,  t(j  be  derived  from 
their  language  and  the  circumstances. 

If  a  place  is  named,  of  course  there  is  no  trouble,  as,  in  case  of  a 
note,  the  place  of  payment  governs  as  to  the  mode  of  payment, 
grace,  demand,  i)rotest,  and  not  ice. ^- 

Or  if  the  place  of  performance  is  fixed  by  the  necessity  of  the 
case,  as  when  work  is  to  be  done  on  land. 

The  seat  of  a  continuous  ^*  business  gives  its  law  to  all  obligations 
in  the  course  of  such  business  emanating  from  him  who  conducts 
the  business,  as  with  bank  collections. 

Delivery  of  goods  to  a  carrier  for  the  vendee  is  such  performance 
as  makes  the  place  of  delivery  the  seat  of  the  contract,  which  de- 
termines the  right  of  stoppage  in  transitu,  etc. 

The  parties  may  in  many  cases  inc()rj)orate  the  law  of  a  particular 
State  in  their  contract  by  reference  to  it. 

Where  there  are  two  laws  which  might  be  applied,  as,  for  example, 
in  case  of  interest,^^  that  most  favorable  to  the  contract  should 
govern  ;  and  if  the  interest  is  proper  in  the  place  where  the  money 
is  used,  that  should  justify  it,  for  that  is  the  real  place  of  perform- 
ance as  to  the  risks  incurred,  which  are  the  basis  of  interest. 

WTien  a  person  is  casually  out  of  his  domicil  and  contracts,  if 
the  circumstances  point  to  a  performance  where  made,  State  C, 
as  in  case  of  hotel  bills  and  watering-place  debts,  or  bargains  in 
general  with  the  natives,  that  law  governs;    but  if  both  yartics 

lute  or  conditional ;  personal  or  real ;  principal  or  surety ;  negotiable 
or  not. 

"  Wharton,  Confl.  of  Laws,  §§  405,  426 ;  Minor,  Confl.  of  Laws,  §  67. 

15  When  no  rate  is  specified,  the  place  of  payment  decides  the  inter- 
est. The  acceptor  pays  interest  according  to  the  law  of  the  place  of 
acceptance,  and  the  drawer  or  indorser  according  to  the  law  of  his  own 
contract.  2  Parsons,  N.  &  B.  376 ;  Gibbs  v.  Fremont,  20  Eng.  L.  &  Eq. 
555  ;  Smith  v.  Smith,  2  Johns.  (N.  Y.)  235.  If  a  rate  is  named,  it  is  valid 
if  the  laAv  either  ^  of  the  place  of  payment  or  of  making  the  contract 
allows  such  rate ;  and  some  cases  ■  hold  that,  if  allowed  l\v  the  law  of  tho 
place  where  the  money  is  to  be  used  and  the  risk  incurred,  it  is  valid, 
for  the  place  of  payment  or  maldng  may  be  determined  merely  by  con- 
venience, and  have  no  relation  to  the  real  value  of  the  money  at  the  place 
where  it  is  invested.  It  is  hard  that  money  lent  to  be  used  in  New 
Mexico  (where  interest  is  constantly  24  ^(..  showing  the  value  of  money 
there  and  the  risk)  should  legally  bear  no  more  than  6%,  because  payable 
in  some  Eastern  State. 


1  Peck  V.  Mayo.  14  Vt.  33 ;  Depau  r.  Humphreys,  8  Mart.  x.  s.  (La.)  1 ;  Potter  v. 
Tallman,  35  Barb.  (N.  Y.)  182.  -  Youur  r.  Godbe,  15  Wall.  562,  21  L.  ed.  250; 
Wharton,  Coiifl.  of  Laws,  §  608,  and  cases  cited. 

37 


R  12  PRELIMINARY 

are  casually  ^^  in  C,  perhaps  only  for  the  purpose  of  negotiation, 
it  may  be  more  reasonable  to  regard  the  domicil  of  the  debtor  as 
the  place  of  performance;  e.g.  where,  in  Tennessee,  Georgia 
parties  give  or  indorse  a  note  payable  in  future  to  New  York 
parties  without  naming  a  place  of  payment,  Georgia  is  the  seat 
of  contract. 

When  the  place  of  performance  is  not  otherwise  determinable, 
it  is  deemed  that  the  place  where  the  contract  was  made  ^^  was  so 
intended,  and  it  is  not  the  place  of  dating,  writing,  or  signing,  but 
the  place  of  delixery,  where  the  bargain  is  consummated,  that 
constitutes  the  place  of  making,  exceid  ^^  as  to  bona  fide  purchasers 
of  negotiable  paper,  for  value,  without  notice  that  it  was  not  de- 
livered where  dated  ;  as  to  them,  the  law  to  which  the  paper  pur- 
ports on  its  face  to  be  subject  governs. 

»  In  Vanzant  v.  Arnold,  31  Ga.  210,  the  plantiffs  resided  in  New  York, 
the  makers  and  indorsers  in  Georgia,  and  the  indorsement  and  deUvery 
were  in  Tennessee,  to  the  plaintiff's  agents.  The  court  said  it  was  known 
the  indorsers  resided  in  Georgia,  and  were  only  in  Tennessee  to  negotiate, 
and  the  parties  must  be  deemed  to  have  contemplated  Georgia  as  the  place 
of  performance.  But  if  the  transaction  in  Tennessee  were  between  a 
Georgian  and  a  native  or  resident  of  Tennessee,  it  would  be  very  Hkely 
a  Tennessee  contract.     See  Story,  Confl.  of  Laws,  §  274. 

"  When  a  note  is  payable  generally,  evidence  that  it  was  agreed  to  be 
paid  in  a  particular  place  is  inadmissible  ;  the  law  makes  it  payable  where 
made.     Frazier  v.  Warfield,  9  Sm.  &  M.  (Miss.)  220. 

18  A  note  drawn  and  dated  in  Maryland,  but  delivered  in  New  York  m 
payment  of  goods  purchased  there,  is  payable  in  New  York  and  governed 
by  its  laws.  Cook  v.  Moffat,  5  How.  295,  12  L.  ed.  160.  The  place  of 
delivery  from  maker  or  drawer  to  payee,  or  from  indorser  to  indorsee,  is  the 
contract  seat,  except  as  against  bona  fide  purchasers  for  value,  in  the  usual 
course  of  business,  and  without  notice  that  the  place  of  dating  and  drawing 
does  not  truly  represent  the  place  of  deUvery.  In  Lennig  v.  Ralston, 
23  Pa.  St.  139,  the  bill  bore  the  dress  of  a  Pennsylvania  bill,  though 
really  issued  in  London.  The  court  said:  "Upon  the  principle  that 
every  one  is  presumed  to  produce  all  the  consequences  to  which  his  acts 
naturally  and  necessarily  tend,  the  presumption  is  the  defendants  intended 
the  purchasers  of  it  should  receive  it  under  the  behef  that  it  was  a  bill 
drawn  in  Philadelphia  in  the  usual  course  of  business." 

As  against  a  bona  fide  purchaser  before,  maturity,  without  notice,  the 
paper  cannot  be  shown  by  parol  to  be  other  than  what  it  claims  on  its 
face  to  be.  So  against  such  an  indorsee  (B.),  the  maker  or  indorser  can- 
not show  that  a  note  dated  in  Massachusetts,  and  indorsed  there  to  B., 
was  really  made  in  New  York,  and  was  void  by  New  York  law.  Towne 
V.  Rice,  122  Mass.  67. 


38 


PART  I 
BANKS  AND  BANKING  IN  GENERAL 

CHAPTER  II 

ORGANIZATION   AND   LOCATION 

§  13.       Who  may  be  a  Banker. 
Common  Law. 
Restraining  Acts. 
Purpose. 

Apply  to  continuous  functions,  not  to  isolated  acts. 
For  violation  of  these  statutes  there  is  no  remedy  but  the 
one  they  provide. 
§  13  A.     Supervision  of  Banking. 
§  14.     Organization. 

By  Charter.     §  6,  n.  1,  3,  4 ;   §  98  /;   §§  743,  744,  750,  171  j. 
Under  General  Law. 
Number  of  members. 
Amount  of  capital.     II.  §§  7,  14,  81. 
Mode  of  paying  it  in. 

Certificate   of  organization   acknowledged   and  recorded. 
II.  §§6,  106  a;   II.  §§12-15,  102.      • 
(a)  Existence  of  the  bank.     §  765. 
Evidence  of. 

Judicial  Notice  of  the  Charter. 
§  15.     Ancillary  Powers  of  a  Bank. 
To  sue  and  to  be  sued. 
To  have  a  corporate  seal. 
To  have  perpetual  succession. 
To  appoint  and  qualify  officers. 
To  make  by-laws. 
To  increase  or  reduce  the  capital. 
§  16.     Appointment  and  Qualifications  of  Officers.     II.  §§9,  10. 
Directors,  how  elected. 

quaUfications  of. 
President. 
Cashier. 
Clerks. 

Term  of  office. 
Bond. 

39 


I   13  ORGANIZATION    AND    LOCATION 

§13.  Who  maybe  a  Banker?"  —  Any  one,  at  common  law. 
Banking  statutes  may  or  may  not  restrict  individuals  in  this 
matter,  to  protect  the  public  from  fraud  and  incompetency ;  but 
the  restriction,  when  it  exists,  applies  to  a  continuous  exercise  of 
one  or  more  of  the  functions  of  banking,  and  not  to  isolated  acts. 
And  no  remedy  but  that  provided  in  the  statutes  exists  for  their 
violation. 

At  common  law,  the  right  of  banking  pertains  equally  to  every 
member  of  the  community.     Its  free  exercise  can  be  restricted  °* 

0  §  13.  For  the  meaning  of  the  terms  "individual  banker"  and  "private 
banker"  see  People  v.  Young,  207  N.  Y.  522,  101  N.  E.  451  (1913). 

0°  The  business  of  banking  is  so  closely  related  to  the  public  welfare 
that  it  properly  falls  within  the  pohce  power  of  the  State.  Schaake  v. 
DoUey,  85  Kan.  598,  118  Pac.  80,  1913A  Ann.  Cas.  254,  n.,  37  L.  R.  A. 
(n.  s.)  877.  See  also  Bruner  v.  Citizens'  Bank,  134  Ky.  283,  120  S.  W. 
345  (1909) ;  State  v.  Richcreek,  167  Ind.  217,  77  N.  E.  1085,  5  L.  R.  A. 
(n  s  )  874,  119  Am.  St.  Rep.  491,  10  Ann.  Cases  899  (1906) ;  United 
States  Fid.  etc.  Co.  v.  Poetker,  180  Ind.  255,  102  N.  W.  372  (1913) ; 
State  Savings  etc.  Bank  v.  Anderson,  165  Cal.  437,  132  Pac.  755  (1913) ; 
Bank  of  California  v.  San  Francisco,  142  Cal.  276,  75  Pac.  832,  100  Am.  St. 
Rep.  130,  64  L.  R.  A.  918  (1904)  ;  Cartmell  v.  Commercial  Bank  etc.  Co., 
153  Ky.  798,  156  S.  W.  1048  (1913) ;  State  v.  Struble,  19  S.  D.  646, 
104  N.  W.  465  (1905) ;  In  re  Rosett,  203  Fed.  67  (1913) ;  id.,  204  Fed. 
431  (1913) ;  Northwestern  Trust  Co.  v.  Bradbury,  117  Minn.  83,  134  N.  W. 
513  (1912)  ;  Noble  State  Bank  v.  Haskell,  219  U.  S.  104,  55  L.  ed.  112, 
31  Sup.  Ct.  186,  32  L.  R.  A.  (n.  s.)  1062,  1912A  Ann.  Cas.  487  (1910) ; 
Engel  V.  O'Malley,  219  U.  S.  128,  55  L.  ed.  128,  31  Sup.  Ct.  190  (1910), 
holding  that  banldng  business  is  witliin  the  police  power  of  the  State,  es- 
pecially such  business  transacted  in  small  amounts  and  with  ignorant 
immigrants,  and  a  statute  regulating  the  business  may  make  distinctions 
depend  upon  the  degree  of  evil,  and  where  size  is  an  index  of  the  evil  to 
be  prevented,  there  may  be  a  discrimination  between  the  great  and  small. 

The  State  has  a  constitutional  right  to  regulate  banks.  In  re  Rosett, 
203  Fed.  67  (1913) ;  id.,  204  Fed.  431  (1913) ;  Engel  v.  O'Malley,  219  U.  S. 
128,  55  L.  ed.  128,  31  Sup.  Ct.  190  (1910).  And  it  is  immaterial  that  they 
were  incorporated  before  the  legislation  was  enacted.  Eureka  Bank  Case, 
35  Nev.  80,  126  Pac.  655  (1912).  To  "regulate"  and  to  "control"  are 
synonymous  terms.  State  v.  McPherson,  30  S.  D.  547,  139  S.  W.  368 
(1913),  and  a  law  which  says  that  whenever  the  superintendent  of  banks 
shall  have  reason  to  believe  that  any  bank  is  in  an  unsound  or  unsafe  con- 
dition to  transact  the -business  for  which  it  is  organized  or  that  it  is  unsafe 
or  inexpedient  for  it  to  continue  business,  the  superintendent  of  banks 
may  forthwith  take  possession  of  such  banks  and  retain  such  possession 
until  such  bank  shall  resume  business  or  its  affairs  be  finally  liquidated, 
as  provided  and  giving  the  bank  only  ten  days  in  which  to  appeal  is  not 
contrary  to  the  fourteenth  amendment  of  the  Constitution  of  the  United 
States.  State  Savings  etc.  Bank  v.  Anderson,  165  Cal.  437,  132  Pac.  755 
(1913),  citing  other  states. 

And  an  act  is  not  unconstitutional  which  establishes  a  depositor's  guar- 
antee fund  to  insure  depositors  against  loss  when  the  bank  becomes  in- 
solvent and  makes  the  bank  liable  for  the  assessment.     Lankford  v.  Platte 

40 


WHO    MAY    Bi;    A    BANKER  §  13 

only  by  legislative  enactment ;  but  that  it  legally  can  be  thus 
restricted  has  never  been  questioned.^  After  laws  upon  the 
subject  have  been  passed,  the  business  must  be  undertaken  and 
conducted  in  strict  accordance  witli  all  the  provisions  contained 
in  them.  It  is  not  in  its  nature  a  corporate  franchise,  thougli  it 
may  be  made  such  by  legislation,  and  individuals  may  be  pro- 
Iron  Works  Co.,  235  U.  S.  4G1,  59  L.  ed.  310,  35  Sup.  Ct.  173  (1915) ; 
Assaria  State  Bank  v.  Dolley,  219  U.  S.  121,  55  L.  ed.  123,  31  Sup.  Ct. 
189  (1910)  affirming  179  Fed.  461  ;  State  v.  Farmer's  National  Bank, 
150  Pac.  212,  Okla.  (1915)  ;  Nol)le  State  Bank  v.  Haskell,  22  Okla. 
48,  97  Pac.  590  (1909),  affirmed  in  219  U.  S.  104,  55  L.  ed.  112.  31 
Sup.  Ct.  190  (1910)  ;  Shallenberger  v.  First  National  Bank,  219  U.  S. 
114,  55  L.  ed.  117,  31  Sup.  Ct.  189  (1910);  Abilene  National  Bank  v. 
Dolley,  228  U.  S.  1,  57  L.  ed.  707,  33  Sup.  Ct.  1  (1912);  and  the  fact 
that  a  national  bank  might  suffer  through  competition  is  immaterial,  id. 
But  the  guarantee  fund  does  not  ai)ply  to  depositors  of  the  permanent 
school  fund,  which  is  protected  by  Comp.  Laws  1909,  sec.  7843.  (Colum- 
bia Bank  etc.  Co.  v.  United  States  Fid.  etc.  Co.,  33  Okla.  535,  126  Pac. 
656  (1912)  ;  Columbia  Bank  etc.  Co.  v.  Southern  Surety  Co.,  35  Okla.  401, 
134  Pac.  900  (1910) ;  nor  to  county  deposits,  Lovett  v.  Lankford,  145  Pac. 
767,  Okla.  (1915).  And  the  State  has  a  first  lien  on  the  assets  of  any 
default  bank  for  the  benefit  of  the  Depositors  Guarantee  Fund  until  after 
the  sufficiency  of  the  fund  is  made  up.  Lankford  v.  Oklahoma  Engra\'ing 
etc.  Co.,  35  Okla.  404,  130  Pac.  278  (1913).  See  also  Lankford  v.  Scliroe- 
dcr,  147  Pac.  1049,  Okla.  (1915).  See  In  re  Rosett,  204  Fed.  431  (1913), 
upon  the  distribution  of  the  fund.  A  bank  may  also  be  required  to  ac- 
cumulate and  maintain  a  reserve  fund.  St.  Charles  State  Bank  v.  Winfield, 
36  S.  D.  493,  155  N.  W.  770  (1915) ;  Mulcahy  v.  Hibernia  Sav.  etc.  Soc, 
144  Cal.  219,  77  Pac.  910  (1904). 

1  In  Brady  v.  Mattern,  125  Iowa  158,  100  N.  W.  358,  106  Am.  St. 
Rep.  291  (1904)  it  is  said  that  the  right  and  duty  of  regulating  banking 
has  been  recognized  in  practically  all  the  states.  Contra,  see  State  i'. 
Scougal,  3  S.  D.  66,  51  N.  W.  858  (1892).  The  restriction  cannot  extend 
so  far  as  to  amount  to  prohibition.  Ex  parte  Pittman,  31  Nev.  43,  99  Pac. 
700,  22  L.  R.  X.  (n.  s.)  266,  n.  (1909)  ;  Marymont  v.  Nevada  State  Bank- 
ing Board,  33  Nev.  333,  111  Pac.  295,  1914A  Ann.  Cas.  162,  n.,  32  L.  R.  A. 
(N.  s.)  477.  But  see  Noble  State  Bank  v.  Haskell,  219  U.  S.,  104,  55  L.  ed. 
112,  31  Sup.  Ct.  186,  32  L.  R.  A.  (x.  s.)  1062,  1912A  Ann.  Cas.  487 
(1910),  which  in  spealdng  of  legislation  says:  "We  are  of  the  opinion 
that  it  may  go  on  from  regulation  to  prohibition  except  upon  such  con- 
ditions as  it  may  prescril)e,"  which,  however,  was  said  to  be  obiter  in 
Eureka  County  Bank  Ilalieas  Corpus  Cases,  35  Nev.  80,  126  Pac.  655 
(1912).  Wisconsin  also  holds  that  the  regulation  cannot  amount  to  pro- 
hibition, but  that  requiring  incorporation  as  a  condition  precedent  to 
banking  is  regulation.  Weed  v.  Bergh,  141  Wis.  569,  124  N.  W.  664,  25 
L.  R.  A.  (n.  s.)  1217  (1910).  See  also  State  v.  Woodmansee,  1  N.  D.  246, 
46  N.  W.  970,  11  L.  R.  A.  420  (1890)  ;  Brady  v.  IMattern,  125  Iowa  158, 
100  N.  W.  358,  106  Am.  St.  Rep.  291  (1904).  But  see  Marymont  v.  Nevada 
State  Banking  Board.  33  Nev.  333,  111  Pac.  295,  1914A  Ann.  Cas.  162,  n., 
32  L.  R.  A.  (n.  s.)  477,  citing  and  reviewing  many  cases  and  holding  that 
the  banking  business  cannot  be  denied  to  individuals  and  restricted  to 
corporations. 

41 


§  13  ORGANIZATION    AND    LOCATION 

hibited  from  transacting  it,  either  altogether  in  all  its  departments/"^ 
or  partially  in  any  specified  ones.^''  A  law  which  forbids  the 
carrying  on  of  "  any  kind  of  banking  business  "  is  a  total  pro- 
hibition against  each  particular  department  of  the  business, 
though  conducted  singly,  and  may  be  infringed  equally  by  ex- 
ercising any  separate  one  of  the  various  banking  functions  as  by 
exercising  all.^ 

Isolated  Acts 

But  the  restraining  statutes,^"  being  really  in  derogation  of 
common  law  rights,  Avill  always  be  interpreted  with  reasonable 
liberality  in  favor  of  the  supposed  infringer ;  and  when  they  are 
penal  in  their  character,  they  will  be  construed  with  considerable 
strictness  in  his  favor.  Isolated  acts  do  not  constitute  an  in- 
fringement. Thus,  discounting  notes  is  one  of  the  most  important 
of  banking  functions,  and  the  one  which,  next  to  the  utterance 
of  bills  for  circulation,^  is  of  most  interest  to  the  public,  and  has 
therefore  been  most  frequently  and  most  carefully  regulated  by 
statute.  But  any  person  may  occasionally  discount  a  note  for 
another  without  coming  within  the  legislative  prohibition.  If 
he  is  simply  dealing  with  his  own  funds,  he  is  not  properly  en- 
croaching upon  the  business  of  banks  in  the  same  department. 
For,  in  order  to  bring  discounting  within  the  proper  definition 
of  a  banking  function,  it  must  be  done  with  money,  in  part  at 
least  that  of  other  persons,  intrusted  to  or  deposited  with  the 
discounter,  so  that  he  has  the  practical  use  and  control  of  it  for 
these  purposes  as  fully  as  if  it  were  his  own.     Even  if  he  does  use 

1"  That  it  is  the  inherent  right  of  every  citizen  to  engage  in  the  banking 
business  is  held  in  Ex  parte  Pittman,  31  Nev.  43,  99  Pac.  700,  22  L.  R.  A. 
(n.  s.)  266,  n.  (1909). 

I''  Quoted  in  Brady  v.  Mattern,  125  Iowa  158,  100  N.  W.  358,  106  Am. 
St.  Rep.  291  (1904). 

2  Curtis  V.  Leavitt,  15  N.  Y.  9,  52 ;  Attorney-General  v.  Utica  Ins.  Co., 
2  Johns.  Ch.  (N.  Y.)  371;  The  People  v.  Same,  15  Johns.  (N.  Y.)  358; 
Same  v.  Bartow,  6  Cow.  (N.  Y.)  290 ;  Nance  v.  Hemphill,  1  Ala.  551  ; 
State  V.  Williams,  8  Tex.  255. 

2«  In  lUinois  there  must  be  a  certificate  of  authority  to  commence  busi- 
ness. People  V.  Brady,  268  111.  192,  108  N.  E.  1009  (1915).  The  auditor 
may  in  his  discretion  withhold  the  certificate,  but  his  discretion  is  not 
arbitrary.  People  v.  Brady,  supra.  A  license  may  be  required.  See 
Engel  V.  O'Malley,  219  U.  S.  128,  55  L.  ed.  128,  31  Sup.  Ct.  190  (1910) ; 
Commonwealth  v.  Grossman,  248  Pa.  St.  11,  93  Atl.  781  (1915). 

^  The  power  of  issuing  "bills  or  paper  credit  designed  to  circulate  as 
money"  is  the  only  banking  power  made  a  franchise  under  the  constitu- 
tion of  South  Dakota.     State  v.  Scougal,  3  S.  D.  65,  51  N.  W.  858  (1892). 

42 


WHO    MAY    BE    A    BANKER  §   13 

the  money  of  others,  he  must  do  it,  not  on  comparatively  rare 
occasions,  and  as  the  special  a<:;ent  of  each  one  of  them  empowered 
to  this  specific  end  ;  but  with  some  degree  of  frequency,  and  as  a 
general  agent  having  control  of  the  combined  or  intermingled 
funds  of  several.^  In  New  York,  restraining  statutes,"*"  penal 
in  nature,  and  treating  in  their  exact  phraseology  only  of  "  as- 
sociations or  companies",  have  been  declared  to  have  no  ai)plica- 
tion  to  individuals.'**  Any  single  person  may  enjoy  all  his  com- 
mon law  rights  unimpeded  by  them.^  But,  upon  the  other  hand, 
no  person  can  enjoy  any  of  the  powers  or  privileges  granted  or 
api)urtenant  to  associations  or  companies,  even  though  for  the 
purpose  of  conducting  his  business  he  assumes  the  style  of  a  cor- 
poration. He  may  furnish  all  the  capital,  may  control  all  the 
business,  may  be  prac-tically  the  bank  itself,  yet  he  must  go  through 
all  the  forms  of  organization  prescribed  in  the  organic  banking 
laws  of  the  country  or  State  before  he  can  be  entitled  to  any  of 
the  rights  which  inhere  in  corporations  only  by  virtue  of  those 
laws.6 

The  jyurpose  of  restraining  acts  is,  of  course,  to  secure  the  public 
welfare  and  safety  from  the  inroads  of  incompetent  men  and 
swindlers.  But,  serious  as  is  the  evil  to  be  guarded  against,  no 
other  means  of  defence  against  it  appear  to  exist  save  precisely 
those  penalties  which  are  provided  in  the  law  itself  for  any  breach 
of  the  law.  No  other  punishnent  can  be  inflicted  than  that  laid 
down  in  the  statute,  and  means  of  prevention  can  be  sought  only 
from  the  same  source.^"  Equity  will  not  intervene  to  check  infringe- 

^Utica  Ins.  Co.  v.  Scott,  8  Cow.  (N.  Y.)  709;  People  v.  Brewster,  4 
Wend.  (N.  Y.)  498. 

■*"  The  laws  of  1907  requiring  a  bond  to  be  given  by  those  engaged  in 
the  transmission  of  monev  to  a  foreigix  country  is  constitutional.  Museo 
V.  United  Surety  Co.,  132  App.  Div.  300  '(1909),  117  N.  Y.  S.  21. 
As  to  who  may  sue  on  the  bond  see  Guffanli  v.  National  Surety  Co.,  133 
App.  Div.  GIO  (1909),  118  N.  Y.  S.  207,  aff'd,  196  N.  Y.  452,  90  N.  E.  174, 
134  Am.  St.  Rep.  848;  Alcssandro  v.  People's  Surety  Co.,  143  App.  Div. 
145  (1911),  127  X.  Y.  S.  572 ;  Carozza  v.  Russo,  146  App.  Div.  772  (1911), 
131  N.  Y.  S.  448. 

*^  New  York  statutes  do  not  apply  to  restrain  individuals. 

5  Bristol  V.  Barker,  14  Johns.  (N.  Y.)  205  ;  Codd  v.  Rathbone,  19  N.  Y. 
37.  To  the  same  effect  is  also  the  law  in  lUinois.  Hunt  v.  Divine,  37  111. 
137. 

«  Hallett  V.  narrower,  33  Barb.  (N.  Y.)  537. 

""  The  provisions  of  section  497  of  the  PoHtical  Code  of  Montana  as 
amended  by  the  Act  of  1903  (Laws  1903,  p.  184,  chap.  C)  requiring  banks 
incorporated  under  the  laws  of  Montana  to  pay  certain  fees  with  penalties 
prescribed  by  section  498,  for  non-compliance,  docs  not  ajjply  to  a  foreign 

43 


&  13  ORGANIZATION   AND    LOCATION 

merits,  and  even  systematic  conduct  of  the  banking  business,  in 
direct  contravention  of  enacted  law,  will  not  be  enjoined  on  the 
ground  that  it  is  a  mischief  or  a  nuisance  to  the  community.'' 

§  13  A.  Supervision  of  Banking.  —  A  state  may  invest  the 
supervision  of  banks  in  a  bank  commissioner  or  other  examiner, 
and  grant  to  him  visitorial  powers  over  banks  and  impose  upon 
him  the  duty  of  examination  of  banks,  the  investigation  of  their 
solvency,  and  the  winding  up  of  their  affairs  if  the  protection  of 
the  depositors  demands  such  action.^  He  may  examine  the  records 
of  the  bank,2  change  the  personnel  of  the  board  of  directors,=^  and 
establish  rules  for  the  proper  discharge  of  his  duty.*  His  power 
should  not  be  unduly  narrowed  by  construction,^  nor  can  he  be 
removed  by  the  governor.® 

§  14.  Organization.  —  A  banking  corporation  may  come  into 
existence,  either  under  a  special  act  of  incorporation,  called  a 
charter,!  or  under  a  general  law.^"  The  latter  is  the  more  just, 
bank  doing  business  within  the  State.  State  v.  ^tna  Banking  etc.  Co., 
34  Mont.  379,  87  Pae.  268  (1906). 

7  Attorney-General  v.  Utica  Ins.  Co.,  2  Johns.  Ch.  (N.  Y.)  371 ;  Same 
V.  Bank  of  Niagara,  1  Hopk.  (N.  Y.)  354. 

1  §  13  A.  State  v.  People's  U.  S.  Bank,  197  Mo.  574,  94  S.  W.  953 
(1906)  ;  State  v.  Title  Guaranty  etc.  Co.,  152  Pac.  189,  Idaho  (1915)  ; 
Scribner  State  Bank  v.  Ransom,  35  S.  D.  244,  151  N.  W.  1023  (1915)  ; 
State  V.  Young,  137  La.  102,  68  So.  241  (1915)  ;  State  v.  American 
Surety  Company,  26  Idaho  652,  145  Pac.  1097  (1914)  ;  In  re  Union  Bank, 
204  N.  Y.  313,  97  N.  E.  737  (1912)  ;  Sanders  State  Bank  v.  Hawkins, 
142  S.  W.  84,  Tex.  Civ.  App.  (1911)  ;  State  v.  Cockell,  27  Okla.  630, 
112  Pac.  1000  (1910) ;  State  v.  Struble,  19  S.  D.  646,  104  N.  W.  465  (1905) ; 
State  V.  Rhame,  92  S.  C.  455,  75  S.  E.  881,  1914B  Ann.  Cas.  519  (1912) ; 
Lafayette  Trust  Co.  v.  Higginbotham,  136  App.  Div.  747  (1910),  121 
N.  Y.  S.  489 ;  In  re  Harris,  221  U.  S.  274,  .55  L.  ed.  732,  31  Sup.  Ct. 
557  (1911) ;    In  re  Mandel,  224  Fed.  642  (1915). 

2  State  V.  Cockell,  supra. 

3  State  V.  People's  U.  S.  Bank,  supra. 

'  St.  Charles  State  Bank  v.  Winfield,  36  S.  D.  493,  155  N.  W.  776 
(1915). 

5  In  re  Union  Bank,  supra. 

6  State  V.  Rhame,  supra.  See  State  v.  Young,  137  La.  102,  66  So.  241 
(1915),  on  his  term  of  office. 

1  §  14.  The  New  York  Constitution,  art.  8,  §  4,  prohibits  any  special 
charter  for  banking  purposes.  See  New  York  Trust  &  Loan  Co.  v.  Hel- 
mer,  12  Hun  (N.  Y.)  35. 

1°  A  bank  cannot  estabhsh  a  branch  in  the  absence  of  statutory  per- 
mission. Bruner  v.  Citizen's  Bank,  134  Ky.  283,  120  S.  W.  345  (1909),. 
Banks  can  only  be  lawfully  organized  and  authorized  to  do  business  in 
Kentucky  as  provided  by  the  banking  law.  Commercial  Banking  etc.  Co. 
V.  Citizens'  Trust  etc.  Co.,  153  Ky.  566,  156  S.  W.  160,  1915C  Ann. 
Cas.  166,  n.,  45  L.  R.  A.  (n.  s.)  950,  n. 

The  Superior  Court  can  confer  no  power  upon  a  corporation  to  do  a 

44 


ORGANIZATION  §  14 

giving  the  same  rights  to  all  persons  who  fulfil  the  conditions  as 
to  number,^  of  those  combining  to  form  the  company,  amount  of 
capital,^  manner  of  paying  it  in/  making  the  organization  certifi- 
cate,*^ and  having  it  properly  acknowledged  and  recorded.^ 

It  may  extend  its  corporate  existence  by  complying  with  the 
requirements  of  statute.^" 

banking  business.  Steed  v.  American  National  Bank,  136  Ga.  693,  71 
S.  E.  1116  (1911). 

When  a  banking  corporation  is  attempted  to  be  formed  in  a  territory 
where  there  is  no  hiw  autliorizing  a  banking  corporation,  but  a  law  is 
subsequently  passed  providing  that  any  company  theretofore  incorporated 
for  doing  a  banking  business  should  be  entitled  to  all  the  privileges,  im- 
munities and  powers  conferred  by  the  amended  statutes  on  its  filing  a 
certificate  with  the  secretary  of  the  territory  setting  forth  its  acceptance 
of  the  statute,  such  bank,  though  not  filing  the  certificate,  is,  upon  sub- 
sequentlv  receiving  deposits,  a  de  facto  corporation.  Mason  v.  Stevens, 
16  S.  D.  320,  92  N.  W.  424  (1902). 

The  repeal  of  a  general  banking  incorporation  law  should  not  be  con- 
strued as  intended  to  repeal  the  charters  of  corporations  formed  under 
such  law  previous  to  its  repeal  when  the  manifest  purpose  of  the  repealing 
act  is  to  revise  the  former  laws  upon  the  subject,  and  make  sul)stitution 
without  changing  its  general  policy  to  interfere  with  corporations  formed 
under  it.  Smock  v.  Farmers'  Union  State  Bank,  22  Okla.  825,  98  Pac. 
945  (1908). 

In  Georgia  a  statute.  Acts  1898,  p.  78,  authorizing  the  Secretary  of 
State  to  grant  charters  to  trust  companies  with  banking  privileges  is  not 
a  violation  of  article  3,  section  7,  paragraph  18  of  that  State  as  the  com- 
panies provided  for  in  the  act  are  embraced  within  the  description  "bank- 
ing" as  used  in  the  constitution.  Mulherin  v.  Kennedy,  120  Ga.  1080, 
48  S.  E.  437  (1904). 

2  In  Massachusetts,  ten  or  more.  R.  L.  c.  115,  §  1.  National  bank, 
five  or  more.     Part  11.  §  5. 

'  One  hundred  thousand  to  one  million  in  Massachusetts.  P.  S.  673. 
National  bank,  see  Part  II.  §  7.  In  Missouri  only  five  thousand  is 
required  of  private  bankers.  State  v.  Cook,  174  Mo.  100,  73  S.  W.  489 
(1903). 

''  In  Massachusetts  one  half  must  be  in  the  bank  vaults  in  gold  and 
silver,  and  examined  by  tliree  commissioners,  before  the  l)ank  can  go  into 
operation,  and  a  majority  of  tlie  directors  must  take  oath  that  the  money 
was  paid  in  by  the  stockholders  towards  the  payment  of  their  respective 
shares,  and  not  for  any  other  purpose.  R.  L.  c.  115,  §  3.  National  bank, 
Part  II.  §  14. 

*  A  Massachusetts  certificate  must  state  the  corporate  name,  city  or 
town  of  location,  amount  and  number  of  shares  of  capital  stock,  name, 
residence,  and  shares  of  each  stockholder,  and  the  time  the  bank  is  to  go 
into  operation.     R.  L.  c.  115,  §  4.     National  bank,  see  Part  II.  §  6. 

See  Jones  v.  Cook,  174  Mo.  100,  23  S.  W.  489  (1903). 

^  Massachusetts  certificate  must  be  acknowledged  before  a  justice,  re- 
corded in  registry  of  deeds  for  county  or  district  of  bank's  location,  and  a 
copy  filed  in  office  of  the  State  secretary.  R.  L.  c.  115,  §  4.  National 
bank,  see  Part  II.  §  6. 

«"  Cascade  Bank  r.  Yoder,  39  Mont.  202,  103  Pac.  499  (1909). 

45 


§  14  ORGANIZATION    AND    LOCATION 

a.  The  Evidence "  of  the  Bank's  Existence  is  the  organization 
certificate/"  or  the  charter,  as  the  case  may  be.  The  former  is 
brought  before  the  court  by  certified  copy ; '"'  the  latter  will  in 
some  States  be  judicially  noticed;  ^  in  others,  it  must  be  pleaded 
and  proved.^ 

'  Where  a  note  is  given  to  a  bank,  the  maker  cannot  afterwards  deny 
the  right  of  the  bank  to  sue  thereon  on  the  ground  that  the  said  bank  has 
not  corporate  existence.  Exchange  National  Bank  v.  Capps,  32  Neb.  242, 
49  N.  W.  223  (1891) ;  Bair  v.  Bank,  27  Neb.  577,  43  N.  W.  347  (1889) ; 
Missouri  Valley  Land  Co.  v.  Bushnell,  11  Neb.  192,  8  N.  W.  389;  Platb 
Valley  Bank  v.  Harding,  1  Neb.  4G1.  A  person  who  has  dealt  with  a  de 
facto  banking  company  cannot  object  to  defects  in  its  organization  as 
affecting  its  capacity  to  sue,  in  order  to  avoid  a  joint  liability  to  it.  Bank 
of  Port  Jefferson  v.  Darling,  91  Hun  (N.  Y.),  236;  Camp  v.  Land,  122 
Cal.  167,  54  Pac.  839;  R.  L.  c.  115,  §  4;  Part  II.  §  6.  In  New  York 
corporate  existence  need  not  be  proved  unless  denied  in  the  answer.  Code 
Civ.  Prac.  §  1776.  The  comptroller's  certificate  under  United  States, 
Rev.  Sts.  §  5169,  is  conclusive  as  to  the  regularity  of  the  proceedings  or- 
ganizing a  national  bank.  Casey  v.  Galli,  94  U.  S.  673,  24  L.  ed.  1G8 ; 
Keyser  v.  Hitz,  2  Mackey  (D.  C.)  514  (1883).  Such  certificate  that  the 
bank  has  complied  with  the  law,  etc.,  and  was  authorized  to  do  business, 
and  proof  that  it  has  done  business  for  several  years,  is  good  evidence  of 
existence.  Mix  v.  National  Bank  of  Bloomington,  91  111.  20  (1878)  ;  Hall- 
stead  V.  Coleman,  143  Pa.  St.  352, 22  Atl.  977.  Where  a  bank  has  taken  steps 
to  extend  its  corporate  existence  and  has  thereafter  operated  and  been 
treated  as  a  banking  corporation  a  borrower  is  estopped  to  deny  that  it 
had  no  legal  existence.  Campbell  v.  Perth  Amboy  Shipping  Co.,  70  N.  J. 
Eq.  40,  62  Atl.  319  (1905).  When  a  mortgage  recites  that  a  deed  is  sub- 
ject to  the  claim  of  a  particular  bank  it  imports  that  such  bank  is  a  corpora- 
tion.    Anglo-CaUfornia  Bank  v.  Field,  146  Cal.  644,  80  Pac.  1080  (1905). 

^«  If  a  state  bank  complies  with  the  statute  in  increasing  its  capital 
stock  and  in  extending  the  term  of  its  corporate  existence  the  Secretary  of 
the  State  must  file  the  certificate  extending  the  terms  of  corporate  existence. 
Cascade  Bank  v.  Yoder,  39  Mont.  202,  103  Pac.  499  (1909).  If  he  refuses 
to  issue  the  certificate  to  one  qualified  to  receive  it  the  Court  may,  by 
mandamus,  compel  him  to  do  so.  State  v.  Cook,  174  Mo.  100,  73  S.  W. 
489  (1903). 

^^  In  First  National  Bank  v.  Schmitz,  90  Minn.  45,  95  N.  W.  577  (1903), 
the  question  is  not  decided  whether  original  must  be  presented  or  whether 
the  certified  copy  is  sufficient. 

8  Shaffer  v.  Hahan,  111  N.  C.  1,  15  S.  E.  1033  (1892)  ;  National  Bank 
V.  Galland,  14  Wash.  502,  45  P.  35  (1896) ;  Stribbling  v.  Bank,  5  Rand. 
(Va.)  132;  Bank  of  Utica  v.  Magher,  18  Johns.  (N.  Y.)  341;  Vance  v. 
Bank,  1  Blackf.  (Ind.)  80;  Towson  v.  Havre  de  Grace  Bank,  6  Har.  & 
J.  (Md.)  47;  Williams  v.  Union  Bank,  2  Humph.  (Tenn.)  339;  Hays  v. 
Northwestern  Bank,  9  Graft.  (Va.)  127.  The  court  will  take  judicial 
cognizance  of  the  expiration  of  a  bank  charter,  and  thereupon  dismiss  an 
action.  Terry  v.  Merchants  &  Planters'  Bank,  G6  Ga.  177.  The  West 
Virginia  courts  will  take  judicial  notice  of  the  Virginia  act  incorporating 
the  Northwestern  Bank  of  Virginia ;  its  existence  being  preserved  by  the 
West  Virginia  constitution  of  1863,  art.  11,  §  8,  and  of  1S72,  art.  8,  §  36. 
Northwestern  Bank  of  Virginia  v.  Maehir,  18  W.  Va.  271  (1881). 

46 


THE    ANCILLARY    POWEKS    OF   THF:    BANK  §  15 

b.  A  bank  continues  in  existence  until  its  cliarter  has  expired 
or  it  has  suffered  a  forfeiture,  or  a  judgment  of  dissohition  has 
been  ordered  against  it.^°  After  its  existence  is  once  proved  tlie 
presumption  is  that  it  continues  to  exist,  and  the  court  will  take 
judicial  notice  that  a  national  bank  is  chartered  for  twenty  years, 
but  it  will  not  take  such  notice  that  its  existence  is  extended  at 
the  expiration  of  the  twenty  years."  But  one  who  executes  a 
mortgage  to  a  bank  after  the  terms  of  its  corporate  existence  has 
expired  is  estopped  to  deny  that  it  had  no  such  existence  when 
the  note  and  mortgage  were  executed. ^^ 

§  15.  The  Ancillary  Powers  of  the  Bank.  —  The  powers  of  a 
bank  may  be  conveniently  divided  into  powers  of  doing  business 
(see  §  44),  and  those  subservient  to  business,  or  ancillary  powers. 

9  Haas  V.  Bank  of  Commerce,  41  Neb.  754,  60  N.  W.  85  (1894) ;  Davis 
V.  Nebraska  National  Bank,  51  Neb.  401,  70  N.  W.  903  (1897) ;  Agncw  v. 
Bank  of  Gettysburg!:,  2  Ilarr.  &  G.  (Md.),  478;  First  National  Bank  of 
Clarion  v.  Gruber,  87  Pa.  St.  468.  In  the  latter  case  the  court  refused  to 
take  notice  of  the  charters  of  State  banks  as  authorizing  them  to  charge  a 
higher  rate  of  interest  than  the  ordinary  rate,  but  said  that  a  bank  charter 
is  a  private  act,  and  must  be  pleaded  and  proved  like  other  private  acts, 
and  the  national  bank  basing  its  claim  to  charge  a  certain  rate  on  the 
existence  of  said  charters  must  prove  them. 

Where  to  suit  by  a  cori)oration  the  general  issue  is  pleaded,  the  corpo- 
ration must  prove  its  legal  existence.  In  New  York  it  was  held  that 
even  the  Bank  of  the  United  States  was  not  entitled  to  be  excepted  from 
this  rule.  United  States  Bank  v.  Stearns,  15  Wend.  (N.  Y.)  314.  But 
this  requirement  has  since  been  dispensed  with  in  New  York  by  special 
statute  (2  R.  S.  458,  §  3).  Bank  of  Genesee  v.  Patchin  Bank,  3  Kern. 
(N.  Y.)  309. 

Where  a  suit  to  recover  upon  worthless  bills,  which  have  been  issued 
by  a  banking  corporation,  is  lirought  against  those  who  are  alleged  to 
have  been  the  officers  and  directors  of  the  corporation,  the  charter  must 
be  proved,  if  its  existence  is  necessary  to  make  the  bank  a  corporate 
body.     Gardner  v.  Post,  43  Pa.  St.  19. 

In  Nebraska  parol  testimony  was  held  admissible  in  sho^^^ng  corporate 
existence.     Shabata  v.  Johnston,  53  Neb.  12,  73  N.  W.  278  (1897). 

And  in  Washington  it  was  held  that  acceptance  of  a  charter  of  incorpo- 
ration might  be  shown  bv  user.  Lancaster  Savings  Bank  v.  Elwell,  17 
Wash.  44(),  49  Pac.  1070  (1897). 

See  Chicago  State  Bank  v.  Carr,  130  N.  C.  479,  41  S.  E.  876  (1902), 
where  the  existence  of  a  corporation  was  proved  by  a  certified  copy  of  its 
amended  charter. 

10  Wilson  V.  First  State  Bank,  77  Kan.  589,  95  Pac.  404  (1908).  See  also 
State  t-.  Barkman,  91  Ohio  St.  248,  110  N.  E.  540  (1915);  In  re  Union 
Bank,  147  App.  Div.  593  (1911),  133  N.  Y.  S.  621 ;  Campbell  v.  Watson, 
62  N.  J.  Eq.  396,  50  Atl.  120  (1901) 

11  Yankton  National  Bank  v.  Benson,  33  S.  D.  399,  146  N.  W.  582, 
1916B  Ann.  Cas.  1011,  n. 

12  Citizens'  Bank  v.  Jones,  117  Wis.  446,  94  N.  W.  329  (1903). 

47 


§  15  ORGANIZATION   AND    LOCATION 

The  latter  powers  or  rights  are,  to  have  perpetual  succession  under 
a  special  denomination  and  artificial  form,  to  sue  °  and  be  sued  in 
the  corporate  name,  to  have  a  corporate  seal,  to  appoint  officers 
and  agents  (§  16),  and  take  bonds  for  their  good  behavior  (§  17), 
and  to  make  by-laws  for  the  government  of  its  affairs  and  the  con- 
duct of  its  members  and  officers  (§  43). 

These  are  all  powers  inherent  at  common  law  in  every  corporation, 
but  are  usually  expressly  conferred  in  the  organic  law  (see  II.  §  8). 

And  express  power  is  usually  given  in  the  organic  law  to  increase 
or  reduce  the  capital  stock  within  certain  limits,  which  is  an  express 
ancillary  power. ^ 

§  16.  The  Apppointment  and  Qualification  of  Officers  are  gen- 
erally provided  for  in  the  charter ;  usually,  the  directors  ^  are 
chosen  annually  by  the  stockholders,  and  are  removable  by  a 
special  meeting  of  the  shareholders  for  that  purpose.  The  direc- 
tors must  have  certain  qualifications^  of  citizenship,  residence, 
and  ownership  of  shares  in  the  bank.  Once  properly  elected  they 
hold  office  till  their  successors  are  electedj^or  until  they  are  disquali- 
fied, or  they  or  the  corporation  die,  or  the  time  for  which  they 
were  elected  expires. 

Term  of  Office 

The  directors  elect  one  of  their  number  president,  and  appoint 
a  cashier,^  and  such  clerks,  tellers,  and  other  officers  as  they  deem 

"  §  15.  A  bank  whose  chartered  period  of  existence  has  not  expired 
and  which  has  not  been  dissolved,  may  sue  on  a  note  even  though  it  has 
voluntarily  proceeded  to  wind  up  its  affairs  as  a  bank,  surrendered  to  the 
bank  commissioner  its  certificate  to  transact  business  as  a  bank,  paid 
all  its  depositors  in  full  and  ceased  to  transact  any  business  as  a  bank. 
Wilson  V.  First  State  Bank,  77  Kan.  589,  95  Pac.  404  (1908). 

1  The  R.  L.  of  Mass.  c.  115,  §  8,  as  provides  for  increase  of  capital  by 
three-fourths  vote  of  stockholders.  For  increase  and  reduction  of  capital 
of  national  banks  when  provided  for  in  articles  of  association  and  ap- 
proved by  comptroller,  see  Part  II.  §  13. 

1  §  16.  In  Massachusetts  seven  to  twelve  directors ;  each  must  have 
five  shares  at  least,  be  a  citizen  of  Massachusetts  and  resident  there,  not  a 
director  in  any  other  bank,  and  a  majority  of  them  must  reside  or  have 
their  places  of  business  in  the  county  of  the  bank,  or  within  ten  miles  of 
the  bank.     R.  L.  c.  115,  §§  17,  18.     National  bank,  see  Part  II.  §  9. 

=  Part  II.  §  10,  settles  the  tenure  of  office  of  national  bank  directors : 
they  hold  for  one  year  plus  any  further  time  passing  before  their  succes- 
sors are  elected  and  qualified,  unless  sooner  disqualified,  removed,  etc. 

The  term  of  office  of  a  director  in  a  bank  organized  under  the  Massa- 
chusetts statutes  is  one  year.     R.  L.  c.  115,  §  19. 

3  In  Massachusetts  the  cashier  cannot  be  a  director  of  the  bank  in 
which  he  is  cashier.     R.  L.  c.  115,  §  29. 

48 


THE    APPOINTMENT   AND    QUALIFICATION    OF   OFFICERS  §  16 

proper  for  the  business  of  the  bank.^  The  term  of  office  in  these 
cases  may  be  fixed  by  the  organic  law,  or  the  l)y-la\vs,  or  by  %'ote 
of  the  corporate  government;  but  unless  limited,  the  officer  holds 
until  a  successor  is  elected,  or  he  is  removed,  or  dies,  or  isdisqualificd, 
or  the  bank  ceases  to  exist,  as,  for  example,  by  expiration  of  char- 
ter.^ But  the  fact  that  the  directors  are  by  the  charter  to  be 
annually  elected,  and  that  they  have  the  appointment  of  the 
cashier,  does  not  of  itself  make  the  office  of  cashier  annual,^ 
nor  does  a  mere  habit  of  the  directors  to  re-elect  every  year  make 
the  office  an  annual  one,  so  as  to  expire  before  a  successor  is  elected 
and  qualified.^  Of  course,  where  the  directors'  ofiice  is  annual 
and  the  president  is  one  of  them,  his  office  also  is  annual. 

Bond 

Whether  required  ®  by  the  organic  law  or  not,  it  is  usual  to  secure 
the  bank  by  requiring  the  cashier  and  subordinate  officers  to  give 
a  bond  for  the  faitliful  discharge  of  official  duty,  and  as  this  is  one 
of  the  points  around  which  the  cases  cluster,  we  will  devote  a 
chapter  to  it. 

*  These  officers  are  removable  by  the  appointing  power.  They  are  the 
servants  or  agents  of  the  corporation  and  not  of  the  directors.  Dehin  v. 
Moore,  64  Or.  433,  130  Pac.  35  (1913). 

5  But  the  charter  period  may  expire,  and  yet  the  bank  not  cease  to 
exist ;  for  the  legislature  may  prolong  its  life,  and  then  the  tenure  of  office 
may  not  be  broken  by  arrival  of  the  limit  first  set.  Exeter  Bank  v. 
Rogers,  7  N.  H.  21.     See  §  27. 

s  Union  Bank  v.  Ridgely,  1  Harr.  &  G.  (Md.)  413. 

'  Amherst  Bank  v.  Root,  2  Met.  (Mass.)  522. 

8  R.  L.  of  Mass.  c.  115,  §  27,  requires  a  bond  not  less  than  S20,000  of 
the  cashier.     See  Part  II.  §  8. 


VOL.  I- 


49 


CHAPTER  III 

OFFICIAL  BONDS  AND   LIABILITIES   OF   SURETIES 

§  17.  General  rule  and  difficulties  stated. 

§  18.  Defences,  anah^sis  of. 

§  19.  Form  and  requisites. 

§  20.  Delivery  and  acceptance. 

§  21.  Fraud  or  illegality  at  inception. 

§  22.  Do  not  cover  loss  by  act  of  other  than  the  officer,  as  by  theft. 

§  23.  Or  loss  by  innocent  mistakes. 

§  24.  Negligence  of  officer. 

§  25.  Exceeding  his  authority. 

§  26.  Unusual  duties  given  him.     See  §  17  a. 

§  27.  Period  covered  by  the  bond. 

§  §  28-32.  Change  in  circumstances  affects  risk.     See  §  17  o. 

§§  33,  37-41.   Misconduct  and  negligence  of  bank  or  other  officers.     See 

§  17  a. 
§  34.  Satisfaction  of  bank's  loss. 

§  35.  Statute  of  limitations. 

§  36.  Revocation  by  surety. 

(Evidence. 
Measure  of  damages. 
Pleading  and  practice. 
§  17,  n.  3.         Construction. 
In  general. 
§  24.  "Well  and  faithfully  ",  "well  and  truly  ",  to  discharge.^ 

§  24.  (Penn.)  "Well  and  truly  to  perform  duties  to  best  of  his  abilities." 

§  23.  "Deliver  to  his  successor  all  moneys",  etc. 

§  26,  n.  0".  "Perform  all  duties  of  office  which  the  directors  may 

prescribe." 
§25.  (Va.)  "FaitMul  discharge  of  the  trust  reposed  in   (him)  as 

assistant  bookkeeper." 
§  41.  Express  stipulation  of  the  maximum  sum  to  be  intrusted 

to  clerk. 

§  17.  Bonds.  —  Power  to  take.  —  Purpose. —  Summary  of  Chap- 
ter. —  The  custom  of  requiring  bonds  from  the  various  officers 
may  probably  be  considered  as  universal  among  banking  insti- 
tutions. Usually  they  are  taken  only  from  the  executive  officers ; 
most  frequently  from  the  cashier  and  tellers,  sometimes  from  the 
bookkeepers ;  and  there  are  instances,  though  these  are  compara- 
50 


BONDS  —  POWER  TO  TAKE  —  PURPOSE  —  SUM^L^RY  OF  CHAPTER   §  17 

lively  rare,  in  whicli  they  have  been  taken  even  from  the  president 
and  directors. 

The  power  to  take  oflScial  bonds  is  inherent  in  every  corporation 
independently  of  statute.^ 

The  purpose  ^  of  the  bond  is  not  penalty,  but  indemnity  against 
loss  by  fault  of  the  officer,  in  the  transaction  of  the  business  of  his 
office,  or  by  reason  of  the  opportunities  it  affords  him.  It  is  not 
for  the  benefit  of  the  bank  but  for  the  benefit  and  protection  of 
the  public. 2" 

The  questions  arising  on  the  execution,  delivery,  acceptance, 
construction,^  and  revocation  *  of  bonds,  and  in  relation  to  the  dis- 

1  §  17.  The  National  Banking  Act,  §  8,  declares  that  the  association 
"may  elect  or  appoint  directors,  and  by  its  board  of  directors  appoint  a 
president,  \'ice-president,  cashier,  and  other  officers,  define  their  duties, 
require  bonds  of  them,  and  fix  the  penalty  thereof"  etc.  It  is  evident 
that  this  gives  no  right  to  the  association  to  require  ])onds  of  a  director, 
at  least  unless  he  shall  also  fill  some  other  office.  liut  this  does  not 
render  the  taking  of  a  bond  from  a  director  illegal ;  nor  does  it  prevent 
such  a  bond  from  being  valid  at  common  law.  It  only  deprives  the  bond 
of  a  statutory  character,  which  is  an  insignificant  loss,  inasmuch  as  it 
seems  to  be  attended  by  no  very  definite  practical  advantage.  The 
power  to  take  official  bonds  is  inherent  in  every  corporation,  indepen- 
dently of  statutory  permission;  and  the  permission  or  the  command  to 
take  them  from  any  particular  officers  cannot  be  construed  to  preclude 
the  power  of  taldng  them  from  others  also.  Bank  of  Northern  Liberties 
V.  Cresson,  12  Serg.  &  R.  (Pa.)  30G. 

It  is  clear  also  that  a  bond  may  be  void  as  a  statutory  bond,  by  reason 
of  variance  from  the  requirements  of  the  statute  under  which  it  purports 
to  be  drawn,  and  yet  be  valid  as  a  common  law  bond.     See  §  19. 
-  See  measure  of  damages,  §  42. 

2"  Watertown  Sav.  Bank  v.  Mattoon,  78  Conn.  388,  G2  Atl.  622  (1905). 
3  Most  of  the  matters  treated  in  this  chapter  are  questions  of  construc- 
tion. No  particular  form  of  words  is  necessary  to"  be  observed  in  the  con- 
tract of  suretyship,  and,  in  its  construction,  there  is  no  reason  why  courts 
should  not  be  governed,  as  in  all  other  contracts,  by  the  rule  that  t^lie  actual 
intention  of  the  parties  must  prevail.  Fink  v.  Farmers'  i?ank,  178  Pa.  St. 
154,  169,  35  Atl.  636.  So  where  a  bond  is  susceptible  of  two  constructions, 
one  favoral)le  to  the  bank,  and  the  other  to  the  surety,  the  former,  if  con- 
sistent with  the  purpose  of  the  bond,  must  be  adopted,  especiaHy  where  the 
bond  is  drawn  bv  the  surety.  American  Surety  Co.  v.  Pauly,  170  U.  S.  133, 
144,  42  L.  cd.  977,  982,  18  Sup.  Ct.  552  (1897).  And  where  the  bond  is 
inartificiallv  and  clumsily  drawn,  so  that  the  careless  collocation  of  incon- 
sistent words  would  lead  to  absurdities  if  a  literal  construction  were  at- 
tempted, the  court  will  revise  and  correct  the  language  so  as  to  render  it 
conformable  to  reason.  Planters  &  Merchants'  Bank  v.  Hill,  1  Stew. 
(Ala.)  201. 

The  phraseology  of  the  bond,  upon  which  the  litigation  in  the  cited 
case  arose,  furnishes  a  fair  example  of  the  method  of  application  of  this 
rule.  The  condition  of  the  bond  was  that  the  cashier  should  "with  fidelity, 
punctuality,  and  attention,  to  the  best  of  his  skill,  judgment,  and  abihty, 

51 


§  17  OFFICIAL   BONDS   AND    LIABILITIES    OF   SURETIES 

charge  of  sureties  by  fraud,  or  misconduct  of  the  bank,  or  officers 
other  than  the  one  guaranteed,  can  be  very  conveniently  grouped 
under  the  various  defences  a  surety  may  make,  adding  in  our 
notes  a  few  points  in  reference  to  evidence,  measure  of  damages, 
and  pleading  and  practice  in  general. 

a.  Liability  of  a  Surety.  —  Express  words  may  insure  against 
even  innocent  mistake  or  accident. 

But  in  the  case  of  an  ordinary  bond  for  the  faithful  discharge 
of  the  duties  of  a  certain  oflBce,  C,  by  a  certain  person,  O.,  the 
surety  is  liable  for  all  loss  caused  by  the  dishonest  or  incompetent  '^ 
(unless  this  is  excluded  by  the  language  of  the  bond)  conduct  of 
O.  in  the  sphere  of  said  office  (including  such  slight  variations^ 
and  temporary  substitutions  as  are  likely  to  occur  in  the  ordinary 
course  of  business),  or  by  his  taking  advantage  of  the  opportunities  ^ 
of  his  employment  in  such  office  to  commit  a  criminal  or  tortious  act, 
during  the  time  ^  he  lawfully  holds  such  office  under  the  election 
to  which  the  bond  relates. 

But  difficult  questions  arise.  Suppose  the  directors^  order  O. 
to  do  a  wrongful  act,  from  which  loss  results  to  the  bank,  or  by 

conduct  himself  in  said  office  well  and  truly,  discharging  all  its  duties, 
executing  the  orders  of  the  directors  of  said  bank,  safely  and  securely 
keeping  all  moneys  deposited  in  his  hands",  and  doing  a  great  multiplicity 
of  other  "duties,  acts,  and  things",  "all  and  singularly",  according  to  the 
descriptions  contained  in  several  more  adjectives  and  adverbs.  The 
writer  of  the  bond  was  evidently  floundering  in  a  sea  of  words,  and  the 
court  was  obliged  to  come  gallantly  to  the  rescue.  They  declared  that  it 
was  evident,  from  the  very  nature  of  the  language,  that  it  was  not  intended 
to  apply  all  the  restrictions  to  each  particular  duty  ;  but  that  an  intelligent 
apportionment  should  be  made  of  the  various  expressions  among  the 
divers  "duties,  acts,  or  things"  respectively,  as  from  their  several  natures 
they  might  be  susceptible  of  the  qualifications  mentioned.  Thus  "punc- 
tuality" could  hardly  be  called  for  in  "keeping"  but  rather  in  "account- 
ing for"  or  "paying  over"  money.  On  the  other  hand,  "judgment  and 
ability"  might  be  required  in  "keeping",  and  "sldll"  in  "accounting", 
but  neither  of  these  qualities  could  be  of  much  assistance  in  the  business  of 
"paying  over."  The  surety  will  never  be  held  to  guarantee  the  perform- 
ance of  the  duties  of  a  pubUc  office  in  a  manner  either  absurd  or  impossible, 
simply  because  an  awkwardly  phrased  bond  would  subject  him  to  this 
obligation  if  an  effort  were  made  to  construe  it  strictly  according  to  its 
wording. 

A  bond  conditioned  that  the  bank  should  keep  "all  said  sums  so  de- 
posited, or  to  be  deposited  as  aforesaid"  implies  that  a  deposit  had  already 
been  made  and  that  the  sureties  were  liable  for  its  safe  keeping  as  well  as 
for  the  safekeeping  of  subsequent  deposits.  Kephart  v.  Buddetke,  20 
Colo.  App.  546,  80  Pac.  501  (1905). 

'  See  §  36.  ^  §  24.  «  §  26. 

^§25.  8  §27.  3  §§37,  33. 

52 


BONDS  —  POWER   TO    TAKE  —  PURPOSE  —  SUMMARY   OF   CH.\PTER       §   17 

their  negligence  or  connivance  give  him  the  opportunity  for 
wrong,  is  the  surety  discharged  ?  It  may  be  said  the  hank  intrusts 
its  business  to  the  directors,  and  their  acts  bind  it,  and  others 
prejudiced  by  their  conduct  are  not  to  be  held  by  the  bank.  The 
answer  is,  that  the  directors  are  not  intrusted  to  do  wrong,  and 
that  the  surety  does  not  have  to  bear  loss  caused  by  them  but  b\' 
O.,  whom  he  has  guaranteed,  and  the  fault  of  any  other  officer 
cannot  **"  make  O.'s  wrong  less  a  breach  of  his  bond.  If  the 
stockholders  themselves  are  guilty  of  wrong,  that  would  be  a  diirercnt 
question ;  they  are  the  real  principal  ^^  on  the  bond,  and  such 
conduct  would  be  a  fraud  on  the  surety  that  ought  to  discharge 
him. 

Suppose  again  that  O.'s  salary  is  increased  or  diminished,  or  the 
bank's  capital  is  raised,  or  O.  is  given  duties  outside  the  si)here 
contemplated  in  the  bond  as  above.  How  shall  these  things 
affect  the  obligation  ? 

Change  of  Officers'  Duties 

On  principle  it  would  seem  clear,  1st,  that  if  the  loss  is  caused 
by  the  employment  of  O.  out  of  his  sphere,  the  surety  is  not  liable, 
and  to  this  the  cases  agree ;  ^°  2d,  that  if  it  can  be  clearly  shown 
that  the  extra  duties  had  nothing  to  do  with  the  loss,  but  that  it 

^  A  bond  would  be  of  little  value  were  the  law  otherwise.  Suppose 
M.  employs  A.  as  a  manager  and  B.  as  cashier,  and  D.  is  surety  for  both. 
If  either  A.  or  B.  makes  default,  he  is  hable  to  M. ;  but  if  A. 's  fault,  giving 
B.  opportunity  for  WTong,  is  to  reheve  the  surety,  then  he  is  liabk^  only  on 
one  bond,  though  both  arc  broken.  If  B.  defaults,  S.  is  liable;  if  A. 
defaults,  S.  is  liable ;  but  if  they  put  their  heads  together  he  is  only  liable 
for  one  of  them.  Or,  if  D.  insures  B.,  and  C.  insures  A.,  in  ease  of  fault  of 
A.  giving  C.  his  opportunity,  only  C.  would  be  liable.  This  seems  a  good 
deal  like  saying  two  wrongs  together  against  the  same  person  make  one  of 
them  right. 

Again,  suppose  the  manager  comes  to  know  the  cashier  is  stealing,  and 
he  buys  silence.  Can  the  cashier,  the  principal  on  his  own  bond,  take 
advantage  of  his  own  wrong  to  deny  his  liability  on  the  bond  to  ]M.? 
And  if  the  principal  is  liable  on  the  bond,  is  not  the  surety? 

As  to  third  persons  generally,  who  are  injured  by  the  negligence  or 
misconduct  of  the  directors  in  the  business  intrusted  to  them,  the  bank 
is  liable ;  but  when  a  person  has  made  an  express  contract,  the  very  pur- 
pose and  nature  of  which  is  inconsistent  with  the  idea  of  holding  the  bank 
to  such  responsibility,  the  case  fronts  about. 

"''  Any  fraud  or  improper  conduct  of  the  creditor  or  obligee  will  dis- 
charge the  surety.  Ham  v.  Greve,  34  Ind.  19  ;  Franklin  Bank  v.  Cooper, 
3G  Me.  179. 

ia§§  30,  26. 

53 


§  17  OFFICIAL   BONDS    AND    LIABILITIES    OF   SURETIES 

was  caused  by  O.'s  conduct  in  the  sphere  of  the  office  C,  or  by 
a  wrongful  advantage  of  the  opportunities  afforded  by  that  office, 
the  surety  should  be  held,  for  it  is  a  loss  within  the  bond  (unless 
of  course  there  is  an  express  provision  that  extra  duties  shall  avoid 
the  contract). 

To  this  second  proposition  the  cases  do  not  assent^*'  if  the  duties 
are  of  a  higher  grade  {i.e.  require  more  skill,  or  put  the  officer  under 
greater  temptation)  than  those  of  the  bonded  office.  In  such  cases 
the  increase  of  risk  avoids  the  bond.  The  surety  has  a  right  to 
judge  of  the  circumstances  under  which  he  is  willing  to  be  liable, 
and  any  change  of  the  risk  without  his  consent  discharges  him, 
ur.Iess  unsubstantial  or  clearly  for  his  benefit. 

It  may,  however,  be  strongly  urged  that  justice  only  requires 
that  the  burden  of  proof  should  be  thrown  upon  the  bank  in  such 
cases  to  show  clearly  that  the  loss  was  not  in  consequence  of  the 
change.  In  most  cases  the  two  rules  would  produce  identical 
results,  as  it  would  usually  be  impossible  to  disentangle  the  in- 
fluences producing  the  officer's  default,  and  on  the  broad  con- 
sideration of  practicality  the  rule  of  law  is  perhaps  the  best,  as 
preventing  troublesome  inquiry  in  favor  of  one  who  has  by  his 
own  act  put  a  cloud  upon  his  rights.  The  analogy  of  goods 
mingled  by  negligence  or  wilful  act  is  against  the  rule  of  law  here, 
for  the  owner  can  claim  the  goods  if  he  can  clearly  distinguish 
them. 

The  ground  for  holding  the  surety  discharged  is,  that  the  cause 
of  loss  may  be  conduct  outside  the  bond,  and  if  this  can  be  success- 
fully rebutted  the  ground  fails.  Nor  does  the  rule  of  law  seem 
necessary  to  prevent  fraud,  for  the  burden  of  proof  would  do  that 
as  well ;  however,  as  the  law  is  well  settled  and  known,  it  can 
work  little  injustice. 

It  might  be  urged  that,  as  the  fault  of  directors  cannot  discharge 
the  surety,  the  addition  of  higher  duties  by  the  directors  should 
not ;  but  the  reason  of  release  of  the  surety  is  that  the  cause  of 
loss  may  be  outside  the  bond,  and  this  reason  is  not  touched  by 
any  consideration  of  the  manner  in  which  O.  came  to  act  beyond 
the  office  C. 

Increase  of  Capital  or  Salary 

As  to  the  increase  of  capital,"  the  arguments  are  about  bal- 
anced as  to  whether  it  is  an  enlargement  of  risk  fairly  to  be  pre- 
sumed within  the  contemplation  of  the  bond,  or  not. 
i«  §§  30,  26.  "  §  32. 

54 


DEFENCES  §  18 

But  the  diminution  or  increase  of  salary  ^^  [^  so  ordinary  a  matter, 
so  naturally  to  be  expected,  and  of  so  little  importance  to  the  risk, 
as  to  seem  clearly  of  no  effect,  though  it  has  been  held  otherwise. 

§  18.    Defences. 

(a)  That  the  bond  never  took  effect. 

(1)  Formal  requisites  absent.     §19. 

(2)  No  delivery  and  acceptance.     §  20. 

(3)  Fraud  or  illegality  in  its  inception.     §  21 . 

(b)  That  the  loss  is  not  of  a  nature  covered  by  the  bond. 

(1)  Loss    by    theft,    robbery,    unavoidable    accident, 

or  other  cause  not  involving  fault  of  the  officer 
(O.)  guaranteed.     §  22. 

(2)  Loss  by  innocent  mistake  of  O.     §  23. 

(3)  Loss  by  conduct  of  O.,  beknv  the  line  of  ordinary 

skill,  competency,  and  care.     §  24, 

(4)  Loss  by  act  of  O.  in  excess  of  his  authority.     §  25. 

(5)  Loss   })y   O.    in    performing    extra    and    unusual 

duties,  or  such  as  do  not  pertain  to  the  sphere 
in  which  he  was  guaranteed.     §  26. 

(c)  That  there  was  no  act  of  O.  of  a  nature  to  create  liability 

of  the  sureties  occurring  within  the  period  covered  by 
the  bond.     §  27. 

(d)  Discharge  of  the  surety. 

(1)  By  a  material  change  not  contemplated  in  the  con- 

tract, as  changes  in  the  banking  firm,  in  the 
duties  of  the  officer,  increase  of  capital  stock 
or  of  the  officer's  salary.     §§  28-32. 

(2)  Misconduct  of  bank  in  keeping  O.  after  discovery 

of  his  dishonesty.     §  33. 

(3)  Satisfaction  of  the  bank's  loss.     §  34. 

(4)  Statute  of  limitations.     §  35. 

(e)  Revocation  previous  to  the  wrongful  act  of  O.     §  30. 

No  Defence. 

(a)  That  the  dishonest,  improper,  or  irregular  act  of  O.  was 

done  under  authority  from  the  directors.     §  37. 

(b)  Nor  that  the  bank  was  negligent  in  not  discovering  pre- 

vious defalcations  of  O.     §  38. 

(c)  Nor  that  the  signature  of  another  surety  was  fraudulently 

obtained.     §21. 

«  §  31. 

55 


§  18  OFFICIAL   BONDS   AND    LIABILITIES   OF   SURETIES 

(d)  Nor  that  a  greater  sum  was  intrusted  to  O.  than  the 

Hmit  set  in  the  bond.     §  41. 

(e)  Nor  that  the  bank  has  failed  to  perform  pubhc  duties, 

or  done  business  contrary  to  its  charter.     §  39. 

(f)  Nor  that  the  officer  failed  to  take  the  oath  required  by 

statute.  §  40. 
§  19.  Form  1  of  the  Bond.  —  The  National  Banking  law  (II.  §  8) 
does  not  specify  the  terms  of  the  bond,  and  the  State  statutes  - 
generally  have  few  provisions  on  the  subject.  As  a  rule,  any 
condition  in  the  bond,  consistent  with  its  character  as  a  guaranty 
that  the  officer  shall  perform  his  contract,  and  not  in  contravention 
of  law,  morals,  or  public  policy,  will  be  sustained. 

Statutory  Bond 

When  there  are  statutory  provisions  to  ivhich  the  bond  fails  to  con- 
form, it  may  still  be  good  as  a  common  law  bond,  unless  the  legislature 
has  declared  that  bonds  not  in  accordance  with  the  statute  shall  be  void.^ 

Although  both  in  its  form  and  in  its  execution  it  should  differ 
very  materially  from  the  special  regulations  prescribed  in  the 
charter  or  statute  in  accordance  with  which  it  purports  to  be 

1  §  19.  Bond  in  name  of  Officers.  A  bond  running  to  the  president  and 
directors,  without  addition  of  the  corporate  name,  will  be  regarded  as  a 
valid  bond  to  the  corporation,  and  may  be  sued  by  the  corporation. 
Pendleton  v.  Bank  of  Kentucky,  1  T.  B.  Monr.  (Ky.)  171. 

Blanks  unfilled.  If  after  an  official  bond  is  duly  signed,  executed,  and 
delivered  to  the  proper  officer  by  the  principal  and  the  sureties,  it  is  found 
that  the  blanks  in  the  body  of  the  instrument,  which  were  left  for  the  names 
of  the  sureties,  have  been  accidentally  left  unfilled,  the  bank  has  authority 
to  insert  the  names.     Hultz  v.  Commonwealth,  3  Grant  (Pa.)  61. 

Date.     Where  the  date  of  the  bond  is  "the day  of  ,  1869",  the 

legal  presumption  is  that  it  took  effect  on  the  last  day  of  that  year.     Graves 
V.  Lebanon  National  Bank,  10  Bush  (Ky.)  23. 

2  In  Massachusetts  the  cashier's  bond  is  to  be  "conditioned  for  the 
faithful  performance  of  his  duties",  and  in  no  case  for  less  than  twenty 
thousand  dollars.     R.  L.  e.  115,  §  27. 

In  Indiana  the  bond  of  the  president  and  cashier  are  "conditioned  that 
they  will  honestly  and  faithfully  discharge  their  several  duties"  with  the 
sum  to  be  fixed  by  the  board  of  directors,  §  3331  Burns  1908,  §  2686  R.  S. 
1881.  Acts  1873,  p.  21,  §  3;  United  States  FideUty  etc.  Co.  v.  Poetkre, 
180  Ind.  2,55,  102  N.  E.  372  (1913). 

3  Bank  of  Brighton  v.  Smith,  5  Allen  (Mass.)  413 ;  Bank  of  Northern 
Liberties  v.  Cresson,  12  Serg.  &  R.  (Pa.)  306 ;  Franklin  Bank  v.  Cooper, 
36  Me.  179  ;  Gathwright  v.  Callaway  County,  10  Mo.  663  ;  The  Governor 
V.  Allen,  8  Humph.  (Tenn.)  176  ;  State  Bank  v.  Locke,  4  Dev.  (N.  C.)  529  ; 
Bank  of  Carhsle  v.  Hopkins,  1  Monr.  (Ky.)  246;  Morse  v.  Hodsdon,  5 
Mass.  314;  Burroughs  v.  Lowder,  8  id.,  373;  Sweetser  v.  Hay,  2  Gray 
(Mass.)  49 ;   Grocers'  Bank  v.  Kingman,  16  Gray  (Mass.)  473. 

56 


DELIVERY  AND  ACCEPTANCE  §  20 

drawn  and  executed,  nevertheless,  as  a  contract  voluntarily  en- 
tered into,  upon  sufficient  consideration  and  for  a  perfectly  k'(;al 
purpose,  it  remains  obligatory  upon  the  parties,  independently 
of  the  statute.  Where  the  bond  difiers  from  the  statutory  form 
only  in  setting  forth  a  greater  number  of  requisitions  to  be  complied 
with  by  the  officer,  if  they  are  severable,  those  of  them  which  are 
not  called  for  by  the  statute  may  be  rejected  as  surplusage.'*  This 
would  render  the  bond  good  under  the  statute,  but  nothing  would 
be  practically  gained  by  it.  For  without  the  severance  and  re- 
jection the  bond  would  still  have  been  good  in  its  original  shape 
at  common  law.  The  operation  of  this  latter  doctrine  can  be  pre- 
vented only  by  the  express  legislative  enactment  that  a  bond 
taken  in  any  other  form  shall  be  void.  No  less  positive  language 
can  be  substituted  for  this  ex-plicit  declaration  with  the  like  eflcet. 
The  words  used  may  amount  to  a  prohibition  against  the  officer's 
entering  upon  the  discharge  of  his  office  until  he  has  given  such 
a  bond.  Still  the  bond  in  the  different  shape  will  remain  good.  It 
w^as  urged  in  the  Brighton  Bank  case,  cited  in  note  3,  that  the  bank 
could  not  recover  because  it  could  not  make  out  its  case  except 
by  proving  and  relying  upon  an  illegal  act.  But  the  court  very 
clearly  showed  the  fallacy  of  this  argument,  even  if  it  were  as- 
sumed that  the  statute  were  to  be  construed  as  a  prohibition  on 
the  bank  directors,  restraining  them  from  permitting  the  cashier 
to  act  as  such  till  he  had  given  the  prescribed  bond.  Still,  the 
bank  proved  no  illegal  act  or  omission  to  support  their  case.  In 
the  taking  of  the  bond  in  question  there  was  no  violation  of  law. 
The  only  possible  fault  lay  in  the  omission  to  take  another  bond. 
But  the  omission  to  do  something  else  did  not  necessarily  vitiate 
that  which  was  done.  The  bond  taken  was  not  prohibited  by 
statute ;  both  might  have  been  legally  taken,  and  both  or  either 
must  be  valid. 

§  20.  Delivery  and  Acceptance.  —  At  common  law  no  vote  or 
record  of  acceptance  is  necessary ;  parol  evidence  of  any  circum- 
stances that  would  raise  a  presumption  of  acceptance  in  the  case 
of  an  individual  is  sufficient ;  but  statutes  or  charter  may  require 
the  bond  to  be  "  approved  "  or  "  accepted  "  b>-  the  directors,  or 
"  by  vote  of  the  directors",  or  that  it  shall  be  "  to  the  satisfaction 
of  the  directors."  In  all  cases  parol  will  be  admitted  to  prove 
circumstances  from  which  the  required  approval  can  be  inferred ; 

^  Shunk  v.  Miller,  5  Barr  (Pa.)  250 ;  Walker  v.  Chapman,  22  Ala.  116 ; 
Woods  V.  State,  10  Mo.  698. 

57 


§  20  OFFICIAL  BONDS   AND    LIABILITIES    OF   SURETIES 

mere  possession  by  the  bank  of  a  paper  like  this,  intended  for 
their  benefit,  is  good  evidence  of  acceptance.  When  directors  are 
themselves  sureties,  see  §  21  a. 

The  form  of  the  bond  and  the  sufficiency  of  the  sureties  offered 
upon  it  ought  of  course  to  be  considered  and  passed  upon  by  the 
responsible  government.  But  where  an  express  legislative  com- 
mand is  laid  upon  them  to  do  so,  it  has  occasionally  been  set  up 
in  defence  to  suits  upon  bonds,  either  that  the  directors  had  not 
"  accepted  "  at  all,  or  had  not  accepted  "  by  vote  "  ;  or  that  there 
is  no  proper  and  admissible  evidence  of  their  having  done  so.  This 
ground  was  first  taken  in  the  case  of  the  Bank  of  the  United  States 
1).  Dandridge.^  At  the  trial  of  that  cause  the  plaintiffs  undertook 
to  prove  that  the  bond  on  which  they  sued  fulfilled  the  requisitions 
of  the  charter,  —  that  it  should  be  "to  the  satisfaction  of  the 
directors",  —  by  offering  in  evidence  the  fact  of  its  being  in  their 
possession,  and  by  other  such  presumptive  evidence  as  would 
suffice  to  raise  the  legal  presumption  if  the  bank  had  been  an 
individual.  The  defendants  objected  that  this  evidence  Avas  in- 
admissible, or,  even  if  admissible,  would  not  be  sufficient ;  that 
corporate  acts  must  be  proved  by  corporate  records  and  minutes 
of  proceedings,  and  since  these  were  altogether  silent  on  the  subject 
of  the  bond,  its  acceptance  and  approval,  as  required  by  the  law, 
must  be  conclusively  assumed  never  to  have  taken  place,  and 
could  not  be  shown  by  other  and  parol  testimony.  Wlien  the 
case  was  tried  before  Chief  Justice  Marshall  in  the  Circuit  Court, 
he  adopted  the  views  of  the  defendants'  counsel ;  but  when  it 
came  before  the  full  bench,  they  reversed  his  decision.  A  long 
opinion,  intended  to  be  exhaustive,  was  delivered  by  Judge  Story, 
to  the  effect  that  the  acceptance  and  approval  might  be  proved 
by  testimony  dehors  the  corporate  records,  and  might  be  pre- 
sumed in  favor  of  the  bank,  as  matter  of  law,  from  proof  of  the  same 
facts  which  would  suffice  to  raise  the  same  legal  presumption  in 
favor  of  an  individual.  Chief  Justice  Marshall,  adhering  to  his 
original  views,  delivered  a  dissenting  opinion.  But  the  decision 
of  the  associate  justices  of  course  settled  the  law. 

While  the  case  w^as  pending,  after  the  ruling  in  the  Circuit 
Court  and  before  its  reversal  had  been  pronounced,  a  like  case 
came  before  the  Supreme  Court  of  Massachusetts.  The  records 
of  the  bank  in  this  case,  however,  showed  that  J.  S.  B.  and  W.  D. 
**  be  accepted  as  sufficient  sureties  in  a  bond  to  be  given  by  the 
1  §  20.  12  Wheat.  64,  6  L.  ed.  552. 
58 


FRAUD    OR    ILLEGALITY    IN    THE    IXCEPTION    OF   THE    BOND       §  21 

cashier",  etc.  Chief  Justice  Parker  delivered  the  opinion.  He 
expressed  surprise  at  the  ruhug  of  Chief  Justice  IVIarshal!  in  the 
Circuit  Court,  above  stated,  saying,  "  We  slunild  have  supposed 
that,  in  the  case  as  well  of  a  corporation  as  of  an  individual,  a  paper 
intended  for  their  benefit,  and  found  on  their  files,  would  be  con- 
sidered as  having  been  accepted  by  them."  But  without  touching 
this  principle,  in  this  cause,  "  the  vote  to  accept  the  sureties,  and 
the  bond's  being  in  the  possession  of  the  president,  are  a  sufficient 
acceptance  of  the  bond."  ^  Several  years  afterwards  the  same 
court  again  held  that  parol  evidence  was  admissible  to  show  that 
the  bond  had  been  laid  before  the  directors,  and  that  they  had 
expressed  themselves  satisfied  with  it,  and  that  this  was  in  law 
equivalent  to  a  formal  acceptance.^  The  same  doctrine  was 
maintained  to  its  full  extent  in  Maryland.''  It  can  no  longer  be 
considered  to  be  open  to  question.  The  fact  of  the  possession  by 
the  bank  of  a  bond  in  due  form,  legally  executed,  and  complete 
in  every  respect,  the  officer  having  been  allowed  to  enter  upon  his 
duties,  is  evidence  which  by  itself  will  suffice  to  authorize  a  suit 
upon  it  as  having  been  delivered  and  accepted  with  all  requisite 
formality.^  And  where  an  officer  makes  no  formal  delivery  of  a 
bond  in  which  he  is  principal,  but  retains  it  among  other  papers 
of  which  he  is  general  custodian,  it  may  be  found  that  he  holds  it 
on  account  of  the  bank  as  its  property.^ 

§21.  Fraud  or  Illegality  in  the  Inception  of  the  Bond.  —  A 
bond  is  void,  if  illegal,  as  when  given  by  a  director  in  a  State 
where  directors  are  forbidden  to  be  sureties  on  the  bond  of  an 
officer  of  their  own  bank ;  or  if  tainted  with  fraud,  as  when  the 
sureties  are  misled  by  intentional  or  careless  misreyreseniations  of 
the  directors,"  or  by  their  concealment  of  facts  which  they  know 

2  Dedham  Bank  v.  Chickoring,  3  Pick.  (INIass.)  335. 

The  fact  that  the  ])ond  of  the  assistant  cashier  was  delivered  to  the 
cashier  of  the  bank,  who  was  one  of  tlie  directors,  and  tliat  the  assistant 
cashier  entered  upon  the  duties  of  his  office  under  sucli  bond,  and  that  such 
bond  was  retained  by  one  of  the  directors  of  the  bank  is  sui'ficient  to  estab- 
lish the  acceptance  of  the  bond,  though  no  acceptance  is  shown  by  the 
minutes  of  the  board  of  directors.  Fiala  v.  Ainsworth,  G3  Xeb.  1,  88  N.  W. 
135,  93  Am.  St.  Rep.  420  (1901). 

3  Amherst  Bank  v.  Root,  2  Met.  (IMass.)  522. 

4  Union  Bank  v.  Ridgely,  1  Ilarr.  &  G.  (Md.)  324. 

s  Graves  v.  Lebanon  National  Bank,  10  Bush  (Ky.)  23 ;  Bostwick  v. 
Van  Voorhis,  91  N.  Y.  353,  quoting  the  words  of  tlio  text  substantially. 

6  Johnson  v.  Gerald,  1(59  Mass.  500,  502,  48  X.  E.  7G4  (1897). 

"  §  21.  Bank  of  llardinsburg  v.  American  Bonding  Co.,  153  Ky.  579, 
156  S.  W.  394  (1913). 

59 


§  21  OFFICIAL   BONDS   AND    LIABILITIES    OF    SURETIES 

increase  the  risk."''  But  it  is  held,  as  we  shall  see,  that  directors 
are  not  bound  to  disclose  facts  which  do  not  affect  moral  character 
or  official  integrity. 

It  is  a  general  principle  of  guaranty  that  non-disclosure  of  the 
falsity  of  facts  on  belief  of  which  the  obligee  knows  the  surety  is 
acting  discharges  him.  We  should  say,  the  concealment  by  the 
directors  of  any  facts,  material,  and  peculiarly  within  their  knowledge, 
is  fraud  ;  °*  if  the  bond  only  covers  losses  by  dishonesty,  facts  not 
affecting  integrity  are  not  material,  but  if  the  surety  is  responsible 
for  losses  by  negligence,  then  facts  which  increase  the  risk  of  loss 
by   negligence   in   an   important  ^     and   substantial  manner   are 

""  There  must  be  entire  good  faith  in  the  transaction  between  obHgee 
and  surety ;  any  taking  advantage  of  the  surety  by  withholding  proper 
information  will  avoid  the  contract.     Story's  Eq.  Juris.  §  .324. 

*  If  untrue  statements  are  made  relative  to  material  facts,  and  the 
directors  knew  they  were  untrue  or  failed  to  make  proper  effort  to  inform 
themselves  thereof,  the  bond  is  invaUd.  ^tna  Indemnity  Co.  v.  Farmers' 
National  Bank,  169  Fed.  7.37  (1909)  ;  and  evidence  should  be  admitted 
to  show  that  the  cashier  who  made  a  false  certificate  that  the  president 
"has  performed  his  duties  in  an  acceptable  and  satisfactory  manner, 
and  we  know  of  no  reason  why  the  guaranty  bond  should  not  be  continued  " 
in  response  to  questions  from  the  Surety  Co.  addressed  to  the  bank,  did 
so  with  the  instructions  or  knowledge  of  the  directors.  Fidelity  etc.  Co.  v. 
Courtney,  186  U.  S.  342,  46  L.  ed.  1193,  22  Sup.  Ct.  833  (1902). 

1  Matters  which,  though  affecting  the  risk,  do  so  in  a  trivial  and  un- 
important manner,  or  are  remote  and  do  not  necessarily  affect  the  risk, 
though  it  is  conceivable  they  may,  or  such  matters  as  are  within  the  con- 
templation of  every  reasonable  man,  as  the  slight  variations  of  prudence, 
care,  and  intellect  among  ordinary  men,  are  not  deemed  material.  If  an 
officer  already  in  the  directors'  ser\'iee  is  re-elected,  they  are  not  bound  to 
state  to  his  sureties,  offered  upon  his  new  bond,  that  he  is  careless,  negli- 
gent, stupid,  or  a  poor  and  inaccurate  accountant.  They  are  not  obUged 
to  state  that  they  themselves  have  been  remiss  in  examining  into  the 
condition  of  the  bank,  the  amount  of  its  funds  on  hand,  and  the  correctness 
of  its  accounts.  Neither  need  they  state  the  existence  of  other  and  prior 
bonds,  even  though  they  may  be  still  in  force.  But  if  they  know  that  there 
is  in  fact  a  defalcation  existing  which  will  be  covered  by  the  terms  of  the 
proposed  bond,  they  are  bound  to  state  it,  and  their  failure  to  do  so  is  such 
a  breach  of  good  faith  on  their  part  as  will  invalidate  the  contract.  Even 
where  a  party  offered  as  bondsman  had  been  a  director  in  the  bank  itself  at 
the  time  the  defalcation  took  place,  and  ought  therefore  from  the  nature  of 
his  official  duty  to  have  been  aware  of  it,  it  was  held  that  the  obligation  of 
his  bond  could  not  be  enforced  against  him,  if  he  should  show  that  as 
matter  of  fact  he  did  not  know  it ;  that  his  co-directors  had  carefully 
concealed  it  from  him  up  to  and  after  the  time  of  his  executing  the  bond, 
and  apparently  with  the  very  object  of  leading  him  to  execute  a  bond  which 
would  by  its  terms  cover  it.  Franklin  Bank  v.  Cooper,  36  Me.  179;  39 
id.,  542  ;  FrankUn  Bank  v.  Stevens,  39  id.,  532  ;  Smith  v.  Bank  of  Scotland, 
1  Dow,  Pari.  R.  294.  The  essence  of  the  matter  seems  to  be,  that  the 
sureties,  unless  informed  to  the  contrary,  have  a  right  to  suppose  that  their 

60 


FRAUD    OR    ILLEGALITY    I.\    THE    INCEPTION    OF   THE    BOND       §  21 

material,  and  if  the  directors  know  such  facts  -  by  reason  of  the 
special  opportunities  of  observing  the  officer  that  his  past  enii)l()y- 
ment  has  afforded,  they  should  be  disclosed.  Receiving  a  guar- 
anty from  G.  knowing  facts  which  G.  does  not  know,  and  has  not 
had  opportunity  to  know,  and  which  it  is  reasonable  to  suppose 
might,  if  known  to  him,  deter  him  from  giving  the  guaranty,  is  a 
fraud  by  all  the  analogies  ^  of  the  law,  as  well  as  by  the  judgment 
of  morality. 

Of  course  fraud  on  one  surety  does  not  affect  the  liability  of 
co-sureties,  with  whom  the  dealings  were  strictly  in  good  faith.* 

We  will  now  more  fully  consider  the  points  thus  briefly  stated. 

a.  Can  a  Director  be  a  Surety  ?  —  The  first  question  which 
presents  itself  is  whether  a  director  can  be  a  surety  upon  the  bond 
of  any  officer  of  his  own  bank.  In  some  States  this  has  been  for- 
bidden by  legislative  enactment.  But  it  is  not  thus  forbidden  by  the 
National  Banking  Act;  and  when  not  forbidden  by  statute,  it  cannot 
be  said  to  be  absolutely  illegal.  The  law  and  the  morality  are  both 
so  very  neatly  put  by  Chief  Justice  Shaw  that  we  are  tempted  to 
give  his  own  words :  "  The  next  exception  is,  that  the  bond  was 
void,  as  against  the  policy  of  the  law,  because  three  of  the  di- 
rectors, whose  duty  it  was  to  examine  and  approve  the  cashier's 

undertaking  is  in  the  ordinary  course  of  business,  similar  in  all  material 
respects  to  other  like  undertakings,  and  exposing  them  to  no  peculiar  and 
hidden  risks. 

-  For  example,  such  marked  and  unusual  carelessness  or  stupiditj'  as  to 
make  it  unreasonable  to  suppose  the  surety  would  guarantee  one  so  wholly 
incompetent,  and  so  exceedingly  likely  to  involve  him,  if  he  was  in  posses- 
sion of  the  facts  known  to  the  directors. 

'  If  the  fraud  be  such  that  wdthout  it  the  contract  would  not  have  been 
made,  it  is  material ;  but  if  it  is  probable  the  same  thing  would  have  been 
done  in  the  same  way  without  the  deceitful  conduct,  it  is  not  material. 
2  Parsons  on  C^'ontracts,  2G7.  The  insured  must  state  all  facts  within  his 
knowledge  which  would  have  an  influence  on  the  terms  of  the  contract, 
and  are  not  known,  or  may  be  supposed  by  him  not  to  be  known,  to  the  in- 
surer. Liiidenau  v.  Desborough,  8  B.  &  C.  586 ;  Bufe  v.  Turner,  6  Taunt. 
338 ;  Clark  v.  Man.  Ins.  Co.,  8  How.  2.35,  12  L.  ed.  lOGl ;  New  York 
Bowery  Ins.  Co.  v.  New  York  Ins.  Co.,  17  Wend.  (N.  Y.)  359  ;  Fletcher  v. 
Commonwealth  Ins.  Co.,  18  Pick.  (Mass.)  419.  See  also  Benj.  on  Sales, 
§  4G1,  and  Kerr  on  Fraud  and  Mistake;  also  Mavnard  v.  Maynard,  49 
Vt.  299  ;  Bruce  v.  Ruler,  2  M.  &  R.  3  ;  Hill  v.  Gray,  f  Stark.  434. 

^  See  cases  cited  in  note  1  to  this  section.  If,  however,  the  obtaining 
of  A.'s  signature  is  the  condition  of  B.'s  signing,  and  A.'s  name  is  fraudu- 
lently obtained,  B.  cannot  lie  held.  Franklin  Bank  v.  Stevens,  39  Me.  532. 
But  a  surety  signing  \vith  the  understanding  that  others  would  sign  is  not 
relieved  if  they  do  not  sign  unless  the  company  is  notified  thereof.  Johnson 
County  V.  Chamberlain  Banking  House,  80  Neb.  9G,  113  N.  W.  1055 
(1907). 

61 


§  21  OFFICIAL   BONDS   AND    LIABILITIES    OF   SURETIES 

bond,  were  themselves  his  sureties.  This  exception  certainly  comes 
with  a  very  bad  grace  from  those  directors  who  thus  became  sure- 
ties. It  sets  up  the  dereliction  of  their  duties  as  directors,  to  avoid 
their  obligation  as  contractors.  It  maj^  have  been  in  very  bad  taste, 
it  may  have  been  very  indiscreet  and  ill-judged,  to  put  themselves 
in  a  situation  to  express  an  opinion  on  their  own  sufficiency  as 
such  sureties.  But  whether  right  or  wrong,  it  is  impossible  to  per- 
ceive how  the  obligors,  either  such  directors  themselves,  or  their 
co-obligors,  can  avail  themselves  of  this  circumstance  to  avoid 
their  obligation.  Another  objection  .  .  .  was,  that  if  directors,  so 
being  sureties  on  the  deed,  could  approve  or  accept  the  deed,  it 
was  in  effect  a  contract  with  themselves,  and  of  no  binding  effect. 
.  .  .  Here  the  corporation  is  an  artificial  person  in  law^,  distinct 
from  all  the  individuals  composing  it,  capable  of  contracting  and 
bringing  suits,  and  may  contract  with  its  own  members,  or  have 
suits  against  them,  as  well  as  against  any  other  persons."  ^ 

In  Maine  the  State  banking  law  provided  that  the  bond  should 
not  be  "  signed  "  by  a  director.  But  on  the  ground  that  the  bond 
was  not  operative  or  valid  till  it  had  been  accepted,  it  was  held 
that  if  the  signer  was,  at  the  time  of  signature,  a  director,  but 
had  ceased  to  be  so  at  the  time  of  acceptance,  there  was  no  viola- 
tion of  the  statute.®  It  was  held  in  another  case  that  the  same 
law  would  invalidate  an  obligation,  and  a  mortgage  security 
accompanying  it,  given  by  a  director  to  third  parties  to  indemnify 
them  against  loss  as  sureties  upon  an  official  bond,  the  object 
being  to  induce  them  to  become  such  sureties.'' 

b.  Misrepresentations.  —  Where  an  embezzlement  by  a  cashier 
had  occurred,  and  might  have  been  discovered  by  a  very  limited 
measure  of  diligence  on  the  part  of  the  directors,  and  they  yet 
failed  to  detect  it,  and  published  a  statement  of  the  affairs  of  the 
bank,  going  to  show  a  faithful  and  careful  management  and  proper 
condition  of  its  affairs,  and  tw^o  persons,  having  read  this  state- 
ment, became  sureties  on  the  cashier's  bond,  it  was  held,  in  Ken- 
tucky, that  they  had  a  good  defence  to  a  suit  against  them  to  make 
good  losses  caused  by  his  subsequent  embezzlements,^  and  when 

5  Amherst  Bank  v.  Root,  2  Met.  (Mass.)  522. 

In  Snattinger  v.  Topeka,  SO  Kan.  341,  102  Pac.  508  (1909),  it  seems  to  be 
assumed  that  a  director  may  be  a  surety  on  the  bond  of  a  depositary  bank, 
although  the  question  is  not  specifically  considered. 

«  Franklin  Bank  v.  Cooper,  36  Me.  179. 

^  Jose  V.  Hewett,  50  Me.  248. 

8  Graves  v.  National  Bank,  10  Bush  (Ky.)  23. 

62 


FRAUD    OR    ILLEGALITY    IN    THE    INCEPTION    OF   THE    BOND       §  21 

the  bank  has  been  required  to  answer  questions  which  answers 
are  expressly  made  a  condition  precedent  to  habiUty  on  the  bond 
the  surety  is  not  hable  when  the  answers  are  false,  and  the  statute 
declaring  statements  to  be  representations  and  not  warranties  does 
not  effect  the  ultimate  effect  of  a  materially  false  representation.^" 

c.  Concealment.  —  In  the  case  above  cited  of  Franklin  Bank 
V.  Ste\ens,  the  sureties  on  a  cashier's  bond  bound  themselves  by 
the  language  of  the  bond  to  guarantee,  not  only  that  the  cashier 
should  account  for  all  money  to  be  subsequently  received  by  him, 
but  also  that  he  should  account  for  all  money  previously  received 
by  him.  It  was  held  that  evidence  offered  by  the  sureties  of 
the  unskilful  and  careless  keeping  of  the  books  of  the  bank,  of 
the  negligence  of  the  directors  and  the  bank  commissioners,  and  the 
non-existence  of  other  bonds,  all  relating  to  the  time  prior  to  the 
date  of  the  bond  in  suit,  was  immaterial,  as  having  no  bearing 
on  the  liability  of  the  sureties.  Though  evidence  tending  to  show 
knowledge,  on  the  part  of  the  bank  officers,  that  property  of  the 
bank  had  been  lost  by  the  cashier  prior  to  the  execution  of  the 
bond,  would  have  been  competent,  as  having  a  direct  bearing  on 
the  liability  of  the  sureties.^ 

In  Pennsylvania,  a  case  arose  where,  at  the  time  the  sureties 
executed  a  bond  for  the  teller,  he  had  already  defrauded  the  bank, 
though  he  had  not  been  as  yet  detected  or  suspected  by  the  officers. 
The  defendant  (the  surety)  sought  to  show  in  defence,  that,  if 
the  officers  had  examined  the  books  of  the  bank  at  the  tune  of  the 
giving  of  the  bond,  they  would  have  been  able  to  detect  the  then 
existing  deficiency.  The  court  said  that  a  fraudulent  concealment 
of  the  defalcation,  at  the  time  when  the  bond  was  executed,  would 
have  constituted  a  defence.  But  that  there  was  no  such  con- 
cealment, since  there  was  no  such  knowledge ;   that  the  "  sort  of 

^  Warren  Deposit  Bank  v.  Fidelity  etc.  Co.,  116  Ky.  38,  74  S.  W.  1111 
(1903).  See  United  States  Fidelity  etc.  Co.  v.  Citizens'  National  Bank, 
147  Ky.  285,  143  S.  W.  997  (1912),  where  the  president  of  a  "county  bank" 
who  was  not  an  expert  accountant  stated  to  the  surety  company  that 
the  books  of  the  cashier  had  been  examined  and  found  correct.  See  also 
United  States  Fidehty  etc.  Co.  v.  Foster  Deposit  Bank,  148  Ky.  776,  147 
S.  W.  406  (1912)  ;  United  States  FideUty  etc.  Co.  v.  Boley  Bank,  43  Okla. 
819,  144  Pae.  615  (1914).  United  States  Fidelity  etc.  v.  Foster  Deposit 
Bank's  Receiver,  153  Ky.  698,  156  S.  W.  371  (1913),  holding  that  the 
directors  must  substantially  comply  with  the  requirement  of  examining 
the  books,  but  that  they  are  not  required  to  make  such  thorough  examina- 
tions as  trained  book-keepers  would  make. 

»  Franklin  Bank  v.  Stevens,  39  Me.  532. 

63 


§  21  OFFICIAL   BONDS   AND    LIABILITIES   OF   SURETIES 

constructive  notice  "  which  the  defendant  sought  to  allege  could 
not  be  permitted  to  be  set  up  to  defeat  his  liability;  that  the 
officers  were  under  no  obligation  to  investigate  the  books  when  the 
bond  was  given,  and  their  failure  to  do  so,  and  ignorance  consequent 
upon  such  failure,  constituted  no  basis  for  a  defence  in  this  suit. 
Though  it  was  intimated  that  a  different  rule  might  have  pre- 
vailed had  the  surety  at  the  time  requested  an  examination,  and 
the  request  had  been  either  refused  or  evaded. ^° 

The  directors  knew  of  certain  irregularities  and  omissions  of  O. 
while  teller,  but  did  not  suppose  them  to  affect  his  moral  character 
or  official  integrity,  and  did  not  disclose  them  to  the  sureties  on 
his  bond  as  cashier.  This  was  held  no  defence  to  a  suit  on  the 
bond. 11 

In  Connecticut  it  is  not  the  duty  of  directors  to  disclose  to 
sureties  prior  defalcations  of  a  cashier. i^ 

Loss  NOT  OF  A  Nature  covered  by  the  Bond 

§  22.    Loss  by  Act  of  another  than  the  Officer  guaranteed.  —  A 

loss  of  moneys  or  securities  liy  reason  of  a  theft  or  robbery,  ac- 
complished without  the  collusion  of  the  officer,  and  not  furthered 
or  rendered  possible  by  his  negligence  or  incompetence,  would  be 
a  good  defence  to  a  suit  upon  a  bond  written  in  any  of  the  forms 
heretofore  described. i  The  bondsmen  are  certainly  not  insurers 
against  the  acts  of  any  person  save  the  principal  in  the  bond. 

§  23.  Innocent  Mistake.  —  The  officer  contracts  for  ordinary 
skill  and  prudence,  and  it  is  this  the  surety  guarantees,  and  if  a 
cashier  causes  loss  by  a  mistake  such  as  cashiers  of  experience  are 
liable  to  make  sometimes,  it  is  not  a  loss  for  which  the  sureties 
are  liable,  unless  the  words  of  the  bond  are  absolute,  and  expressly 
agree  that  the  officer  shall  do  certain  specific  things  ;  in  such  case, 
if  the  officer  fails  to  do  these  things,  by  mistake  or  otherwise,  the 
surety  is  liable. 

1"  Wayne  v.  Commercial  National  Bank,  52  Pa.  St.  343. 

11  Bostwiek  v.  Van  Voorhis,  91  N.  Y.  353.  See  United  States  Fidelity 
etc.  Co.  V.  Citizens'  National  Bank,  147  Ky.  285,  143  S.  W.  997  (1912). 

But  if  the  acts  indicate  fraud  or  dishonesty  it  is  the  duty  of  the  bank 
officials  to  notify  the  surety  thereof.  National  Council  of  Knights  etc. 
V.  Wilson,  147  Ky.  293,  143  S.  W.  1000  (1912). 

«  Watertown  Savings  Bankz;.  Mattoon,  78  Conn.  388, 62  Atl.  622  (1905). 

1  §  22.  Allison  v.  Farmers'  Bank,  6  Rand.  (Va.)  204 ;  American  Bank 
V.  Adams,  12  Pick.  (Mass.)  303;  Planters  &  Merchants'  Bank  v.  Hill,  1 
Stew.  (Ala.)  201  ;   Mohrenstecher  v.  Westerreet,  87  Fed.  157. 

G4 


NEGLIGENCE    OF   THE    OFFICER  §  24 

But  though  an  overpajment  by  mistake  may  be  set  up,  and 
often  successfully,  in  defence  to  a  suit  upon  a  bond,  it  is  necessary 
that  the  officer  should  have  acted  honestly,  not  only  in  the  trans- 
action of  overpayment,  but  equally  in  reference  to  all  matters 
which,  however  remotely,  concern  it  or  are  connected  with  it.  If 
he  subsequently  commits  any  deceit  or  fraud,  or  makes  false 
entries  in  the  books,  for  the  purpose  of  concealing  the  deficiency, 
his  dishonest  dealing  in  this  particular  will  suffice,  in  the  eye  of 
the  law,  to  give  the  coloring  of  guilt  to  the  entire  ail'air  from  the 
very  outset.  It  may  still  remain  true,  that  the  actual  loss  of  the 
money  was  caused  wholly  and  solely  by  the  innocent  overpa^Tnent ; 
and  that  the  subsequent  misconduct  could  not  aggravate  the 
injury,  as  subsequent  misconduct  could  not  have  remedied  it. 
Still  the  acts  resorted  to  for  securing  concealment  are  a  siiggestio 
falsi;  the  concealment  itself  is  a  suppressio  veri.  Each  is  an 
unfaithfulness,  and  will,  as  a  rule,  be  assumed  to  have  contributed 
to  the  injury  suffered  by  the  bank.^ 

If  the  bond,  instead  of  insuring  honesty  and  competency  in  such 
general  terms  as  are  displayed  in  the  foregoing  instances,  enu- 
merates specific  acts  in  distinct  language,  and  guarantees  that  the 
officer  shall  perform  these  acts,  the  peril  of  possible  mistakes  in 
their  performance,  however  innocent  and  excusable  the  error  may 
be,  is  assumed  by  the  obligors.  A  deliberate  undertaking,  for  ex- 
ample, that  the  cashier  shall  "  deliver  to  his  successor  in  office  .  .  .  all 
moneys,  securities,  stocks,  etc.,  etc.",  is  an  absolute  and  uncondi- 
tional guaranty  for  such  delivery,  and  the  fact  of  an  innocent  loss, 
growing  out  of  an  excusable  mistake,  cannot  be  availed  of  in  defence 
to  a  suit  for  non-delivery.^ 

§  24.  Negligence  of  the  Oflacer.  —  The  officer  contracts  for 
reasonable  skill  and  diligence,  and  the  surety  guarantees  he  will 
fulfil  his  contract  unless  he  expressly  narrows  his  engagement, 
and  no  words  can  be  relied  on  to  restrict  the  liability  of  a  bank 
officer's  bondsmen  to  mere  personal  honesty  and  integrity,  unless 
these  terms  or  their  clear  equivalents  are  used,  and  stated  as  the 
limits  of  the  insurance. 

If  the  officer's  conduct  is  above  the  line  of  ordinary  skill  and  care, 
as  observed  among  persons  of  his  class,  the  case  comes  under  §  28  ; 
that  is,  where  only  such  slight  negligence  attaches  to  the  officer 

'  §  23.  Union  Bank  v.  Clossey,  11  Johns.  (N.  Y.)  182;  Rochester  City 
Bank  v.  Elwood,  21  N.  Y.  88. 

2  State  Bank  v.  Chetwood,  3  Ilalst.  (N.  Y.)  1. 

VOL.  I  —  5  65 


§  24  OFFICIAL  BONDS   AND    LIABILITIES   OF   SURETIES 

as  is  to  be  expected  of  ordinary  men  in  his  position.     This  is  the 
substance  of  the  law  of  this  topic,  both  on  principle  and  authority. 

Carelessness  and  Ignorance 

Of  course  considerable  variety  is  found  to  exist  in  the  form 
and  language  of  the  bonds  used  by  difit'erent  corporations,  and 
especially  in  those  portions  wherein  is  described  the  species  of 
good  and  satisfactory  conduct  which  is  insured.  Very  commonly 
only  general  phraseology  is  used.  It  is  stipulated  simply  that  the 
officer  shall  "well  and  faithfully'',  or  ''faithfully",  or  "well  and 
truly",  discharge  and  perform  his  duties.  Practically,  it  may  be 
considered  that  these  phrases  are  equivalent  each  to  either  of  the 
others.  For  though  a  finical  linguist  might  seek  to  draw  some 
delicate  distinction  between  the  signification  of  the  word  "  well  " 
on  the  one  side,  and  the  words  "  faithfully  "  and  "  truly  "  on  the 
other,  yet  such  over-nicety  is  not  encouraged  by  the  law  which 
has  been  laid  down  in  the  premises  ;  and  it  is  safe  to  say  that  these 
words  may  be  used  interchangeably.  The  better  rule  of  con- 
struction, which  is  to  be  applied  to  all  alike,  seems  to  be  that  they 
are  designed  not  only  to  guarantee  honesty  and  obedience,  but 
also  reasonable  skill,  competence,  and  diligence.  The  reason  for 
taking  the  bond  is  by  no  means  limited  to  the  narrow  object  of 
protecting  the  banking  house  only  against  loss  arising  from  em- 
bezzlement or  other  species  of  criminal  conversion  and  misap- 
propriation, but  also  against  the  equally  mischievous  danger  of 
carelessness,  thoughtlessness,  and  ignorance.^  The  security  for 
the  "  faithful  discharge  "  of  duties  would  be  rendered  "  utterly 
illusory",  if  its  import  were  to  be  narrowed  to  a  guaranty  against 
personal  frauds  only.  Duties  performed  negligently  and  unskil- 
fully, or  violated  from  want  of  capacity  or  want  of  care,  can 
never  be  said  to  be  "  well  and  truly  "  executed .^  In  Massachu- 
setts a  bond  calling  only  for  "  faithful  "  performance  was  declared 
to  bind  the  obligors,  not  only  for  the  honesty  of  the  officer,  but 
also  for  his  "  faithful  execution  of  the  duties  of  his  office,  which 
embraces  competent  skill  and  due  diligence."  ^     It  must  certainly 

1  §  24.     Rogers  v.  Kelly,  2  Camp.  123. 

2  Minor  v.  Mechanics'  Bank,  1  Pet.  46,  7  L.  ed.  47. 

A  surety  is  responsible  for  the  negligence  of  a  cashier,  on  a  bond  condi- 
tioned that  he  will  honestly,  faithfully,  and  efaciently  perform  his  duties. 
Fiala  v.  Ainsworth,  68  Neb.  308,  94  N.  W.  153  (1903). 

5  American  Bank  v.  Adams,  12  Pick.  (Mass.)  303. 

When  the  assistant  cashier  beUeves  that  the  cashier  is  taking  money  of 

66 


NEGLIGENCE    OF   TUE    OFFICER  §  24 

be  considered  that  the  hist  two  cases,  one  of  which  was  decidetl 
in  the  highest  tribunal  in  the  land,  estabhsh  the  correct  rule  of 
law.  Yet  in  Xew  York  there  is  a  well-known  cause  in  which 
precisely  the  opposite  doctrine  was  laid  down.  The  bond  of  a 
teller  was  conditioned  that  he  should  "  well  and  faithfully  perfcjrm 
the  duties",  etc.  The  court  declared  that  this  was  security  solely 
for  his  honesty  in  his  trust,  and  not  for  his  competency.^  Yet  it 
is  very  curious  to  note  that,  though  the  conflict  between  the 
abstract  statement  of  law  in  New  York  and  in  INIassachusetts 
could  not  well  be  more  direct  and  apparently  irreconcilable, 
nevertheless  both  courts,  having  substantially  like  facts  to  deal 
with,  might  not  imjjrobably  come  to  very  nearly  the  same  practical 
results.  In  Xew  York,  it  was  said  that  an  overpayment  by  mis- 
take, honestly  made,  was  a  matter  of  incompetency,  and  was  not 
insured  against  in  the  bond.  In  Massachusetts,  it  was  an  obvious 
inference  from  the  language  of  the  court  that,  if  the  fact  was  that 
the  deficiency  was  caused  by  an  overpayment,  made  honestly 
and  through  a  simple  mistake,  then  evidence  that  experienced  and 
able  tellers  were  liable  occasionally  to  make  such  mistakes  would 
have  been  admitted  for  the  purpose  of  showing  that  at  least  this 
fact  did  not  of  itself  suffice  to  prove  incompetence.  It  is  not  to 
be  supposed  that  ample  evidence  of  this  description  could  ever 
be  found  inaccessible.  Whence  it  might  not  improbably  occur 
that,  upon  diametrically  opposite  doctrinal  bases,  the  same  con- 
clusion of  acquitting  the  sureties  might  be  arrived  at. 

If  the  two  above-cited  decisions  are  the  only  ones  which  directly 
and  in  terms  run  counter  to  the  Xew  York  decision,  there  is  yet 
a  decision  ^  in  the  Pennsylvania  reports  which  fails  to  do  so  only 
because  it  goes  much  farther,  though  in  the  same  direction,  than 
either  the  Supreme  Court  of  the  United  States  or  the  bench  of 
Massachusetts.  In  this  case  the  bond  was  conditioned  that  "  J.  B,, 
the  cashier,  shall  well  and  truly  perform  the  duties  of  cashier  of 
the  bank  aforesaid,  fo  ihe  best  of  his  abilities."  The  italicized 
words  certainly  ought  to  have  sufficed  to  exclude  from  the  operation 
of  the  guaranty  acts  of  simple  incompetency  or  ignorance,  if  any 
language  short  of  an  exclusion  in  terms  could  do  so.  The  defend- 
ant's counsel  argued  thus,  and  urged  that  the  insurance  of  the 

the  bank  \\ithout  authoritv  it  is  liis  duty  to  so  report  to  the  directors. 
Fiala  r.  Ainsworth,  (V.i  Neb.  1,  88  X.  W.  135,  93  Am.  St.  Rep.  420  (1901). 

*  Union  Bank  v.  Clossey,  10  Johns  (N.  Y.)  271  ;    11  id.,  182. 

*  Barrington  v.  Bank  of  Washington,  14  Serg.  &  R.  (Pa.)  405. 

67 


§  24  OFFICIAL   BONDS   AND    LIABILITIES   OF   SURETIES 

bond  was  restricted  to  the  cashier's  fideUty  and  honesty ;  the  degree 
of  his  ability  might  be  considered  as  expressly  exempted,  provided 
his  best  ability,  such  as  it  might  prove  to  be,  was  uniformly  used. 
Certainly  these  arguments  were  not  devoid  of  force.  The  court 
complimented  them  as  ingenious,  but  declared  them  unsound. 
The  opinion  held,  substantially,  that  the  covenant  was  that  the 
cashier  should  discharge  the  duties  of  his  appointment,  that  is 
to  say,  that  he  should  do  so  with  competent  skill  and  ability.  It 
was  said  that  one  who  accepts  an  office  or  trust  of  any  kind  contracts 
to  execute  it  with  competent  skill  and  ability ;  his  sureties,  who 
are  bound  that  he  shall  execute  it  according  to  his  skill  and  ability, 
w^arrant  for  the  performance  of  this  contract  of  the  officer.  His 
undertaking  is  to  act  according  to  the  duties  of  his  station.  So, 
if  by  his  act  of  honest  intention,  but  in  excess  of  his  authority, 
the  bank  suffers  a  loss,  it  must  be  reimbursed  by  the  obligors  in 
the  above  bond.® 

This    is    subtle   and    not    altogether   unanswerable   reasoning. 
It  proceeds  on  the  basis  of  what  it  is  supposed  that  the  bond 
would  naturally  be  designed  to  contain,  rather  than  upon  the 
basis  of  what  it  really  does  contain.     There  is  a  little  confusion, 
moreover,  between  the  undertaking  of  the  cashier,  implied  by  his 
entry  into  office,  and  that  of  the  sureties,  actually  expressed  in 
the  instrument ;    between  the  liability  of  the  cashier  at  common 
law,  and  that  which  exists  under  and  by  virtue  of  the  stipulations 
of  the  bond.     It  is  true  that  the  cashier  by  the  acceptance  of  the 
trust  impliedly  contracted  to  exercise  it  with  due  skill  and  ability ; 
but  it  was  by  the  acceptance  of  the  trust,  strictly  and  literally,  and 
not  at  all  by  the  execution  of  the  bond,  that  he  thus  contracted. 
It  is  possible  that  his  acceptance  of  office  may  have  placed  him 
under  obligations  greater  than  those  named  in  his  bond.     But 
to  say  that  the  sureties  in  the  bond,  who  defined  in  perfectly  in- 
telligible language  the  extent  to  which  they  consented  to  become 
guarantors,  could  have  the  same  extended  until  it  became  com- 
mensurate with  a  liability  of  another  person,  their  principal,  rising 
from  an  entirely  alien  origin,  seems  to  us  hardly  a  tenable  position. 
It  is  not  a  logical  sequence,  but  a  verbal  illusion,  to  say  that, 
because  the  cashier,  by  accepting  office,  binds  himself  to  use  due 
skill  in  its  functions,  therefore  his  bondsmen,  expressly  guarantee- 
ing only  that  he  shall  use  skill  "to  the  best  of  his  abilities",  im- 
pliedly assume  and  guarantee  that  the  skill  thus  described  is  due 
6  American  Bank  v.  Adams,  12  Pick.  (Mass.)  303. 
68 


LOSS   BY   ACT   OF   OFFICER    IN    EXCESS   OF   HIS   AUTHORITY        §  25 

skill.  This  is  to  read  their  contract  by  the  Hght  of  his  ;  to  embody 
his  indivi(hial  and  imphed  undertaking,  arising  from  liis  in(livi(hial 
act,  into  their  specifically  worded  and  independent  undertaking ; 
to  substitute  the  measure  which  a  legal  implication  ai)plies  to  his 
contract  for  skill,  in  place  of  the  measure  which  they  in  their  con- 
tract have  taken  i)ains  to  provide  in  exact  phraseology.  But 
though  the  original  soundness  of  this  opinion  may  be  thus  criti- 
cised, yet  it  must  he  acknowledged  to  be  the  law.  It  has  stood 
for  long  years  unchallenged,  and  perhaps  it  would  now  be  foolish 
to  change  it. 

§  25.  Loss  occasioned  by  an  Act  of  O.  in  Excess  of  his  Authority. 
—  If  an  officer  goes  outside  of  his  duties,  as  to  take  funds  lie  liad 
no  occasion  to  touch,  the  better  opinion  is  that  the  surety  is  bound, 
for  the  "  faithful  discharge  "  of  his  office  implies  that  he  shall  not 
go  outside  of  it,  even  though  his  intention  is  honest, ^  especially  not 
to  use  the  opportunities  it  affords  him  to  embezzle  the  bank's  funds, 
or  defraud  it,     A  case  in  Virginia,  however,  holds  the  contrary. 

But  O.'s  act  beyond  authority  must  cause  loss  to  the  bank ;  if 
it  is,  for  instance,  an  act  of  agency  which  does  not  bind  the  bank, 
no  cause  of  action  against  the  sureties  arises  unless  the  bank  sees 
fit  to  ratify  the  act.  We  will  now  examine  the  cases  and  develop 
more  fully  the  points  thus  briefly  stated. 

In  Allison  v.  Farmers'  Bank,-  a  Virginian  bench  held  that  the 
sureties  on  an  accountant's  bond  were  not  liable  for  his  theft  of 
money  from  the  teller's  drawer,  since  his  bond  secured  only  his 
fidelity  in  the  "  office  of  accountant",  and  as  accountant  he  was 
not  put  in  possession  of  any  money  of  the  bank.  This  ruling  seems 
thoroughly  narrow  and  unsatisfactory;  it  was  rendered  only  by 
a  divided  court,  and  has  been  deliberately  overruled  in  New  York 
in  the  case  above  cited,  of  Rochester  Bank  v.  Elwood,^  with  the 
true  criticism  that  its  principle,  if  followed,  would  substantially 
cancel  all  official  bonds.  In  this  latter  case,  also,  the  bond  spe- 
cifically secured  the  faithful  discharge  "of  the  trust  reposed  in  [the 
officer]  as  assistant  bookkeeper,"  In  this  case,  also,  he  embezzled 
funds  which,  in  the  strict  performance  of  his  duties,  he  had  no 
occasion  to  touch,  and  then  he  made  false  entries  in  his  books  to 
conceal  the  fact.  This  last  feature  in  the  case  gives  rise  to  some 
remarks  in  the  opinion  not  perhaps  strictly  bearing  upon  the 
precise  point  in  discussion ;   but  rather  than  mutilate,  or  give  in 

1  §  25.     See  Barrington  v.  Bank  of  Washington,  §  24, 

2  6  Rand.  (Va.)  204.  '  21  N,  Y,  88. 

69 


§  25  OFFICIAL   BONDS   AND    LIABILITIES   OF   SURETIES 

an  imperfect  shape,  the  reasoning  of  the  court,  we  shall  condense 
the  whole.  The  judge  said  that,  construing  the  instrument  by 
the  light  of  attendant  circumstances,  he  did  not  think  that  the 
bond  was  limited  to  insuring  mere  fidelity  in  the  actual  book- 
keeping. The  bookkeeper  was  in  such  close  contact  that  he  could 
easily  abstract  money,  and  more  easily  than  any  one  else  could 
conceal  the  abstraction  by  falsifying  his  books.  These  facts  must 
he  ijresumed  to  have  been  known  to  the  sureties,  ivhen  they  guaranteed 
his  faithful  performance  of  a  trust  as  an  emploijee  in  the  hank.  It 
cannot  be  fairly  supposed  that  they  intended  to  guarantee  only  that 
he  should  keep  the  books  correctly,  hut  rather  that  he  should  behonest 
and  faithful  in  his  trust  as  an  employee  of  the  bank.  They  engaged 
absolutely  for  his  integrity  and  fidelity  in  the  discharge  of  the 
trust  of  assistant  bookkeeper.  The  bond  indicated  the  depart- 
ment to  which  he  was  to  be  assigned,  and  guaranteed  that  he  was 
a  trustworthy  person  to  discharge  its  duties.  His  "faithful 
discharge  "  of  the  trust  implies  an  engagement  that  he  shall  not 
transcend  it  to  embezzle.  If  he  does  transcend  it,  and  uses  the  op- 
portunities it  affords  him,  for  the  purpose  of  stealing,  it  is  not  a 
"faithful  discharge.''  Therefore  he  is  liable  for  the  abstraction, 
per  se.  But  especially  would  he  be  liable  if  the  false  entries  were 
concurrent  and  simultaneous  with,  and  a  part  of,  the  guilty  res 
gesioe.  A  liability  which  would  clearly  have  accrued  had  these 
entries  been  made  to  enable  a  confederate  to  take  the  money 
cannot  be  evaded  by  the  bookkeeper's  taking  it  himself.  It  is 
no  defence  that  the  false  entries  were  made  solely  to  enable  him 
to  escape  detection.  He  used  a  means  furnished  by  his  agency 
to  consummate  successfully  a  fraud.  The  taking  and  the  entries 
w^ere  one  transaction,  and  it  can  hardly  be  contended  that  the 
ultimate  loss  of  the  bank  was  in  no  degree  attributable  to  the 
false  bookkeeping  and  the  abuse  of  trust  as  bookkeeper.  The 
falsification  was  parcel  of  the  wrongful  act,  and  this  is  deemed 
sufficient. 

Indeed,  it  seems  a  reasonable  general  rule  to  assert,  that,  if 
the  officer  has,  in  any  part  of  the  transaction,  acted  otherwise 
than  in  perfect  honesty  and  good  faith,  excuses  cannot  be  heard 
to  absolve  the  sureties.  It  is  impossible  to  split  up  the  trans- 
action into  parts,  and  to  say  this  part  was  the  only  part  which 
actually  caused  the  injury,  and  this  part  was  honest.  Such  a 
system  of  legal  anatomy  is  simply  absurd.  Originally  it  was 
open  to  the  courts  to  declare  the  undertaking  absolute,  and  to 
70 


LOSS   BY   ACT   OF   OFFICER    IN    EXCESS   OF   HIS   AUTHORITY        §  25 

refuse  to  admit  any  explanatory  matter  by  way  of  exculpation. 
If  practical  justice  effected  a  relaxation  of  this  jjossihle  strin- 
gency, yet  it  was  only  for  the  sake  of  protecting  substantial  bona 
fide  innocence,  not  to  aid  in  introducing  a  practice  of  the  artful 
dissection  of  a  complete  whole  into  guilty  and  innocent  com- 
ponents, and  the  referring  the  injury  to  the  one  or  the  other  of 
these.  If  in  any  portion  of  the  entire  business  there  has  been 
dishonesty,  this  must  be  regarded  as  tainting  the  whole. 

Ratification 

When  we  come  to  the  subject  of  the  powers  and  duties  of  cashiers, 
it  will  be  seen  that  dealings  may  be  had  with  these  officers  under 
such  circumstances  of  time  and  place  that  the  bank  may  not  be 
bound  by  them.  But  the  bank  may  at  any  time  waive  the  ir- 
regularity, abandon  its  defence,  and  assume  the  liability  which 
the  party  dealing  with  the  cashier  sought  to  impose  upon  it.  It 
has  an  unquestionable  right  to  do  this,  if  it  chooses.  It  depends 
upon  the  choice  which  the  bank  shall  make  between  repudiation 
or  ratification,  w^hether  or  not  it  can  have  any  remedy  on  the 
official  bond.  If  it  repudiates  the  transaction,  it  cannot  sue 
upon  the  bond ;  for  the  reason  that  it  has  avoided  all  suffering. 
It  would  have  no  possible  cause  of  action.  But  if  it  ratifies  and 
adopts  the  transaction,  the  right  of  action  for  compensation  for 
any  injury  consequent  upon  the  irregularity  accrues.  Where  a 
bank  has  to  consider  what  line  of  action  it  shall  take  in  such  cir- 
cumstances, it  must  be  governed  by  its  views  of  wise  policy  in  the 
premises.  If  its  reputation  would  suffer  from  a  rigid  adherence 
to  its  rights,  and  a  more  liberal  conduct  is  deemed  advantageous, 
it  has  the  unquestionable  right  to  act  accordingly.  It  is  under 
no  obligation  to  the  sureties  in  the  bond  to  stand  upon  its  extreme 
legal  rights,  and  to  narrow  down  their  liability  and  watch  over 
their  interests  to  the  sacrifice  of  its  own.  The  ])ossibility  of  such 
dilemmas  occurring,  and  of  the  decision  being  in  favor  of  corporate 
ratification,  is  an  event  which  every  bondsman  must  be  assumed 
to  contemplate  as  constituting  an  essential  part  of  his  risk.  But 
it  is  evident  that  if,  by  the  decision  of  the  bank,  the  act  docs  not 
bind  it,  then  it  can  suffer  no  loss,  however  official  the  proceedings 
may  have  purported  to  be;  and  it  is  not  the  fact  that  the  act 
purports  to  be  official,  and  thereby  accomplishes  a  fraud  upon 
others,  that  gives  the  right  of  action  to  the  bank  ;  but  it  is  the  fact 

71 


§  25  OFFICIAL   BONDS   AND    LIABILITIES    OF   SURETIES 

that  some  substantial  loss  or  measurable  injury  has  been  actually 
inflicted  upon  the  bank  itself,  through  the  medium  of  the  dis- 
honesty or  irregularity.^ 

§  26.  Unusual  Emplosrment.  —  The  bond  covers  any  duties 
belonging  by  custom  to  the  ofiice,  and  such  as  in  the  natural 
course  of  business  °  are  assigned  to  the  officer,  as  in  the  temporary 
absence  of  a  fellow  officer,  or  any  similar  emergency.  But  losses 
occurring  by  reason  of  extra  duties  not  thus  reasonably  within 
the  contemplation  of  the  surety  ground  no  suit  against  him  unless 
the  words  of  the  bond  cover  the  loss  of  the  given  kind  unquali- 
fiedly .o«     See  §  30. 

Unqualified  Insurance 

A  bond  insured  that  the  clerk  should  "  well  and  faithfully 
serve",  etc.,  and  should  not  "cancel,  obliterate,  spoil,  destroy, 
waste,  embezzle,  spend,  or  make  away  with  "  any  of  the  books, 
cash,  notes,  etc.,  "  of  the  bank  or  of  any  of  the  customers,  which 
should  be  deposited  in  his  hands,  or  intrusted  to  his  custody  or 
possession,  or  come  to  his  care,  custody,  or  possession."  At 
request  of  a  customer,  the  clerk  was  sent  eleven  miles  to  receive 
a  sum  to  be  deposited  to  the  customer's  credit  in  the  bank.     On 

^  Pendleton  v.  Bank  of  Kentucky,  1  T.  B.  Monr.  (Ky.)  171. 

°  §  26.  A  bond  for  the  faithful  performance  of  the  duties  of  the  office 
of  teller  or  cashier  covers  all  defaults  in  the  duties  of  such  office  annexed 
from  time  to  time  by  those  who  are  authorized  to  control  the  affairs  of  the 
bank ;  and  the  sureties  enter  into  the  contract  in  reference  to  the  rights 
and  authority  of  the  president  and  directors,  under  the  charter  and  by- 
laws. Minor  v.  Mechanics'  Bank,  1  Pet.  46,  7  L.  ed.  47 ;  Planters'  Bank 
V.  Lamkin,  R.  M.  Charlt.  (Ga.)  29. 

0°  A  bank  was  incorporated  with  power  to  appoint  all  necessary  officers, 
to  take  bonds  from  them,  and  to  make  all  necessary  by-laws,  rules,  and 
regulations.  By  one  of  the  by-laws  it  was  provided  that  it  should  be  the 
duty  of  every  other  officer  of  the  bank  to  perform  such  services  as  might  be 
required  of  them  by  the  president  and  cashier.  In  an  action  against  the 
principal  and  sureties  of  a  bond  given  by  a  bookkeeper  of  a  bank,  condi- 
tioned for  the  faithful  performance  of  the  duties  of  his  office,  "and  of  all 
other  duties  required  of  him  in  said  bank  ",  the  bond  was  adjudged  to  have 
been  taken  in  conformity  with  the  charter ;  and  the  bookkeeper  having, 
whilst  in  discharge  "of  the  other  duties  required  of  him  ",  taken  large  sums 
of  money,  the  sureties  were  rendered  liable  on  his  bond.  Planters'  Bank 
V.  Lamkin,  R.  M.  Charlt.  (Ga.)  29.  Where  the  bond  of  a  receiving  teUer 
covered  his  duties  as  such,  "or  the  duties  to  which,  in  the  employer's 
service,  he  may  be  subsequently  appointed  or  assigned  by  the  employer  ", 
it  was  held  that  the  bank  might  appoint  him  assistant  cashier  without  notice 
to  the  surety.  FideUty  Co.  v.  Gate  City  Bank,  97  Ga.  636,  25  S.  E.  392 
(1895). 

72 


WRONGFUL   ACT    BEYOND   THE    PERIOD    OF   THE    BOND  §  27 

his  return  he  lost  the  sum.  In  suit  by  the  bank  the  jury  found 
that  it  was  not  the  custom  to  send  a  clerk  to  receive  deposits 
away  from  the  bank.  Nevertheless,  somewhat  strangely  as  it 
must  seem,  the  court  held  that  the  loss  was  covered  by  the  con- 
dition of  the  bond  ;  remarking  that  the  same  would  be  the  case 
where  money  should  be  received,  or  a  check  paid  erroneously  or 
wrongfully  after  banking  hours,  or  if  the  clerk  should  be  despatched 
to  London  on  an  emergency  to  procure  funds. ^  In  this  case  the 
bond  seems  to  insure  against  loss  of  funds  of  the  bank  coming  to 
the  care  of  the  officer,  no  matter  how. 

Temporary  Absence 

The  receiving  teller  was  assigned  the  duties  of  the  general 
teller,  in  the  temporary  absence  of  the  latter.  The  court  said 
that  a  bank  teller's  official  bond  covers  any  duties  to  which,  in 
the  natural  course  of  business,  he  may  be  assigned  by  the  cashier 
or  other  superior  officer  in  the  temporary  absence  of  the  person 
whose  duty  it  is  to  perform  them.^ 

A  bookkeeper's  sureties  are  not  released  by  the  mere  fact  that 
he  also  assumed  the  duties  of  teller,  unless  the  errors  were  con- 
nected with  or  induced  by  the  employment  as  teller.^ 

§  27.  Wrongful  Act  beyond  the  Period  of  the  Bond.  —  I'nless 
otherwise  expressed,  the  bond  covers  the  legal  term  ^  of  office  of 
the  person  guaranteed  (what  constitutes  the  legal  term  being, 
however,  a  difficult  question  in  some  cases,  see  pp.  72-76)  ;  but 
whether,  nothing  being  said  in  the  bond  on  the  subject,  the  surety 
is  to  be  held  to  contemplate  the  possible  extension  of  the  officer's 
term  under  his  election,  in  consequence  of  legislative  action  pro- 
longing the  corporate  existence  beyond  the  charter  limit,  qucErer 

'  Melville  v.  Doidge,  G  C.  B.  450. 

2  Detroit  Sa\angs  Bank  v.  Ziegler,  49  Mieh.  157,  13  N.  W.  496. 

3  Home  Savings  Bank  ;-.  Traube,  75  Mo.  199  ;  Garnett  v.  Farmers'  Na- 
tional Bank,  91  Ky.  618-620,  16  S.  W.  709  (1891). 

1  §  27.     See  §  16. 

A  bond  being  executed  for  one  year  to  indemnify  a  bank  against  the 
dishonesty  of  its  cashier  occurring  during  the  term  of  the  bond,  or  any 
renewal  thereof,  and  discovered  within  six  months  of  such  term,  or  re- 
newal, and  there  being  a  subsequent  instrument  to  continue  the  former 
in  force  for  another  year  according  to  its  terms  and  conditions,  the  instru- 
ment will  be  construed  as  though  the  bond  had  been  originally  executed 
for  two  years.  Rankin  v.  U.  S.  Fidelity  etc.  Co.,  86  Ohio  St.  267,  99  X.  E. 
314(1912).  .    . 

2  The  presumption  that  the  official  bond  applies  only  to  the  existing 
term  is  very  far  from  conclusive,  and,  if  it  is  clear  that  the  parties  meant 

73 


§  27  OFFICIAL   BONDS    AND    LIABILITIES    OF   SURETIES 

A  conflict  has  been  supposed  ^  to  exist  on  this  point  between 
New  Hampshire  and  Pennsylvania ;  but,  keeping  in  mind  the 
rule  that  the  words  of  a  judge  are  to  be  understood  in  reference  to 
the  facts  of  the  case,  the  seeming  disagreement  disappears.  In 
the  New  Hampshire  case,  the  bank  did  not  cease  to  exist,  the  legis- 
lative medicine  being  administered  before  death,  and  the  court 
sustained  this  supplemental  liability,  such  a  continuance  of  the 
officer's  term  being  within  reasonable  contemplation  of  the  parties 
at  the  time  of  making  the  bond.  In  the  Pennsylvania  case,  the 
bank  had  ceased  to  exist  and  was  resuscitated,  and  the  court  denied 
that  the  bond  once  dead  could  be  revived  in  this  way. 

So  the  cases  do  not,  upon  close  inspection,  seem  to  cross  each 
other.  When  the  charter  limit  is  actually  reached,  or  the  bank 
in  any  way  ceases  to  exist,  if  only  for  a  moment,  the  officer  is  no 
longer  an  officer;  he  has  come  to  the  end  of  his  term,  and  the 
bond  is  dead,  and  can  only  be  revived  by  act  of  the  parties  to  it, 
or  by  some  event  expressly  provided  for  in  the  bond  itself.  But 
if  a  bond  covers  the  term  of  a  cashier's  office,  and  by  reason  of 
legislative  action  the  bank  does  not  expire  at  the  original  charter 
limit,  the  cashier's  term  being  thereby  extended  unbroken  beyond 
said  limit  by  a  contingency  easily  within  the  contemplation  of  the 
parties  at  the  time  of  executing  the  bond,  it  is  at  least  clear  that  a 
case  holding  such  a  bond  to  cover  such  an  extension  is  not  sub- 
stantially discordant  with  a  case  in  which  the  bank's  existence 
was  absolutely  determined,  though  the  language  of  the  judges 
may  have  been  wider  than  their  cases,  their  decisions  broader 
than  the  foundation. 

However,  Ohio  presents  us  with  a  case  that  is  surely  in  conflict 
with  New  Hampshire ;  but,  as  will  be  seen  by  referring  to  the 
citations  in  the  expansion  of  this  section,  the  court,  instead  of 
setting  out  reasons  for  the  faith  that  was  in  it,  declare  the  ref- 
erences of  the  counsel  conclusive.  And  yet,  when  these  references 
are  examined,  there  is  only  argument  from  analogy.  In  each 
case  where  the  question  of  period  arose,  there  was  a  definite  limit 
inherent  in  the  officer's  term  ;  in  one  case  it  was  annual,  in  another 
he  was  elected  for  six  months,  and  of  course  such  limitations  are 
very  different  from  a  contingency  entirely  external  to  the  officer's 

to  create  a  continuing  liability,  the  bond  must  be  held  to  have  done  so. 
Fink  V.  Farmers'  Bank,  178  Pa.  St.  154,  169,  35  Atl.  636;  Shackamaxon 
Bank  v.  Yard,  143  Pa.  St.  129,  22  Atl.  208. 
^  See  Parsons  on  Contracts. 

74 


WRONGFUL   ACT    BEYOND    THE    PERIOD    OF   THE    BOND  §  27 

term.  Like  that  of  the  dissolution  or  continuance  of  the  bank  at 
the  charter  Hmit,  there  is  nothing  certain  about  that ;  but  when  a 
cashier's  office  is  annual,  that  is  a  definite,  certain  limit,  upon  the 
very  subject  matter  of  the  bond. 

Therefore,  on  the  whole,  although  it  may  be  fairly  urged  that 
a  surety  should  have  the  benefit  of  any  doubt  as  to  what  may 
have  been  within  his  contemplation  (though  Mr.  Burge  thinks 
his  words  must  be  construed  contra  proferentem),  yet  upon  the 
cases  we  must  conclude  that  New  Hampshire  has  the  only  well 
considered  case  upon  the  precise  point. 

Taking  a  new  bond  at  a  re-election  determines  the  old,  unless 
expressly  reserved  by  a  proviso  in  the  new. 

It  is  not  necessary  that  all  the  acts  in  the  chain  of  wrongful 
conduct  causing  the  loss,  and  concealing  it,  should  be  done  within 
the  period ;  it  is  enough  to  charge  the  sureties,  if  any  substantial 
part  of  such  conduct  occurs  within  the  time  covered  by  their  bond. 
The  remainder  of  this  section  is  devoted  to  a  fuller  treatment  of 
these  points. 

//  the  Officer  is  elected  for  an  Expressly  Limited  Time,  the  Bond  has 
Reference  to  that  Period.     Effect  of  Annual  Re-election 

The  bond  of  an  officer  remains  in  force  as  a  continuing  obligation 
only  during  the  periotl  for  which  he  legally  holds  office  under  his 
election.  His  re-election  at  the  end  of  this  period,  and  his  entry 
upon  a  second  term  of  office,  though  no  actual  gap  intervenes,  do 
not  operate  to  revive  or  to  keep  alive  his  bond.^''  If  the  office  be 
annual,  the  bond  should  be  annually  renewed.  Though  if  the 
office  be  annual  with  the  proviso  that  the  incumbent  shall  con- 
tinue to  hold  until  a  successor  is  appointed  and  qualified,  and  the 
officer  continues  to  hold  over  after  the  expiration  of  the  year  by 
virtue  of  this  clause,  his  bond  will  likewise  continue  in  force.     It  is 

3°  The  condition  in  a  bond  is  controlled  and  restricted  by  the  recital, 
and  when  the  recital  refers  to  the  term  of  appointment  of  a  cashier  "for 
one  year"  the  sureties  on  his  bond  are  not  liable  for  defalcations  commenc- 
ing after  the  term  of  office  to  which  the  bond  refers.  Blades  v.  Dewey, 
136  X.  C.  17G,  48  S.  E.  ()27,  103  Am.  St.  Rep.  924,  n.  (1904). 

By  the  terms  of  an  appointment  that  "E.G.  ITines  be  employed  for  the 
next  year  as  cashier"  he  entered  upon  a  new  term,  with  a  fixml  limitation 
of  time  and  beyond  the  limitation  of  which  the  original  bond  could  be  of 
no  force  and  effect.  Wapello  State  Sav.  Bank  v.  Colton,  133  Iowa  147, 
110  N.  W.  450,  11  L.  R.  A.  (n.  s.)  493,  n.  (1907).  See  Rankin  v.  Tygard, 
198  Fed.  795  (1912). 

75 


§  27  OFFICIAL   BONDS   AND    LIABILITIES   OF   SURETIES 

essential,  however,  that  the  office  derive  an  annual  character  by- 
force  of  some  law,  or  legal  resolution,  or  by-law,  if  the  obligation 
of  the  bond  is  to  be  only  of  a  year's  duration.^^  If  the  office  is 
declared  to  be  so  by  the  charter,  or  in  the  organic  law,  or  in  the 
corporate  by-laws,  or  perhaps  even  by  a  vote  of  the  corporate 
government,  it  will  be  assumed  that  the  sureties  entered  into  their 
undertaking  with  a  view  to  this  established  limitation  upon  its 
continuance.*  But  we  have  the  authority  of  Amherst  v.  Root, 
cited  below,  for  the  doctrine  that  a  mere  habit  or  usage  of  the 
directors  to  re-elect  every  year  does  not  impart  the  legal  character 
of  annual  duration  to  the  office.  The  sureties  are  not  supposed  to 
have  regarded  a  custom  which  has  in  fact  no  particular  necessity 
or  object,  and  which  may  at  any  time  be  broken  in  upon  or  wholly 
abandoned  without  changing  the  legal  position  of  affairs  in  any 
respect.  The  naked  fact  of  annual  re-election,  therefore,  is  not 
sufficient  to  make  the  obligation  of  the  bond  only  annual.  This 
rule  applies  to  all  cases  in  which  the  bond  names  or  refers  to  no 
specific  limitation  of  the  liability,  and  to  all  cases  in  which  such 
general  phrases  are  used  as  "during  his  continuance  in  office", 

3!-  But  see  Blades  v.  Dewey,  136  N.  C.  176,  48  S.  E.  627,  103  Am.  St. 
Rep.  924,  n.  (1904). 

4  Though  the  bond  do  not  recite  the  term  of  the  office  or  agency,  if  it 
be  one  of  limited  duration,  by  general  statute,  charter,  by-law,  or  terms 
of  appointment,  the  parties  are  still  supposed  to  contract  with  a  reference 
to  the  Umited  term,  and  the  sureties  will  not  be  held  answerable  for  the 
misconduct  of  the  principal  beyond  that  term,  upon  a  new  appointment, 
even  though  the  words  of  the  bond  are  that  they  shall  be  responsible  for 
the  principal,  "at  all  times  or  any  time  hereafter."  St.  Saviour's  South- 
wark  V.  Bostock,  2  (B.  &  P.)  New  R.  174;  Hassell  v.  Long,  2  M.  &  S. 
(Eng.)  363 ;  Peppin  v.  Cooper,  2  B.  &  Aid.  431 ;  Parker  v.  Barker,  1 
T.  R.  295;  Blades  v.  Dewey,  136  N.  C.  176,  48  S.  E.  627,  103  Am.  St. 
Rep.  924,  n.  (1904) ;  Ida  County  Sav.  Bank  v.  Seidensticker,  128  Iowa  54, 
102  N.  W.  821,  111  Am.  St.  Rep.  189  (1905).  Sureties  on  the  bond  of  a 
cashier  whose  term  of  office  is  annual  are  not  Uable  for  defaults  occurring 
after  an  election  the  next  succeeding  year,  and  the  lapse  of  a  sufficient 
time  for  him  to  qualify  by  giving  a  new  bond.  Harris  v.  Babbitt,  4  Dillon 
185.     See  Rankin  v.  Tygard,  198  Fed.  795  (1912). 

In  Ulster  County  Savings  Institution  v.  Ostrander,  15  N.  Y.  App.  Div. 
173,  it  was  held  that  where  a  treasurer  who  is  elected  for  one  year  gives  a 
bond  to  pay  over  ...  to  his  successor  "at  the  expiration"  of  his  office 
and  to  faithfully  serve  .  .  .  "during his  continuance  in  office  ",  the  surety 
is  only  liable  during  the  first  year. 

But  the  same  court  later  held  that  a  bond  for  faithful  service  "during 
his  continuance  in  office,  even  though  he  hold  under  successive  appoint- 
ments ",  binds  the  surety  although  the  officer  held  over  without  a  reap- 
pointment. Ulster  County  Savings  Institution  v.  Young,  15  N.  Y.  App. 
Div.  181. 
76 


WRONGFUL   ACT    BEYOND   THE    PERIOD    OF   THE    BOND  §  27 

or  "  SO  long  as  he  sliall  be  "  cashier,  teller,  etc.  Of  course,  if  the 
bond  distinctly  declares  its  own  duration,  this  is  conclusi\e  upon 
the  question.^  Where  the  charter  prescribes  an  annual  election 
of  directors,  and  that  the  "  directors  for  the  time  being  shall  have 
power  to  appoint  a  cashier",  the  tenure  of  office  of  the  cashier  is 
not  thereby  rendered  annual.  But  having  been  once  duly  ap- 
pointed, by  a  vote  containing  no  express  limitation,  he  will  continue 
to  hold  office  by  virtue  of  this  original  appointment,  either  until 
the  expiration  of  the  charter  or  until  his  removal  before  that  time 
by  the  directors.^  And  where  the  bond  of  a  cashier  is  without  any 
limitation  as  to  time,  the  liability  of  the  surety  does  not  end  at 
the  expiration  of  the  term  of  office  of  the  board  of  directors  that 
appointed  him.' 

In  a  Delaware  8  case,  the  charter  gave  directors  power  to  ap- 
point cashier,  annexed  no  term  to  the  oflfice,  but  required  him  to 
be  qualified  by  taking  oath  and  giving  bond.  In  1862  and  1865 
he  gave  bond ;  in  1863  and  1864  he  did  not,  though  annually  re- 
elected. The  bond  was  conditioned  for  a  faithful  discharge  of 
his  duties  as  cashier,  no  time  being  named.  The  question  was 
whether  the  cashier's  term  of  office  expired  at  the  new  election,  or 
continued  till  the  cashier  was  qualified  by  a  new  bond.  The  court 
took  the  latter  view,  for  otherwise  there  would  not  be  a  succession 
of  cashiers  qualified  as  required  by  the  charter,  and  in  the  absence 
of  amj  express  rule  that  the  office  shall  expire  ipso  facto  on  a  new 
election,  it  is  a  reasonable  construction  that  the  old  term  shall  continue 
till  the  new  is  duly  and  properly  entered  on. 

B  Welch  V.  Seymour,  28  Conn.  387 ;  State  Treasurer  v.  Mann,  34  Vt. 
371 ;  Dedham  Bank  v.  Chickering,  3  Pick.  (Mass.)  335.  See  also  Boston 
Hat  Manufactory  v.  Alessinger,  2  id.,  223,  and  the  authorities  thercnn 
cited  and  discussed.  But  it  should  be  remarked  that  Dedham  Bank  v. 
Chickering,  though  not  overruled,  was  yet  declared  to  be  of  questionable 
soundness,  in  Johnson  v.  Frankfort  Bank,  23  Me.  322.  "During  the  time 
of  his  employment  by  the  bank"  was  held  to  bind  the  surety  where  the 
cashier  continued  in  office  several  years  without  re-election  ;  although  the 
State  law  required  annual  election  of  such  officers.  Shackamaxon  Bank 
V.  Yard,  143  Pa.  St.  129,  22  Atl.  908.  "For  and  during  all  the  time  he  shall 
hold  said  office"  continues  over  all  appointments.  Westervelt  v.  Mohren- 
stecher,  76  Fed.  118. 

« Union  Bank  v.  Ridgely,  1  Harr.  &  G.  (Md.)  413. 

■>  Merchants'  Bank  of  Ellis  ;•.  Honey,  58  Kan.  603,  50  Pac.  871  (1897). 

8  Sparks  v.  Farmers'  Bank  of  Delaware,  3  Del.  Ch.  274,  294. 


77 


§  27  OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES 

Statutory  Provisions 

A  similar  rule  was  laid  down  in  the  case  of  Amherst  Bank  v. 
Root,^  in  a  very  clear  and  satisfactory  opinion,  delivered  by 
Chief  Justice  Shaw.  The  statute  proviAed  that  the  cashier  should 
retain  his  place  until  removed  therefrom,  or  until  another  should  he 
appointed  in  his  stead.  In  1831,  a  cashier  was  appointed  and  gave 
bond  ;  in  1832,  he  was  reappointed,  and  gave  no  new  bond.  He 
continued  in  office  several  consecutive  years,  and  in  1836—37  was 
guilty  of  defaults.  His  two  appointments  were  each  expressed,  on 
the  records,  to  be  "  for  the  year  ensuing."  The  portion  of  the 
opinion  which  we  have  occasion  to  rely  upon  at  present  is  sul)- 
stantially  as  follows  :  This  statutory  provision  governs  the  tenure  by 
which  the  cashier  holds  office,  which  is  "  2intil  another  is  appointed." 
If  he  is  to  hold  the  office,  he  is  also  to  perform  the  official  duties, 
and  a  bond  that  he  shall  faithfully  perform  the  duties  will  "  include 
duties  performed  after  the  limited  time  for  which  he  is  chosen, 
and  during  the  time  that  the  office  is  continued  by  force  and  oper- 
ation of  law."  Though  the  election  was  expressed  to  be  for  the 
year  next  ensuing,  yet,  the  office  not  being  by  law  annual,  he  held 
it  by  force  of  the  general  law  until  another  should  be  appointed  in 
his  stead.  That  the  directors  hold  by  virtue  of  an  annual  election 
has  no  effect  in  controlling  the  positive  provision  of  the  law  con- 
cerning the  cashier's  tenure  of  office.  A  plausible  argument  is,  that 
the  fact  of  an  annual  election  is  evidence  of  a  by-law  or  usage 
making  the  office  annual.  But  the  directors  are  supposed  to 
know  the  general  law,  which  declares  that  the  cashier  shall  con- 
tinue in  office  till  they  remove  him.  Their  re-election,  therefore, 
amounts  only  to  the  fact  that  they  wish  to  give  expression  to  their 

3  Amherst  Bank  v.  Root,  2  Met.  (Mass.)  522.  Judge  Dewey's  dissent- 
ing opinion  appears  wholly  unconvincing  when  compared  with  that  of  the 
Chief  Justice. 

The  case  of  Amherst  Bank  v.  Root  is  discussed  in  Ida  County  Sav. 
Bank  v.  Seidensticker,  128  Iowa  54,  102  N.  W.  821,  111  Am.  St.  Rep.  189 
(1905),  which  holds  that  a  statute  providing  that  a  cashier  should  hold  his 
office  "at  the  pleasure  of  the  board"  is  not  the  equivalent  of  the  Massa- 
chusetts Act,  and  that  a  cashier's  bond  which  does  not  expressly  limit  the 
period  of  its  operation  must  be  read  in  connection  with  the  terms  of  the 
appointment  under  which  a  cashier  holds  his  office,  and  if  such  appoint- 
ment be  for  a  definite  period  the  bond  ceases  to  be  effective  upon  the 
expiration  of  the  term  so  designated,  and  that  the  surety  is  not  bound  for 
defalcations  occurring  after  four  successive  annual  re-elections.  See, 
also.  Blades  v.  Dewey,  136  N.  C.  176,  48  S.  E.  627,  103  Am.  St.  Rep.  924, 
n.  (1904). 

78 


WRONGFUL   ACT    BEYOND   THE    PERIOD    OF  THE    BOND  §  27 

will  that  he  should  remain.  His  election  to  an  office  which  he  already 
holds-,  and  would  continue  to  hold  without  an  election,  is  otdi/  a  iiiani- 
festation  of  their  intent  that  he  should  continue  to  hold.  That  they 
themselves  regard  it  thus,  as  a  continuance  of  an  existing  office, 
not  the  commencement  of  a  new  one,  is  obvious  from  tlicir  requiring 
no  new  bonds.  "  The  cases  where  it  has  been  held  that  tlic  gen- 
erality of  the  words  of  an  obligation  may  be  restrained  and  modi- 
fied are  of  two  classes :  first,  where  tliere  is  a  preaml)le  or  recital, 
stating  directly  or  by  implication  the  intent  and  purpose  of  tlie 
parties  to  the  bond  ;  or,  secondly,  where  it  is  a  stipulation  for  fidelity 
in  office,  and  it  ai)pears  by  the  nature  of  the  constitution  of  the 
office  that  it  was  limited  to  a  particular  time."  In  the  present 
case  the  words  are  general ;  there  is  no  recital ;  the  office  itself  is 
not  annual.  That  the  election  was  "  for  the  year  ensuing  "  is 
answered  by  the  fact  that  the  law  made  the  office  a  continuing 
one  until  the  incumbent  was  removed,  and  another  chosen  in  his 
place ;  which  did  not  happen  till  after  the  occurrence  of  the 
breaches  assigned.  Dewey,  J.,  dissented,  on  the  ground  that  it 
was  competent  for  the  directors  to  make  the  office  annual,  and  they 
had  done  so  by  their  votes. 

Expiratio7i  of  Charter.     Supplemental  Liability 

If  no  other  legal  limitation  can  be  annexed  to  the  term  of  office, 
it  might  seem  that  at  least  the  duration  of  the  charter,  or  the 
period  for  which  the  corporation  may  exist  under  the  law  of  its 
organization,  must  be  the  utmost  time  over  which  the  bondsmen's 
liability  could  be  extended.  It  is  clear  that  a  renewal  of  the  charter 
or  extension  of  the  period  of  existence  cannot  operate  to  carry  the 
obligation  over  into  the  second  lease  of  corporate  life,  if  the  charter 
limit  is  reached  before  the  renewal.  But  if  the  bank  does  not 
cease  to  exist,  its  existence  being  prolonged  by  an  act  before  the 
limit  of  its  former  term  is  reached,  it  has  been  held  ^^  m  Xew 
Hampshire  that  the  bond  continues.  The  possibility  of  such  a  pro- 
longing of  the  cashier's  term  was  within  reasonable  contemplation 
at  the  time  the  bond  was  made.  O.  might  be  cashier  for  a  week 
or  for  life,  according  to  circumstances,  one  of  which  is  such  legis- 
lative action  as  the  present,  and  the  bond  was  given /or  all  the  time 
he  should  be  cashier. 

The  court  said  :   "  The  true  rules  of  law  to  be  deduced  from  all 
i«  Exeter  Bank  v.  Rogers,  7  N.  H.  21. 

79 


§  27  OFFICIAL   BONDS   AND    LIABILITIES   OF   SURETIES 

the  cases  on  this  subject  are  these.  When  the  term  of  office  is 
limited  to  a  particular  period,  as  a  year  or  five  years,  and  the 
person  appointed  cannot  continue  in  office  for  a  longer  period 
without  a  new  appointment,  then  the  official  bond,  if  nothing 
appear  to  the  contrary,  is  presumed  to  be  intended  to  be  confined 
to  the  particular  term;  and  if  the  officer  be  reappointed  there 
must  be  a  new  bond.  But  when  an  office  is  held  at  the  will  of 
those  who  make  the  appointment,  and  is  not  limited  to  any  cer- 
tain term,  then  the  bond  is  presumed  to  be  intended,  if  nothing 
appear  to  the  contrary,  to  cover  all  the  time  the  person  appointed 
shall  continue  in  office  under  the  appointment. ^"'^  Thus  a  sheriff 
is  appointed  in  this  State  to  hold  his  office  during  the  term  of  five 
years,  and  cannot  hold  it  beyond  that  term  w^ithout  a  new  appoint- 
ment. The  bond  he  gives  does  not  therefore  extend  beyond  the 
term  for  which  he  is  appointed.  But  the  deputies  of  the  sheriff 
hold  their  offices  at  the  will  of  the  sherifp,  and  their  bonds  may 
extend  to  any  period  during  which  they  are  continued  in  office, 
notwithstanding  the  sheriff  may  in  the  meantime  be  reappointed, 
and  be  compelled  to  give  new  bonds  himself.  These  rules  are 
founded  in  sound  reason  and  good  sense.  The  presumption  which 
the  law  makes  as  to  the  intention  of  the  parties  to  the  bond  is  the 
natural  presumption  in  both  cases.  Now  we  are  of  the  opinion  that 
the  terms  of  the  condition  in  this  case  are  broad  enough  to  embrace 
the  whole  term  during  which  Rogers  was  cashier,  and  that  there  is 
nothing  in  the  form  of  the  appointment,  the  nature  of  the  office, 
the  words  of  the  condition,  or  the  conduct  of  the  parties,  that 
gives  the  slightest  indication  of  any  intention  in  any  party  that 
the  bond  should  be  limited  to  the  period  mentioned  in  the  original 
charter  as  the  termination  of  the  corporation." 
In  Thompson  v.  Young,^^  the  facts  were  these  :  — 
In  the  year  1811,  the  Bank  of  Muskingum  was  incorpo- 
rated, the  charter  to  continue  until  the  1st  of  January,  1818. 
Marple  was  appointed  cashier.  Vanhorn,  Price,  Thompson,  and 
Mclntire  executed  with  Marple,  as  securities,  a  bond  in  the 
penalty  of  $20,000.  Marple  proceeded  to  discharge  the  duties 
of  cashier. 

Before  the  1st  of  January,  1818,  the  legislature  extended  the 

i««  This  holds  true  in  regard  to  a  surety  on  a  bond  given  by  a  bank 
designated  as  a  depositary  by  a  city.  Snattinger  v.  Topeka,  80  Kan.  341, 
102  Pac.  508  (1909). 

11  Thompson  v.  Young,  2  Ohio  334. 

80 


WRONGFUL   ACT    BEYOND   THE    PERIOD   OF  THE    BOND  §  2/ 

charter  until  the  1st  of  January,  1(S43.     ^Marple  was  continued 
cashier,  without  either  a  new  appointment  or  a  new  bond. 

In  1815,  ^Iclntire,  one  of  the  securities,  died.  In  1S19, 
Marple  became  a  defaulter  to  a  large  amount ;  and  suit  was 
commenced  against  Marple,  Vanhorn,  Price,  and  Thompson,  the 
surviving  obligors,  and  judgment  obtained  against  them  for  the 
amount  of  the  defalcation.  At  the  trial,  no  evidence  was  given 
of  any  default  before  the  1st  of  Jaiuiary,  1818.  The  court  said : 
"  The  authorities  adduced  by  the  defendants  are  conclusive  that 
the  securities  were  not  bound  for  any  defalcation  that  took  place 
after  the  expiration  of  the  first  charter.  And  we  hold  them  to 
be  in  accordance  with  the  soundest  principles  of  justice." 

The  chief  authorities  to  which  reference  was  made  were  to  the 
following  effect :  — 

In  Arlington  v.  Merricke,^-  the  defendant  entered  bonds  as 
security  for  Jenkins,  appointed  deputy-postmaster  for  six  months. 
In  an  action  to  recover  on  account  of  Jenkins's  failure  in  some 
way,  his  counsel,  Saunders,  said :  "  The  defendant,  by  the  inten- 
tion of  the  condition,  was  not  to  be  responsible  for  Jenkins  for  any 
longer  time  than  for  the  said  six  months,  although  the  words  are 
that  Jenkins,  during  all  the  time  that  he  shall  continue  deputy- 
postmaster,  etc.,  indefinitely,  shall  observe  and  perform,  etc. ; 
yet  this  time,  which  is  indefinite  in  itself,  ought  to  be  construed 
only  for  the  said  six  months,  for  which  the  condition  recites  that 
Jenkins  was  appointed  to  be  deputy-postmaster,  and  to  which 
the  condition  relates.  And  that  rather  because  Jenkins  cannot 
continue  deputy-postmaster  for  any  longer  time  than  for  the 
said  six  months,  unless  he  be  appointed  anew,  and  have  a  new 
deputation  for  a  longer  time.  As  he  said  that,  by  the  construction 
which  the  plaintitt"s  counsel  would  put  upon  it,  the  defendant 
would  be  tricked ;  for  it  appears  that  the  defendant  intended  to 
be  bound  for  Jenkins  for  the  due  execution  of  the  said  ofl^ce  only 
for  six  months ;  but  the  plaintift'  would  have  the  defendant 
bound  during  the  whole  life  of  Jenkins,  which  is  unreasonable 
to  suppose."  Hale,  Chief  Justice,  said  :  "  The  condition  shall 
refer  to  the  recital  by  which  the  defendant  was  bound  only  for 
six  months,  and  not  longer,  and  that  for  the  reason  above  alleged 
by  Saunders." 

A  foot-note  says,  "  This  has  been  considered  a  leading  case 
upon  this  subject  ever  since." 

^-  Arlington  v.  Merricke,  2  Saunders  414. 

VOL.   I  —  6  81 


§  27  OFFICIAL   BONDS   AND    LIABILITIES    OF    SURETIES 

In  Wright  v.  Russell/^  De  Grey,  C.  J.,  said  :  "  The  law  is,  that 
the  surety  shall  not  be  bound  beyond  the  scope  of  his  engagement, 
as  understood  at  the  time  he  entered  into  it.  Where  there  is  the 
least  difference  hetioeen  the  condition  and  the  breach  assigned,  the 
surety  will  not  he  bound.  Here  Wright  takes  a  clerk  when  sole, 
with  security  for  his  good  behavior  in  his  service.  He  then,  by 
his  own  act,  takes  in  a  partner.  From  that  moment  the  suretyship 
is  at  an  end.  If  there  is  one,  there  may  be  twenty  partners  taken 
in.  Is  the  surety  liable  if  Baird  disobeys  the  orders  of  any  one 
of  these  partners?  Or  can  the  surety  be  called  upon  to  insure 
the  money  of  all  the  partners?     Certainly  not." 

Bigelow,  Clerk,  etc.  v.  Bridge.^*  "  By  the  Court.  The  bond 
in  this  case  appears  to  have  been  given  to  the  plaintiff,  as  clerk 
of  the  peace  for  the  county,  pursuant  to  the  provisions  of  the 
statute  of  1785,  c.  76,  §  1.  But  the  choice  of  county  treasurer 
being  by  that  statute  annual,  it  is  apparent  that  the  bond  re- 
quired by  it  was  intended  for  the  protection  of  the  public,  so 
long  only  as  the  person  chosen  should  continue  in  office  in  virtue 
of  such  election.  A  new  bond  should  regularly  have  been  taken 
for  each  several  year  for  which  the  defendant  was  elected.  If 
this  bond  were  valid  against  the  defendant,  it  would  be  equally 
valid  against  his  sureties ;  but  they  could  never  contemplate 
their  contract  as  binding  them  thus  indefinitely.  And  indeed  it 
is  to  be  presumed  that  the  plaintiff  did  not  consider  them  as  held 
to  answer  the  present  demand,  as  he  has  not  joined  them  with 
their  principal  in  this  action.  But  the  principal  in  a  bond  is  no 
further  bound  than  his  sureties." 

It  will  be  observed  that  the  authorities  are  not  precisely  to  the 
point,  since,  so  far  as  they  directly  refer  to  the  limitation  of  the 
surety's  obligation  by  the  term  of  the  principal's  ofiice,  the  limi- 
tation was  one  inherent  in  the  office  itself.  In  one  case  the  office 
was  annual,  in  the  other  for  the  definite  term  of  six  months,  which 
is  not  exactly  similar  to  the  case  in  which  they  were  cited,  the 
limitation  there  being  not  inherent  in  the  office,  but  aside  from  it, 
—  a  contingency  which  might  or  might  not  affect  the  term  of  the 
principal's  office. 

Authority  is  clear  that  legislative  reaction  of  a  deceased  bank 
does  not  infuse  new  life  into  the  bond.^^     In  Pennsylvania  the 

»  Wright  V.  Russell,  2  W.  Bl.  934.  "  8  Mass.  275. 

15  Bank  of  Washington  v.  Barrington,  2  P.  &  W.  (Pa.)  27  ;  Thompson 
t;.  Young,  2  Ohio  334;   Union  Bank  v.  Ridgely,  1  Harr.  &  G.   (Md.)  413. 

82 


WRONGFUL    ACT    BEYOND    THE    PERIOD    OF   THE    BOND  §  27 

court  declared  that  the  revival  of  the  charter  after  a  for- 
feiture had  been  legally  consummated  by  default  of  the  cashier 
will  not  operate  to  revive  the  obligation  of  the  sureties  on  this 
bond. 

"  By  the  constitution  of  this  corporation,  its  existence  was  sub- 
ject to  be  terminated  alike  by  forfeiture  of  its  charter  and  efflux 
of  time ;  and  for  the  benefit  of  each  of  these  as  limitations  of  the 
term  of  their  liability,  the  sureties  had  stipulated,  not  indeed  in 
terms,  but  tacitly,  and  by  irresistible  implication  from  the  nature 
of  the  contract.  They  had  treated  on  the  basis  of  corporate  ex- 
istence as  it  then  stood,  and  in  reference  to  all  its  incidents.  They 
might  have  seen,  and  they  are  therefore  to  be  considered  as  having 
known,  that  the  bank  was  subject  to  cease  by  the  happening  cf  a 
contingency,  and  that  with  it  would  cease  their  liability.  Who 
can  say  this  did  not  enter  into  their  estimate  of  the  risk  which 
they  consented  to  take  on  themselves?  They  were,  in  effect, 
insurers,  but  without  a  premium,  of  the  cashier's  fidelity  ;  and  they 
were  entitled  to  the  benefit  of  any  termination  of  the  risk  which 
may  be  brought  within  the  letter  or  the  spirit  of  their  contract. 
Their  engagement  was  without  a  consideration  beneficial  to  them- 
selves, and  it  is  therefore  not  to  be  extended  beyond  its  strict 
technical  import." 

In  this  case  the  forfeiture  was  absolute  and  complete,  when  the 
legislature  came  to  the  rescue,  and  declared  the  bank  should  come 
again  into  existence,  ratifying  the  acts  done  in  the  interval ;  and 
the  court  are  careful  to  state  that  they  have  not  to  pass  on  a  case 
where  the  legislature  had  only  intervened  to  prevent  the  con- 
summation of  an  inchoate  forfeiture. 

That  both  the  officer  and  the  corporate  government  have,  in 
fact,  supposed,  or  have  conducted  themselves  so  that  it  must  be 
assumed  that  they  supposed,  that  the  bond  was  still  continu- 
ing in  force  after  it  had  in  fact  been  terminatcfl  in  any  of  the 
ways  above  described,  does  not  aft'ect  its  validity,  or  operate  as 
a  waiver  of  its  determination.  The  misapprehension,  being 
common  to  both  parties,  does  not  prevent  either  from  standing 
upon  his  original  rights. 

Taking  a   New  Bond 

a.  When  an  officer  has  given  a  bond  in  which  no  express  limi- 
tation of  time  is  set  to  the  duration  of  the  obligation,  if  afterwards, 

S3 


§  27  OFFICIAL   BONDS   AND    LIABILITIES    OF   SURETIES 

at  the  close  of  a  year  or  other  term  of  his  incumbency,  he  is  again 
appointed,  again  quahfies,  and  gives  a  new  bond,  —  the  old  ap- 
pointment is  thereby  terminated,  the  obligation  of  the  old  bond 
ceases,  and  no  recovery  can  be  had  against  its  obligors  by  reason 
of  his  subsequent  default. ^^  But  if  there  is  a  special  proviso  in 
the  second  bond  that  it  shall  not  impair  the  obligation  of  any 
previous  bond  until  the  same  shall  have  been  given  up  and  can- 
celled, all  the  bonds  will  still  be  legally  valid,  and  will  be  equally 
available  as  security  against  breaches  until  such  cancellation  of 
the  earlier  ones  actually  takes  place.^^ 

Part  of  the  Wroi^g  beyond  the  Bond  Period 

h.  It  has  sometimes  happened  that  an  officer,  being  reappointed 
for  a  second  term  of  office,  and  giving  a  new  bond  for  the  new 
term,  is  at  the  very  time  of  his  appointment  a  defaulter,  though 
the  fact  is  unknown  to  all  the  parties  save  himself.  If,  then, 
after  the  reappointment,  he  does  any  further  wrongful  official  act 
in  reference  to  the  existing  defalcation,  though  only  for  the  purpose 
of  concealing  it,  and  even  though  he  may  not  in  any  manner  in- 
crease its  amount  or  alter  its  nature,  the  sureties  upon  the  second 
bond  will  be  liable,^^  Whether  or  not  the  sureties  on  the  first 
bond  could  also  be  held,  either  altogether  instead  of  the  sureties 
on  the  second  bond,  or  for  the  purpose  of  making  up  the  full 
amount  of  the  loss  if  this  could  not  be  obtained  from  the  sureties 
on  the  second  bond,  is  a  question  upon  which  the  only  two  au- 
thorities which  we  have  are  somewhat  at  variance.  In  the  In- 
diana case,  the  officer  misappropriated  moneys  received  by 
him  in  his  second  term  to  make  good  his  defalcation  in  the 
previous  term,  and  the  court  held  positively  that  only  the 
sureties  for  the  second  term  could  be  held.  In  the  Massachusetts 
case,  the  cashier  had  embezzled  in  the  first  term ;  after  his  reap- 
pointment, he  borrowed  money,  as  cashier,  and  placed  it  in  the 
bank  to  meet  an  examination,  after  which  he  withdrew  the  amount 
from  the  bank  and  returned  it  to  the  lenders.  The  court  said, 
although  a  deficit  existed  prior  to  the  execution  of  the  second 
bond,   "  and  which  may  have  been  covered  by  an  antecedent 

i«  Johnson  v.  Frankfort  Bank,  23  Me.  322.  See  Wapello  State  Sav. 
Bank  v.  Colton,  133  Iowa  147,  110  N.  W.  450,  11  L.  R.  A.  (n.  s.)  493,  n. 
(1907). 

1^  Pendleton  v.  Bank  of  Kentucky,  1  T.  B.  Monr.  (Ky.)  171. 

18  Ingraham  v.  Maine  Bank,  13  Mass.  208 ;   Cook  v.  State,  13  Ind.  154. 

84 


IDENTITY   OF   BANKING    FIRM  §  29 

bond  ",  yet  the  transaction  in  the  second  term  was  not  distinguish- 
able from  an  actual  payment  from  his  own  funds  to  make  good 
the  deficiency,  and  a  removal  afterwards  of  corporate  funds  with- 
out the  assent  of  the  government.  It  follows  from  these  cases, 
that  it  is  not  necessary  that  the  entire  transaction  creating  the 
liability  should  take  place  within  the  period  covered  by  the  bond. 
The  occurrence  of  any  substantial  part  within  that  period  is 
enough  to  make  the  liability  attach.  A  fortiori,  therefore,  if  the 
whole  of  the  fraudulent  part  falls  within  the  term  of  the  obligation, 
the  obligors  will  be  bound. ^^ 

§  28.  The  Surety  is  discharged  by  a  Material  Change  in  the 
relations  between  the  officer  and  the  bank,  so  as  to  increase  the 
risk  in  an  important  degree,  or  in  the  identity  of  the  obligee,  unless 
the  change  is  provided  for  in  the  bond. 

For  the  surety  has  a  right  to  judge  for  himself  of  the  circum- 
stances under  which  he  is  willing  to  be  liable,  and  they  cannot 
be  maicrialhj,  i.e.  substantially,  changed  without  his  consent, 
unless  the  change  is  manifestly  for  his  benefit. 

§  29.  Identity  of  Banking  Firm.  —  Where  there  is  a  change 
in  the  banking  firm  to  which  the  obligation  of  the  bond  runs,  it 
will  depend  upon  the  language  of  the  bond  whether  it  will  enure 
to  the  benefit  of  the  new  firm.  It  may  be  so  written  that  the 
obligation  is  to  the  original  firm  and  to  its  successors  through 
any  number  of  subsequent  changes ;  or  it  may  be  so  written  that 
the  obligation  is  only  to  the  individuals  who  at  the  date  of  the  bond 
composed  the  firm.  An  early  case  touching  upon  this  question 
was  that  of  Wright  v.  Russell.^  The  guarantor  in  the  bond  under- 
took with  A.  for  the  fidelity  of  a  clerk  in  A.'s  employ,  so  long  as 
he  should  continue  in  A.'s  service  as  clerk.  Afterward  A.  took  a 
partner,  and,  the  clerk  being  in  default,  suit  was  brought  by  A. 
upon  the  bond,  alleging  that  the  clerk  had  received  money  on 
account  of  the  partnership,  and  had  not  paid  it  over.  But  the 
court  held  that  k.  could  not  recover ;  that  the  taking  of  a  partner 
by  A.  put  an  end  to  the  obligation.  The  condition  of  the  obli- 
gation ran  to  A.  alone,  and  the  breach  was  not  strictly  within 
the  condition ;  nor  was  there  anything  to  show  that  the  surety 
intended  to  guarantee  the  clerk's  fidelity  to  any  other  person 
than  A.     This  case  has  been  subjected  to  much  criticism  ;    but 

>9  State  V.  Van  Pelt,  1  Cart.  (Tnd.)  304. 

1  §  29.     3  Wils.  530,  2.  W.  Bl.  934.     Also  to  the  same  effect  is  Dry  v. 
Davy,  10  Ad.  &  El.  30. 

85 


§  29  OFFICIAL   BONDS   AND    LIABILITIES   OF   SURETIES 

appears  never  yet  to  have  been  directly  overruled  upon  any  sub- 
stantially identical  condition  of  facts.^ 

The  directors  of  an  unincorporated  banking  company  merged  the 
association  into  an  existing  corporation  chartered  as  an  insurance 
and  trust  company,  and  continued  to  do  banking  contrary  to 
charter.     The  cashier's  bond  was  held  inoperative  by  the  change.'' 

Yet  in  sundry  cases  the  obligation  has  been  held  to  be  continuing 
where  the  court  felt  able  to  hold  upon  the  facts  that  the  bankers 
were  really  the  same  copartnership  throughout  the  several 
changes.^  Wliere  the  obligee,  being  a  joint-stock  banking  com- 
pany, received,  after  execution  of  the  bond,  a  considerable  acces- 
sion of  proprietors  and  capital,  and  thereupon  increased  the 
number  of  directors  and  changed  its  name,  it  was  nevertheless 
held  that  the  bond  continued  a  live  security,  surviving  these 
changes,  on  the  ground  that  the  bank,  not  having  changed  its 
constitution  in  any  respect,  had  preserved  its  identity,^  This 
seems  to  be  the  true  test,  in  theory,  whether  the  obligee  has  lost 
or  continued  his  or  its  identity.  But,  as  usual,  the  difficulty  lies 
in  applying  the  theory  to  the  facts,  and  determining  the  question 
of  continued  identity.  Some  of  the  cases  seem  to  make  a  break 
very  much  easier  of  accomplislmient  than  others. 

Where  a  state  bank  is  converted  into  st  national  bank  with  a 
change  of  name,  under  the  National  Banking  Act,  neither  its 
identity,  nor  its  right  to  sue  upon  liabilities  formerly  incurred 
is  affected.^" 

But  a  bond  requiring  the  clerk  to  account  to  the  banker  and 
his  executors,  administrators,  and  assigns,  does  not  cover  defaults 
committed  subsequently  to  the  obligee's  death  when  the  clerk 
is  in  the  employ  of  the  executors.^ 

§  30.  Change  in  the  Duties  of  the  Officer.  —  If  the  new  duties 
are  of  a  lower  grade,  and  less  risk  than  the  functions  of  the  office 
guaranteed,  the  surety  is  not  discharged  wholly,  though  he  may 
not  be  liable  for  a  loss  arising  from  such  employment.     See  §  26. 

2  Barclay  v.  Lucas,  3  Dougl.  321,  1  Term  291,  n.  Though,  as  would 
appear  by  the  note  at  the  end  of  the  report  of  the  ease  in  Douglas,  it 
also  has  not  escaped  question. 

3  Bensinger  v.  Wren,  100  Pa.  St.  500  (1882). 

4  Chapman  v.  Beckinton,  3  Q.  B.  722;  Metcalfe  v.  Bruin,  12  East 
400 ;   Wilson  v.  Craven,  8  M.  &  W.  584. 

6  Metcalfe  v.  Bruin,  12  East  400. 

5«  Michigan  Insurance  Bank  v.  Eldred,  143  U.  S.  293,  36  L.  ed.  162,  12 
Sup.  Ct.  450  (1892). 

«  Barker  v.  Parker,  1  Term  287 ;   but  see  Strange  v.  Lee,  3  East  490. 

86 


CH.A.NGE    IX    THE    DL'TIES   OF   THE    OFFICER  §  30 

Presumed  Assent  of  Surety 

Or  if  the  change,  though  increasing  the  risk,  does  so  in  a  sHght 
and  unimportant  mainier,  and  is  such  a  variation  as  is  hkely  to 
occur  in  the  course  of  business,  it  (k)es  not  avoid  the  bond,  for  the 
surety  is  presumed  to  know  that  the  directors  have  power  to  make 
such  rcguhitions  and  changes  as  they  see  fit,  and  the  surety  is  pre- 
sumed to  contemphite  such  action,  and  assent  in  advance  to 
reasonable  and  moderate  alterations  in  official  duties ;  otherwise 
the  security  would  be  truly  a  bond  and  fetter  on  the  business  of 
the  bank,  rather  than  an  obligation  upon  the  surety.  But  if 
duties  of  a  higher  grade,  requiring  more  skill,  or  subjecting  the 
officer  to  greater  tcmi)tations,  are  added,  the  surety  is  discharged, 
though  it  may  be  doubted  if  the  rule  is  not  more  sweeping  than 
justice  requires.     See  §  17. 

Express  Assent 

The  language  of  the  bond  may  expressly  refer  to  such  matters, 
or  be  so  broad  and  absolute  as  to  cover  them.  See  §  26.  We 
will  now  consider  the  cases  that  illustrate  these  rules. 

Lower  and  Higher  Grade  Duties 

a.  Assent  to  any  considerable  increase  of  risk  can  never  be  im- 
plied. The  character  of  the  risk  can  never  be  materially  altered. 
A  bookkeeper  may  have  many  more  books  given  him  to  keep 
than  he  had  at  the  time  of  the  execution  of  the  bond ;  a  cashier 
may  be  deputed  to  act  as  teller ;  "  for  the  office  of  teller  is  not 
higher  than  that  of  cashier."  Such  changes  do  not  work  substan- 
tial increase  in  the  bondsmen's  risk,  or  an  increase  which  it  can 
be  supposed  that  they  would  have  repudiated,  or  would  have 
considered  unlikely  to  occur,  when  they  entered  into  the  contract 
of  insurance.  The  bookkeeper  is  a  bookkeeper  still ;  though  he 
has  more  labor,  it  is  of  the  same  nature ;  the  cashier  only  fulfils 
in  person  the  functions  of  a  subordinate,  which  are  strictly  con- 
sistent with  his  own  office.  But  to  raise  an  assistant  bookkeeper 
to  the  office  of  teller,  or  to  the  still  higher  office  of  cashier,  would 
assuredly  be  to  vitiate  his  bond  as  a  security  for  his  good  conduct 
and  sufficient  skill  in  his  new  position.^     It  would  be  absurd  to 

1  §  30.  Anderson  v.  Thornton,  3  Q.  B.  271.  See  also  Grant  on  Bankers 
and  Banking.     He  there  lays  down  the  principle,  very  soundly,  that  a 

87 


§  30  OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES 

take  for  granted  that  persons  willing  to  guarantee  that  a  man  has 
skill  and  ability  enough  to  assist  in  keeping  books,  are  therefore 
willing  to  guarantee  that  he  has  skill  and  ability  enough  to  be  the 
teller  or  cashier  of  a  banking  corporation ;  equally  absurd  to 
declare  it  to  be  an  implication  of  law  that,  because  the  same  per- 
sons will  guarantee  his  honesty  in  the  circumstances  of  such 
moderate  opportunity  and  temptation  to  fraud  as  he  must  en- 
counter in  the  bookkeeping,  therefore  they  will,  and  in  fact  do, 
guarantee  the  same  honesty  in  the  face  of  the  vastly  increased 
opportunity  and  temptation  held  out  by  the  duties  of  teller  or 
cashier.2 

A  bank  bookkeeper  who,  in  1S63,  had  given  bond  for  faithful 
discharge  of  his  duties  as  bookkeeper,  was,  in  1870,  appointed 
teller  with  an  increased  salary,  and  in  1879  was  a  defaulter.  Held, 
that  the  bond  did  not  cover  the  defalcation.^ 

Words  are  sometimes  added  to  the  effect  that  the  officer  shall 
perform  all  the  "  duties  of  the  said  office  which  may  be  prescribed 
by  the  directors."  These  words  clearly  enlarge,  rather  than  re- 
strict, the  responsibility  of  the  sureties,  and  distinctly  anticipate 
that  additional  duties  may  be  imposed  during  the  term  of  the 
suretyship,  and  will  be  included  within  its  protection.  But 
evidently  these  additional  duties  must  be  consistent  with  the  func- 
tions of  the  office  named  ;  or,  if  not  consistent,  they  must  at  least 
be  of  a  lower  grade  and  a  less  risk.  A  teller  could  not  be  made 
a  director,  nor  could  a  bookkeeper  be  made  a  president,  and  still 
remain  guaranteed  by  this  bond,  by  virtue  of  the  enlarging  power 
of  this  phrase.^ 

A  cashier's  bond  was  conditioned  to  secure  the  faithful  dis- 

variation,  without  assent  of  surety,  which  may  amount  to  substituting  a 
new  for  the  old  agreement,  is  an  absolute  discharge  of  the  surety.  This  is 
sound,  and  accords  with  the  text,  though  Grant's  further  designation  of 
any  variation  "which  may  prejudice"  the  surety  ought  in  our  view  to  have 
been  rather  more  narrowly  restricted,  as  by  limiting  it  to  cases  of  sub- 
stantial prejudice,  or  the  prejudice  of  that  kind  or  degree  which  the  surety 
could  not  have  been  reasonably  expected  to  contemplate  as  a  possibility 
when  he  entered  into  the  undertaking. 

2  Minor  v.  Mechanics'  Bank,  1  Pet.  46,  7  L.  ed.  47 ;  Rochester  Bank  v. 
Elwood,  21  N.  Y.  88. 

3  National  Mechanics'  Banking  Association  v.  Conklin,  24  Hun  (N.  Y.) 
496  (1881). 

The  change  from  assistant  cashier  to  cashier  without  increased  respon- 
sibility will  not  forfeit  an  indemnity  bond.  First  National  Bank  v.  United 
States  FideUty  etc.  Co.,  150  Wis.  601,  134  N.  W.  742  (1912). 

^  Durkin  v.  Exchange  Bank,  2  Patt.  &  H.  (Va.)  277. 


INCREASE    OR   REDUCTION    OF    SALARY  §  31 

charge  of  "  all  his  duties  as  clerk  of  said  bank  ",  also  for  protection 
against  his  misappropriation  of  any  funds  of  the  bank  which  might 
"  come  under  the  care  or  control  of  said  cashier  as  clerk."  It 
was  in  evidence  that  the  cashier  performed  to  some  extent  the  duties 
of  teller;  also  that  this  was  contemplated  to  be  included  in  the 
phrase  "  duties  as  clerk."  It  was  held  that  the  sureties  on  the 
bond  were  not  entitled  to  a  ruling,  as  a  matter  of  law,  that  there 
had  been  such  a  change  in  the  duties  of  the  clerk  as  would  dis- 
charge them  from  liability  for  his  wrongful  approi)riati()n  of  funds.^ 

Where  a  cashier  was  employed  by  the  bank  in  transacting 
what  was  not  ])roj)crly  banking  business,  in  the  course  of  which 
he  appropriated  the  bank  funds  to  his  own  use,  the  sureties  on  the 
bond  were  liable  for  moneys  so  appropriated.^ 

§31.  Increase  or  Reduction  of  Salary.  (See  §17.) — A  clerk 
was  paid  by  salary  at  the  time  of  the  giving  of  the  bond,  and 
afterward  it  was  arranged  that  he  should  be  paid  by  commissions, 
which  gave  him  a  larger  return  than  his  salary,  and  it  was  held 
that  the  surety  was  thereby  discharged  from  further  liability.^ 
And,  so  again,  where  a  clerk,  in  consideration  of  having  his  salary 
raised,  agreed  to  become  liable  to  bear  one-fourth  part  of  all  losses 
on  the  discounts  made  by  the  bank,  it  was  held  that,  from  the  date 
of  this  new  arrangement,  the  surety  was  discharged.- 

There  does  not  seem  to  be  much  reason  in  the  former  of  these 
decisions,  nor  is  our  respect  for  it  increased  when  we  find  a  re- 
duction of  salary  held  not  to  discharge  the  surety's  obligation.' 
Surely  one  would  think  a  reduction  of  salary  more  likely  to  lead 
to  negligence  in  labor,  or  to  dishonesty,  than  an  increase  of  salary, 
though  the  court,  in  the  first  case  cited,  thought  otherwise. 

In  the  second  case  the  liability  assumed  by  the  clerk  is  a  much 
more  substantial  ground  for  discharge  than  the  increase  of  salary, 
for  a  new  liability  might  give  occasion  for  stronger  temptation  to 
cover  it.  So  common  and  unsubstantial  a  change  as  to  its  effect 
on  the  risk  seems  a  very  unsatisfactory  ground  of  avoiding  the 
bond.-* 

5  Rollstone  National  Bank  v.  Carleton,  136  ISIass.  226. 

«  Springer  v.  Exchange  Bank,  14  Can.  S.  C.  Rep.  716. 

1  §  31.     North  Western  Railway  Company  i-.  Whinray,  10  Exeh.  77. 

2Bonar  v.  Macdonald,  3  H.  L.  Cas.  226. 

3  Frank  v.  Edwards,  10  Exeh.  81. 

*  Increase  of  commissions  of  agent  held  not  to  invalidate  bond.  Smith 
V.  Addison,  5  Crancli  (C.  C.)  623  ;  People  i-.  Vilas,  36  N.  Y.  459  ;  Amicable 
Ins.  Co.  V.  Sedgwick,  110  Mass.  163. 

89 


§  31  OFFICIAL   BONDS   AND    LIABILITIES   OF   SURETIES 

Increasing  a  cashier's  salary  and  enlarging  his  duties,  but  chang- 
ing neither  the  character  of  the  duties  nor  his  relation  to  the  bank 
as  cashier,  is  no  defense  to  an  action  against  the  sureties  for  the 
cashier's  violation  of  duty.^ 

§  32.  An  Increase  of  Capital  Stock  may  be  considered  a  fact 
within  the  contemplation  of  the  surety,  and  though  a  change  of 
risk,  it  is  a  change  of  such  nature  as  may  happen  at  any  time  in 
the  course  of  business  by  the  accumulation  of  deposits.  This  is 
the  opinion  of  Delaware.^  The  court  rest  their  decision  on  the 
simple  statement  that  there  had  been  no  enlargement  of  the 
cashier's  duties ;  that  "  the  sphere  of  his  duties  was  the  same, 
although  the  subject  matter  of  his  charge  might  be  increased, 
which  is  no  more  than  what  happens  from  day  to  day  from  fluc- 
tuations in  the  amount  of  deposits." 

In  Massachusetts,  the  court  consider  that  to  hold  the  sureties 
after  the  increase  would  be  to  extend  and  enlarge  their  liability .^ 
In  the  Delaware  case  the  cashier's  bond  did  not  cover  loss  by  his 
mistake ;  in  the  Massachusetts  case  it  did  ;  and  it  was  considered 
obvious  that  the  chance  of  mistake  was  increased  by  enlargement 
of  the  capital.  If  the  chance  of  loss  by  mistakes  of  greater  number 
or  magnitude  released  the  surety  in  Massachusetts,  it  may  be 
difiicult  to  imagine  why  the  increased  temptations  of  larger  busi- 
ness should  not  have  had  the  same  effect  in  Delaware ;  in  other 
words,  the  difference  of  facts  in  the  cases  seems  insufficient  to 
explain  the  contrariety  of  the  decisions. 

It  may  well  be  argued,  that  a  surety  might  be  willing  to  guar- 
antee O.,  in  a  bank  with  a  small  capital,  and  the  fluctuations  of 
deposits  likely  in  such  a  bank,  and  yet  be  unwilling  to  guarantee 
him  in  a  bank  with  a  larger  business  ;  for  although  he  in  any  case 
contemplates  fluctuations,  the  argument  of  Delaware  is  not  entirely 
satisfactory,  for  contracting  in  reference  to  fluctuations  in  the  busi- 
ness of  a  bank  with  a  small  capital  does  not  cover  a  change  of  the 
line  round  which  the  variations  are  grouped,  —  an  elevation  of 

5  Wallace  v.  Exchange  Bank,  126  Ind.  265,  26  N.  E.  175. 

1  §  32.  Bank  of  Wilmington  &  Brandywine  v.  WoUaston,  3  Harr. 
(Del.)  90. 

2  Grocers'  Bank  v.  Kingman,  16  Gray  (Mass.)  473.  It  seems  just  that 
the  bondholders  should  not  be  held  in  any  case  not  clearly  mthin  their 
contract,  but  Mr.  Burge,  in  his  work  on  Suretyship  (p.  646),  says  the  words 
of  the  bond  are  to  be  construed  strictly  against  the  surety,  for  they  are  his 
words.  This  rule  is,  however,  a  mere  lifeless  formula,  that  is  only  used 
by  the  courts  when  they  can  see  no  other  way  to  sustain  the  interpretation 
they  think  just,  or  when  no  other  reason  applied. 

90 


UNREASONABLE   RETENTION    OF   THE    OFFICER  §  33 

their  centre  of  gravity.  A  man  may  stand  in  the  waves  at  low- 
water,  who  would  be  overwhelmed  by  the  billows  of  the  higher 
tides. 

On  the  other  hand,  it  is  not  every  increase  of  liability  that  can 
avoid  a  bond  ;  else  each  new  deposit,  or  temporary  absence  of 
a  superior  officer,  would  have  that  result.  The  true  question 
seems  to  be.  Is  the  enlargement  such  as  was  within  the  reasonable 
contemplation  of  the  parties  at  the  time  of  making  the  bond  ? 

And  as  the  increase  of  capital  is  one  of  the  bank's  well-known 
powers,  set  down  in  its  organic  law,  and  quite  frequently  exercised, 
it  would  be  hard  to  imagine  on  what  ground  it  could  be  said  not 
to  be  contemplated. 

Still,  the  just  principle,  that  in  case  of  doubt  the  surety  should 
be  favored,  not  the  bank,  urges  decision  in  the  opposite  direction, 
and  perhaps  the  best  rule  on  reason  and  authority  is,  that  any 
substantial  increase  of  risk,  not  exyresshj  provided  for,  or  necessarily 
incident  to,  the  bank's  business  as  ordinarily  carried  on,  will  dis- 
charge the  surety.     See  §  17. 

§  33.  Unreasonable  Retention  of  the  Officer  after  discovery  of 
his  defalcation  will  (perhaps)"  discharge  the  sureties  as  to  any 
subsequent  breach  of  the  bond. 

0  §  33.     A  comparison  of  this  section  with  §  37  will  disclose  the  fact, 
that  while  the  surety  is  not  discharged  by  direct  command  of  the  directors 
to  do  an  unlawful  act,  yet  he  is  supposed  to  be  released  by  neglect  of  the 
directors  to  discharge  or  suspend  the  officer  ^\ith  reasonable    despatch. 
The  question  in  both  is  substantially  this :   Is  the  bank  to  lose  its  remedy 
against  the  cashier's  bondsmen  for  any  breach  of  the  condition  of  the  bond, 
because  some  other  officer  of  the  bank  is  also  in  fault?     (See  the  JSIass. 
case  cited  §  38,  and  Minor  v.  Mechanics'  Bank  at  the  end  of  §  37,  and 
§  17  a.)     The  surety  does  not  agree  to  indemnify  provided  the  other 
officers  conduct  themselves  properly,  but  if  O.  conducts  Inmsclf  improperly. 
If  the  stockholders  become  aware  of  O.'s  defalcation,  and  do  not  act  m  the 
premises,  that  mght  relieve  the  surety  from  future  liability;    but  the 
directors  are  not  the  bank,  and  if  their  wrongful  conduct  in  commandmg 
or  connivance  \\ith  a  dishonest  act  of  the  cashier  docs  not  depri\'e  the  bank 
of  its  remedy  against  the  surety,  on  what  ground  would  their  connivance 
with  a  second  wrong,  knowing  of  a  prior  offence,  or  the  less  fault  of  neg- 
lecting to  discharge  O.,  operate  to  release  the  surety?     True,  it  may  be 
argued  that  the  bank  intrusts  the  superintendence  of  the  cashier  and 
subordinates  to  the  directors,  and  must  be  bound  by  their  conduct  in  the 
matters  given  into  their  charge ;   but  such  an  argument  applies  to  all  the 
cases  of  §  37,  as  well  as  to  those  of  §  33.     It  has  been  declared  tliat  mere 
negligence  in  examining  the  accounts  of  a  cashier  is  no  release  of  his  sureties. 
Black  t'.  Ottoman  Bank,  10  W.  R.  871 ;  Atlas  Bank  v.  Brownell,9  R.  I.  IGS. 
In  Amherst  Bank  ;-.  Root,  2  Met.  (Mass.)  r,22,  C.  .1.  Shaw  says,  "Tlu>  idea 
that  the  cashier  is  excused  by  the  act  or  negligence  of  the  directors  arises 
from  considering  the  board  of  directors  as  the  corporation,  and  then  apply- 

91 


§  33  OFFICIAL   BONDS   AND    LIABILITIES    OF    SURETIES 

A  reasonable  time  is  allowed  for  the  directors  to  assemble  and 
act  in  the  prenlises.  But  if  misconduct  is  suspected,  or  even 
actually  discovered,  and  the  directors  are  satisfied  at  first  only  to 
suspend  the  wrong-doer  temporarily  from  the  exercise  of  his 
functions,  and  pass  a  vote  to  that  effect,  the  liability  of  the  bonds- 
men still  continues  until  the  suspension  is  actually  effected.  At 
least  this  is  the  case  if  there  is  no  unnecessary  or  unreasonable 
delay  in  carrying  the  suspension  into  effect.^  For  though  the 
continuance  in  office  by  the  directors  of  an  official,  whom  they 
know  to  be  dishonest  and  unfit  for  his  post,  may  have  the  effect 
of  vitiating  the  obligation  of  his  bond  as  a  security  for  his  defaults 
occurring  after  the  knowledge  and  continuance  in  office,^  yet  a 
suspension  is  not,  in  fact,  a  continuance  in  office.  The  directors 
have  a  right  to  take  this  step  first,  for  the  purpose  of  gaining  time 
for  more  elaborate  investigation  and  deliberation.  If  they  take 
it  with  due  promptitude,  it  is  enough.  For  the  guilty  party  is 
as  incompetent  to  do  acts  which  will  place  his  bondsmen  under 
any  further  liability  when  he  is  suspended,  as  when  he  is  absolutely 

ing  the  very  equitable  principle,  that  one  ought  not  to  recover  of  a  surety 
damages  caused  by  himself.  We  think  the  principle  does  not  apply." 
The  board  is  not  the  corporation  in  such  matters.  To  hold  it  so  would 
defeat  the  very  object  of  the  bond.  See  United  States  v.  Kirkpatrick,  9 
Wheat.  720,  G  L.  ed.  199 ;  Minor  v.  Mechanics'  Bank,  1  Pet.  46,  7  L.  ed. 
47  ;  Farmington  v.  Stanley,  60  Me.  472  ;  Tapley  v.  Martin,  116  Mass.  275. 
No  negligence  of  those  with  whom  rests  the  duty  of  supervision,  short  of  a 
virtual  connivance  at  the  official  delinquency,  or  a  wilful  shutting  of  the 
eyes  to  the  fraud  about  to  be  committed,  can  release  a  surety.  Dawson  v. 
Lawes,  Kay  280.  See  Story's  Eq.  Jur.  §  325.  It  is  to  be  noted  that  these 
decisions  are  negative ;  do  not  say  even  that  fraud  would  discharge  the 
surety,  but  that  nothing  less  can,  and  especially  that  the  fraud  of  which 
they  speak  as  possibly  able  to  release  is  the  fraud  of  the  person  interested, 
not  of  his  agents.  See  on  this  subject  Tapley  v.  Martin,  116  Mass.  276; 
Graves  v.  Lebanon  Bank,  10  Bush  (Ky.)  23. 

The  weight  of  authority  and  reason  seems  heavily  against  releasing 
the  surety  because  of  the  directors'  fault,  unless  it  is  so  expressed  in  the 
bond,  or  the  organic  law  contains  some  provisions  touching  such  matters, 
which  may  therefore  be  considered  as  contemplated  in  the  contract  of 
suretyship.  Section  33  has  no  decision  to  rest  upon  that  goes  to  the 
point,  but  the  law  was  stated  as  in  §  33,  without  the  "perhaps,"  by  Mr. 
Morse,  and  is  retained  by  the  editor  in  respect  to  his  opinion. 

1  M'Gill  V.  Bank  of  the  United  States,  12  Wheat.  511,  6  L.  ed.  711. 

2  This  doctrine  is,  perhaps,  to  be  fairly  implied  from  the  language  of 
the  court  in  Taylor  v.  Bank  of  Kentucky,  2  J.  J.  Llarsh.  (Ky.)  5G8 ;  which, 
however,  only  holds  directly  that  the  retaining  an  officer  in  office  after 
knowledge  of  his  default  does  not  exempt  the  surety  from  liability  for  all 
faults  prior  to  the  knowledge  and  retention.  Also  arguendo  in  Franklin 
Bank  v.  Cooper,  36  Me.  179.     See  note  0,  above. 

92 


THE    STATUTE    OF    LIMITATIONS  §  35 

dismissed.  But  the  neglect  of  the  directors  either  to  suspend 
or  to  remove  the  officer,  after  they  have  become  aware  of 
his  dishonesty  or  incompetence,  will  not  relieve  the  sureties 
from  the  liability  which  had  already  accrued  for  breaches  which 
had  been  consummated  prior  to  the  time  when  the  directors 
acquired  such  knowledge.^  It  only  annuls  the  bond  for  the 
future. 

§  34.  Satisfaction  received  by  the  bank  is  a  good  defence.  But 
a  payment  will  be  applied  to  known  defalcations  in  preference 
to  those  unknown,  though  prior. 

The  cashier,  who  had  given  a  bond  with  sureties,  embezzled 
money  to  the  amount  of  $4,000.  The  capital  stock  of  the  bank 
was  afterward  increased,  the  embezzlement  remaining  undis- 
covered. The  cashier  continued  in  office,  and  no  new  bond  was 
required.  He  continued  his  embezzlements  upon  a  much  more 
extensive  scale  after  the  increase  of  the  corporate  capital.  At 
last,  being  detected,  he  turned  over  to  the  bank  assets  to  the  value 
of  $20,000.  The  bank  sued  the  sureties  to  recover  the  deficit 
which  still  existed.  The  court  ruled  that  the  increase  of  capital 
put  an  end  to  the  liability  of  the  sureties  from  that  time  forth. 
The  sureties  then  claimed  that  the  payment  made  by  the  cashier 
should  be  appropriated  first  to  the  discharge  of  his  earliest  em- 
bezzlements, by  which  means  the  sum  of  $4,000  embezzled  by  him 
prior  to  the  increase  of  capital  would  be  restored,  and  the  sureties 
would  practically  escape  without  loss.  But  the  court  said,  that 
"  inasmuch  as  that  embezzlement  (of  the  $4,000)  was  not  known 
to  the  bank  when  the  conveyance  was  made  (by  the  cashier),  and 
the  purpose  of  the  conveyance  was  to  cover,  as  far  as  it  would,  the 
known  defalcations  of  the  cashier,  ...  the  sureties  are  not  entitled 
to  have  that  property  applied  in  discharge  of  their  liability. 
The  property  was  neither  conveyed  nor  received  for  that 
purpose."  ^ 

§  35.  The  Statute  of  Limitations  usually  requires  suits  on 
cashier's  bonds  to  be  brought  within  two  years  after  the  cause  of 
action  arose.  In  suit  upon  a  bond,  whereby  the  cashier  was  obliged 
to  make  and  give  full  satisfaction  and  recompense  to  the  bank  for 
all  moneys,  bills,  notes,  and  effects  which  should  come  to  his  hands, 
it  was  held  that  the  cause  of  action  did  not  accrue  at  the  date  of 
any  defalcation  or  embezzlement,  or  other  act  protected  against, 

s  State  Bank  v.  Chetwood,  3  Halst.  (N.  J.)  1. 

»  §  34.     Grocers'  Bank  v.  Kingman,  16  Gray  (Mass.),  473. 

93 


§  35  OFFICIAL   BONDS   AND    LIABILITIES   OF   SURETIES 

but  that  it  be  accrued  when  the  cashier,  upon  quitting  his  oflfice, 
failed  to  make  a  full  delivery  of  the  funds  received  by  him ;  and 
from  this  latter  date  the  statute  began  to  run.^  If  the  bank  had 
previously  become  aware  of  the  defalcation  no  doubt  the  statute 
would  have  begun  to  run  from  the  time  of  knowledge  of  the  cause 
of  action. 

§  36.  Revocation.  —  A  surety  may  at  pleasure  revoke  his 
guaranty  upon  reasonable  and  proper  notice,  the  circumstances 
being  such  that  the  bank  can  dismiss  the  officer  without  injury  to 
itself  if  he  should  fail  to  provide  new  sureties,  unless  the  bond  is  on 
a  continuing  consideration  the  benefit  of  which  the  surety  cannot 
or  does  not  renounce,  or  it  was  made  to  cover  a  transaction  not  yet 
completed.^ 

In  England,  however,  it  has  been  held  that  a  guaranty  under 
seal  cannot  be  revoked  without  the  aid  of  equity.^ 

But  notification  by  one  surety  that  he  desires  to  be  released 
does  not  affect  the  liability  of  the  others.^ 

The  death  of  a  surety  and  notification  thereof  before  the  com- 
mencement of  the  cashier's  defalcations  will  not  relieve  the  surety's 
estate.^ 

§  37.  No  Act  of  the  President  or  Directors  in  violation  of  their 
duty  to  the  stockholders  can  discharge  the  surety  on  the  bond  of  a 
bank  ofiicer.^     See  §  33,  note  0,  and  §  38, 


1  §  35.  Bank  of  Wilmington  &  Brandywine  v.  WoUaston,  3  Harr. 
(Del.)  90. 

1  §  3G.  1  Parsons  on  Contracts,  515.  And  see  Le  Rose  v.  Logansport 
National  Bank,  102  Ind.  332  (1885).  Surety  may  revoke,  without  cause, 
on  proper  notice  seasonably  given,  etc. 

2  Bostwiek  v.  Van  Voorhis,  91  N.  Y.  353. 

3  Shackamaxon  Bank  v.  Yard,  143  Pa.  St.  129,  22  Atl.  908. 

1  §  37.  Fiala  v.  Ainsworth,  68  Neb.  308,  94  N.  W.  153  (1903).  Minor 
V.  Mechanics'  Bank,  1  Pet.  46,  7  L.  ed.  47.  It  is  no  defence  that  a  cashier 
has  done  a  dishonest,  irregular,  or  improper  act,  under  the  express  direc- 
tion of  the  board  of  directors,  if  he  knew  that  their  purpose  in  procuring  the 
act  to  be  done  was  wrongful.  He  is  bound  to  obey  them,  doubtless,  and  it 
may  be  that  he  would  have  rejected  any  participation  in  the  profits  of  their 
scheme.  But  neither  his  duty  of  obedience,  nor  his  intention  to  keep  his 
own  hand  clear  from  their  illicit  gains,  are  a  justification  or  excuse  for  his 
connivance.     The  guilt  that  is  in  the  act  leavens  its  entirety. 

Where  a  president  and  cashier  entered  into  a  scheme  to  defraud,  in 
pursuance  of  which  they  gave  a  certificate  in  order  that  the  cashier  could 
obtain  a  fidelity  bond,  it  was  not  presumed  that  the  president  communi- 
cated to  the  bank  what  he  had  done  to  promote  the  fraud,  and  the  bank 
recovered  on  the  bond.  American  Surety  Co.  v.  Pauly,  170  U.  S.  133,  160, 
42  L.  ed.  977,  987,  18  Sup.  Ct.  552,  563 '(1897). 

94 


NO    ACT    OF   THE    PRESIDENT    OR    DIRECTORS  §  37 


Fault  of  Another  Officer  no  Excuse 

It  is  no  excuse  that  the  defalcation  was  accomplished  by  the 
exercise  of  a  power  unlawfully  conferred  by  the  directors  upon  the 
defaulting  officer.  And  if  he  acted  with  the  fraudulent  connivance 
of  the  president,  or  any  one  or  all  of  the  directors  this  would  only 
make  them  partners  in  crime.^"  Thus,  where  a  bank  authorized 
its  teller  to  issue  due-bills,  but  had  no  la^^'ful  power  to  issue  such 
bills  or  clothe  him  with  such  authority,  and  he  accomplished  his 
defalcations  by  issuing  due-bills  for  his  own  benefit,  it  was  held 
that  the  surety  could  not  avail  himself  of  this  illegality  in  defence 
to  a  suit  on  his  bond,  and  could  not  set  up  that  the  bank  could  not 
be  compelled  to  pay  the  bills. ^ 

If  a  cashier  permit  a  transfer  of  stock  to  be  made  to  the  bank 
beyond  the  amount  permitted  by  the  charter,  he  and  his  sureties 
are  answerable  to  the  stockholders  on  his  bond  for  any  loss  caused 
thereby,  although  such  transfer  was  authorized  by  a  resolution 
of  the  directors ;  ^  and  so  if  he  permit  overdrafts  without  special 
excuse.^  But  making  an  excess  loan  does  not  of  itself  constitute 
a  breach  of  a  cashier's  bond.'*" 

The  fact  that  the  cashier  consented  to  the  bookkeeper's  appli- 
cation to  his  own  use  of  money  not  due  him  constitutes  no  defence 
to  an  action  on  the  bookkeeper's  bond.^  This  is  an  ably  argued 
case,  and  Henry,  J.,  dissented,  quoting  Bissell  v.  First  National 
Bank,  69  Pa.  St.  415,  and  Caldwell  v.  National  INIohawk  Valley 
Bank,  64  Barb.  (N.  Y.)  333. 

The  mere  fact  that  the  directors  sanctioned  overdrafts,  will 
not  release  the  liability  of  a  teller's  sureties  for  the  consequent 
loss.^ 

The  culpable  neglect  of  the  directors  and  agents  of  a  bank  to 
make  frequent  examinations  of  the  affairs  of  the  bank,  to  count 
the  money,  and  generally  to  watch  over  its  concerns,  according 
to  the  direction  of  the  by-laws,  is  no  defence  to  the  sureties  in  a 
suit  on  an  official  bond.     The  negligence  of  one  agent,  or  set  of 

»"  Phillips  V.  Bossard,  35  Fed.  99,  100. 

*  Wayne  v.  Commercial  National  Bank,  52  Pa.  St.  343  (1866). 
^  Bank  of  Washington  v.  Barrington,  2  Pa.  St.  29. 

*  Bank  of  St.  Mary's  i-.  Calder,  3  Strobh.  Law  (S.  C.)  408. 
*"  Moheenstecher  v.  Westervclt,  87  Fed.  157. 

^  Chew  V.  Ellingwood,  8G  Mo.  2G0  (1885). 

"  Market  Street  Bank  v.  Stumpe,  2  Mo.  App.  545. 

95 


§  37  OFFICIAL   BONDS   AND    LIABILITIES   OF   SURETIES 

agents,  cannot  deprive  the  corporation  of  its  remedy  for  the  default 
of  another  agent.'^ 

Indeed,  no  act  or  vote  of  the  directors  of  a  bank,  contrary  to 
their  duties,  and  in  fraud  of  stockholders'  rights  and  interests, 
will  excuse  the  cashier  or  his  sureties  from  a  violation  of  the  stipu- 
lation in  his  bond,  well  and  truly  to  execute  the  duties  of  his 
office.^ 

§  38.  Negligence  of  the  Directors  in  supervision  or  failing  to 
discover  a  defalcation  °  does  not  discharge  the  surety  as  to  subse- 
quent frauds ;  ^  but,  as  we  have  seen,^  careless  misrepresentations 
in  ignorance  of  defalcation  that  due  diligence  would  have  disclosed, 
constitute  a  defence  if  the  surety  was  misled  thereby. 

On  the  bond  of  a  cashier  of  a  bank  "  faithfully  and  honestly  to 
discharge  his  duties  as  such  cashier,  and  faithfully  apply  and 
account  for  all  such  moneys",  etc.,  "  and  return  the  same,  on 
proper  demand,  to  the  order  of  the  board",  etc.,  he  and  his  sureties 
are  liable  for  a  loss  caused  by  his  negligence,  though  the  directors 
did  not  use  due  diligence.^ 

It  is  no  defence  to  a  suit  against  the  sureties  on  the  bond  of  a 
bank  cashier,  that  the  directors  neglected  their  duty  in  not  discover- 
ing that  which  the  sureties  covenanted  the  cashier  should  reveal.'* 

A  person  had  been  a  bookkeeper,  and  in  that  position  had  com- 
mitted frauds,  which  had  never  been  detected.  He  was  raised 
to  the  position  of  cashier,  and  as  such  furnished  a  bond,  with 
sureties,  for  the  faithful  performance  of  his  duties.  He  continued, 
however,  to  commit  frauds  of  a  like  general  character  with  those 
previously  committed  by  him  as  bookkeeper.     Held,  that  in  a  suit 

7  Amherst  Bank  v.  Root,  2  Met.  (Mass.)  541 ;  but  see  People  v.  Jansen, 
7  Johns.  (N.  Y.)  332.  See  Fidelity  etc.  Co.  v.  Courtney,  186  U.  S.  342, 
46  L.  ed.  1193,  22  Sup.  Ct.  833  (1902). 

8  Minor  v.  Mechanics'  Bank,  1  Pet.  46,  7  L.  ed.  47.  See  also  American 
Surety  Co.  v.  Pauly,  170  U.  S.  133,  156,  42  L.  ed.  977,  987,  18  Sup.  Ct.  552, 
563. 

"  §  38.  The  care  used  by  officials  in  making  examinations  of  the  books 
of  the  cashier  is  a  question  for  the  jury.  Employers'  Liability  Corp.  v. 
Stanley  Deposit  Bank,  149  Ky.  735,  149  S.  W.  1025  (1912). 

1  See  Chew  v.  Ellingwood,  86  Mo.  260  (1885),  and  see  §  37. 

2  §  21  6. 

3  Batchelor  v.  Planters'  National  Bank  of  Louisville,  78  Ky.  435  (1880) ; 
Fiala  v.  Ainsworth,  68  Neb.  308,  94  N.  W.  153  (1903) ;  Fidelity  etc.  Co.  v. 
Courtney,  186  U.  S.  342,  46  L.  ed.  1193,  22  Sup.  Ct.  833  (1902).  See 
United  States  FideHty  etc.  Co.  v.  Foster  Deposit  Bank,  148  Ky.  776,  147 
S.  W.  406  (1912) ;  United  States  Fidehty  etc.  Co.  v.  Foster  Deposit  Bank's 
Receiver,  1.53  Ky.  698,  156  S.  W.  371  (1913). 

*  Frelinghuysen  v.  Baldwin,  16  Fed.  452. 

96 


EFFECT   OF    FAILURE   TO   TAKE    THE    REQUIRED   OATH  §  40 

by  the  bank  to  recover  from  the  sureties  on  the  bond  for  the  frauds 
committed  durin<i  the  cashiersliip,  it  could  not  be  shown  in  defence 
that  the  frauds  committed  by  him  as  bookkeeper  woukJ  have  been 
discovered  had  the  officers  of  the  bank  not  been  grossly  derelict 
in  the  examination  of  the  books  of  the  bank.  "  The  object  of  the 
bond  is  to  guarantee  to  the  bank  the  faithful  performance  by  the 
cashier  of  his  duties.  His  duties  and  obligations  are  not  affected 
by  the  negligence  of  the  other  officers  or  agents  of  the  bank,  and 
such  negligence  does  not  discharge  his  sureties."  It  is  also  a  qucere 
whether,  if  the  officers  of  the  bank  had  had.  knowledge  of  the 
frauds  of  the  principal  as  bookkeeper,  and  had  failed  to  communi- 
cate such  knowledge  to  the  sureties  on  his  bond  as  cashier,  these 
sureties  would  thereby  have  been  discharged.^  To  decide  such 
a  qucere  against  the  sureties  would  be  a  great  hardship  upon  them, 
not  easily  capable  of  justification. 

§  38  A.  Notification  of  Default.  —  When  a  bond  requires  that 
"  immediate  notice  "  be  given  to  the  surety  upon  discovering 
default  of  an  officer,  the  word  "  immediate  "  means  within  a 
reasonable  time  ;  and  it  is  proper  to  leave  to  the  jury  the  question 
whether  or  not  a  notice  given  within  ten  to  se\enteen  days  after 
discovery  of  default  is  given  with  reasonable  promptness.^ 

§  39.  Ultra  Vires  action  by  the  bank  is  no  defence,  as  if  the 
bank  commenced  o])crations  contrary  to  charter,  or  has  failed  to 
perform  its  public  duties,  as  in  reference  to  redeeming  its  notes. ^ 
And,  where  a  bank  had  no  express  authority  to  establish  a 
"  branch  "  at  which  the  cashier  was  engaged,  it  was  held  no  de- 
fence to  an  action  on  his  bond.^ 

§  40.  Effect  of  Failure  to  take  the  Required  Oath  or  Informality 
in  Appointment.  —  The  fact  that  the  officer  did  not  take  the  oath 
of  office  which  was  required  by  statute  prior  to  entering  upon  the 
exercise  of  his  functions,  does  not  operate  to  vitiate  his  bond. 
Being  one  of  the  duties  prescribed  for  him  to  do,  his  neglect  to  do 
it  may  be  itself  a  breach  of  the  condition  of  the  bond.^     And  so 

^  Tapley  v.  Martin,  116  Mass.  275.  See  United  States  r.  Kirkpatrick, 
9  Wheat.  720,  6  L.  ed.  199 ;  Inhabitants  of  Farmington  v.  Stanley,  GO  Me. 
472. 

'  §  38  A.  Fidelity  etc.  Co.  ;-.  Courtney,  186  U.  S.  342.  46  L.  ed.  1193, 
22  Sup.  Ct.  833  (1902);  Employers'  Liability  Assur.  Corp.  v.  Stanley 
Deposit  Bank,  149  Ky.  735,  149  S.  W.  1025  (1912). 

1  §  39.  Hughes  v.  Bank  of  Somerset,  5  Litt.  (Ky.)  45 ;  Wallace  v. 
Exchange  Bank,  126  Ind.  265,  26  N.  E.  175.     See  §  722. 

2  Morehead  Banking  Co.  v.  Tate,  122  N.  C.  313,  30  S.  E.  341  (1898). 
1  §  40.     State  Bank  v.  Chetwood,  3  Halst.  (N.  J.)  1. 

VOL.  I  —  7  97 


§  40  OFFICIAL   BONDS   AND    LIABILITIES   OF   SURETIES 

far  as  it  is  a  breach  of  the  duty  of  the  directors,  it  is  covered  by 
the  principles  of  §  38. 

The  surety  cannot  escape  HabiHty  on  the  ground  that  his  prin- 
cipal was  never  duly  appointed  or  legally  qualified. ^ 

§  41.  Express  Limitation  of  Risk.  —  If  the  bond  stipulates  that 
a  certain  sum  only  shall  be  left  in  the  custody  of  the  clerk,  and  a 
larger  sum  be  left,  the  bond  is  not  thereby  avoided.  The  nomi- 
nation of  the  sum  will  be  construed,  unless  clearly  otherwise  ex- 
pressed, to  be  a  limitation  of  the  liability  of  the  surety.^ 

The  principles  of  §§37  and  38  apply  in  such  cases,  and  the  rule 
that  the  substantial  object  of  the  bond,  namely,  indemnity  against 
loss  by  fault  of  the  ofiicer  under  the  circumstances  of  ordinary 
business  in  his  office,  will  be  kept  in  mind,  and  the  bond  so  con- 
strued as  to  make  it  available  to  this  end,  unless  the  limitations  are 
so  clearly  adverse  that  they  will  not  bear  a  construction  in  harmony 
with  that  rule. 


§  42.     Notes   on   Evidence,   Measure    of  Damages,    and   Practice 
AND  Pleading  in  General. 

(a)  Evidence.  —  1.  In  a  suit  to  recover  a  deficiency  in  money,  or  the 
value  of  securities  which  ought  to  be  but  are  not  forthcoming,  it  is  suffi- 
cient for  the  bank  in  the  first  instance  to  allege  and  prove  that  they  came 
into  the  hands  and  possession  of  the  ofiicer,  and  have  not  since  been  re- 
turned or  accounted  for  by  him.  These  facts,  laid  in  the  declaration  and 
satisfactorily  established  on  the  trial,  suffice  to  create  a  presumption  that 
the  missing  property  has  been  wasted  or  misappropriated  by  the  officer. 
If  the  deficiency  is  in  the  money,  or  uninvested  funds  of  the  bank,  it  is  not 
necessary  for  the  bank  to  declare  or  to  prove  the  receipt,  at  certain  times, 
of  specific  sums  by  the  cashier,  from  individuals  named,  and  to  allege  these 
particular  sums  to  have  been  since  lost  or  converted.  Obviously  this 
would  be  at  once  a  useless  and  an  impossible  requirement.  All  the  sums 
paid  into  the  bank  are  usually  blended  into  one  aggregate  mass,  and  the 
waste,  loss,  or  embezzlement  in  the  great  majority  of  cases  takes  place  from 
this.  If  at  any  time  an  officer  should  lose  or  embezzle  the  whole  of  any 
especial  sum  taken  by  him  at  one  time  from  an  individual,  it  would  prob- 
ably be  totally  impossible  for  the  bank  to  assure  itself  of  the  fact.  Conse- 
quently it  is  incumbent  upon  the  bank  to  allege  and  prove  simply  that  the 
officer  has  received  a  certain  amount  as  a  sum  total,  and  that  he  has  re- 
turned or  accounted  for  a  less  amount,  likewise  as  a  sum  total.  If  then 
the  defendants  seek  to  rebut  the  presumption  of  his  liability  for  the  differ- 
ence which,  unless  they  do  so,  becomes  conclusive  and  supports  a  judg- 
ment against  them,  the  burden  is  shifted  upon  them  to  allege  and  show 
that  the  deficiency  occurred  in  some  manner  such  as  to  relieve  them  from 
a  liability,  under  the  bond,  to  make  it  good.     If  to  this  end  they  intend  to 

2  Board  of  County  Com'rs  v.  State  Bank,  64  Minn.  180,  66  N.  W.  143. 
1  §  41.     Lindsay  v.  Lord  Downes,  2  Ir.  Ed.  307.     See  the  cases  in  §  42. 

98 


NOTES   OX    EVIDENCE  §  42 

rely  upon  the  innocent  mistake  of  the  officer,  or  upon  a  robbery  from  him, 
either  of  which  is  a  sufficient  defence  (Walker  v.  British  Guarantee  Associa- 
tion, 18  Q.  B.  227,  also  the  cases  cited  below  in  the  discussion  of  this  topic), 
they  must  set  forth  the  time,  place,  and  other  circumstances  attendant 
upon  the  mistake  or  theft,  with  such  certainty,  if  i)ossible,  as  to  show  tiiat 
it  befell  while  the  officer  was  actinj?  duly  and  properly  in  the  discharge  of 
his  functions  according  to  the  ordinary  rules  and  customs  of  the  business. 
It  is  not  sufficient  for  them  to  show  simply  that  the  explanation  is  a 
reasonable  or  a  probable  one ;  they  must  maintain  it  aflirmatively  as  a 
positive  fact.  Allison  v.  Farmers'  Bank,  G  Rand.  (Va.)  204  ;  Minor  v. 
Mechanics'  Bank,  1  Pet.  4G,  7  L.  ed.  47  ;  American  Bank  v.  Adams,  12 
Pick.  (Mass.)  303;  ISIorris  Canal  &  Banking  Co.  v.  Van  Vorst,  3  Zabr. 
(N.J.)  98. 

For  proper  allegations  in  suit  on  a  contract  of  a  fidelity  company  to 
make  good  losses  occasioned  by  misconduct  of  an  employee,  see  Fidelity 
Co.  V.  Gate  City  Bank,  97  Ga.  035,  25  S.  E.  392  (1895). 

2.  But  the  proof  which  will  be  required  must  be  in  accordance  with  the 
intrinsic  nature  of  the  fact  itself.  It  would  be  seldom,  for  example,  that 
a  paying  teller  could  show,  wath  the  certaintj'  of  demonstration,  especially 
after  the  lapse  of  much  time,  that  he  had  overpaid  certain  amounts  on 
certain  checks.  The  question  would  seem  to  be  eminently  fit  for  the  de- 
cision of  a  jury,  though  in  the  case  of  the  American  Bank  v.  Adams  the 
court  declared,  as  if  it  were  a  matter  of  law,  that  the  evidence  adduced 
was  insufficient  to  sustain  the  defence  of  an  innocent  overpayment.  The 
evidence  was  that  the  teller  was  considered  to  be  honest,  careful,  and 
\igilant ;  that  the  directors  had  stated  their  belief  that  the  loss  occurred 
through  overpayments ;  that  they  had  since  continued  to  employ  the 
teller  in  duties  of  trust  and  confidence ;  and  that  similar  innocent  losses 
befell  tellers  so  frequently  that  they  might  be  regarded  as  unavoidable  in- 
cidents to  the  business  of  the  office.  The  court  said  that  all  this  doul)tless 
went  strongly  to  repel  the  notion  of  want  of  integrity,  but  nevertheless 
was  not  sufficient  to  "prove  the  specific  mode  of  the  loss"  ;  the  defendant 
must  maintain  his  justification  affirmativeh^  It  is  not  to  be  supposed, 
however,  that  the  intention  of  the  court  in  delivering  this  opinion  was  to 
signify  that  the  question  of  fact,  to  wit,  what  was  the  real  cause  of  the 
loss,  was  to  be  taken  from  the  forum  of  the  jury.  Their  language  should 
rather  be  construed  as  a  criticism  mad(>  upon  the  evidence  offered  in  a 
certain  cause,  and  serviceable  in  suggesting  the  instructions  which  may 
in  an  approi)riate  case  be  given  to  a  jury  to  guide  them  in  weighing  the 
testimony  which  is  before  them.  It  is  clear  that,  though  the  court  may 
declare  as  matter  of  law  that  the  jury  shall  not  regard  proof  of  a  proba- 
bility established  by  testimony  of  a  purely  general  character  as  equi\a- 
lent  to  definite  proof  of  a  specific  fact,  yet  still  it  must  remain  for  the 
jury,  in  subjection  of  course  to  this  rule  of  law,  to  determine  whether  or 
not  that  specific  fact  is  proved  to  their  reasonable  satisfaction. 

3.  If  the  plaintiffs  assert  that  the  officer  has  received  a  certain  amount 
which  he  has  never  accounted  for.  it  will  be  proper  for  the  defendants  to 
deny  that  he  has  e^•er  received  the  amount.  This  leaves  the  burden  of 
proving  the  receipt  upon  the  bank.  But  if  the  defendants  only  answer 
that  the  officer  has  accounted  for  all  that  he  has  ever  received,  they  have 
the  onerous  task  of  proving  the  correctness  of  both  sides  of  the  account, 
and  of  making  them  balance.  They  in  fact  relieve  their  adversaries  of 
nearly  all  that  work  which  would  otherwise  have  to  be  done  in  establish- 
ing a  prima  facie  case.     Furthermore,  if  they  deny  the  receipt,  they  may 

99 


§  42  OFFICIAL  BONDS   AND    LIABILITIES   OF   SURETIES 

still  plead  excuses,  if  the  receipt  should  be  proved,  which  they  could  not 
do  if  they  had  adopted  the  other  form  of  answer.  Exeter  Bank  v.  Rogers, 
6  N.  H.  142. 

There  must  be  evidence  of  an  actual  loss  to  the  bank.  Thus  in  a  suit 
upon  a  teller's  bond  it  is  not  enough  to  show  that  he  made  an  error  of 
$1000  in  adding  items  in  the  depositors'  column.  Commonwealth  v. 
Strickler,  178  Pa.  St.  148,  35  Atl.  628,  also  Mohrenstecher  v.  Westervelt, 
87  Fed.  157  (1898). 

Entries  made  by  the  clerk  in  the  books  kept  by  him  in  the  course  of 
his  duties  will,  after  his  death,  be  evidence,  against  the  sureties  in  his 
bond  of  his  receipt  of  the  moneys  therein  entered  as  received.  Whitnash 
V.  George,  8  B.  &  C.  556.  See,  also.  State  Bank  v.  Brown,  96  App.  Div. 
441  (1904),  89  N.  Y.  S.  381,  holding  that  the  books  of  a  bank  may  be  intro- 
duced to  show  the  amount  of  the  cashier's  embezzlement,  where  part  of  the 
entries  were  made  by  the  cashier  and  part  by  clerks  of  the  bank  who  swore 
that  their  entries  were  true,  and  part  by  a  clerk  who  had  died  before  the 
trial. 

(b)  Measure  of  Damages.  —  The  obligation  may  be  in  any  sum  which 
the  directors  see  fit.  Though  it  is  not  probable  that  they  would  be  allowed 
to  recover  any  designated  sum  as  "liquidated  damages "  in  all  cases,  neither 
any  money  in  the  nature  of  vindictive  or  penal  damages,  at  least  from  the 
sureties.  From  them  the  recovery  should  be  limited  to  the  actual  amount 
of  the  loss.  The  bond  is  strictly  for  reimbursement,  not  for  either  punish- 
ment or  profit.  This  character  imperatively  fixes  the  measure  of  damages 
at  the  amount  of  actual  pecuniary  loss  or  injury  which  the  bank  has  sus- 
tained. The  rule  was  thus  laid  down  in  Bank  of  Washington  v.  Barring- 
ton,  14  Serg.  &  R.  (Pa.)  405,  where  it  was  also  said  that  only  the  injury 
naturally  and  in  the  ordinary  course  of  business  arising  from  the  miscon- 
duct could  be  recompensed.  Remote  results  cannot  be  proved  against  the 
sureties ;  much  less,  results  which  are  in  a  measure  due  to  negligence  or 
ignorance  of  the  directors  in  the  events  transpiring  after  the  malfeasance. 

If  an  officer  converts  bills,  notes,  or  other  species  of  the  promises  to 
pay  of  the  bank,  on  which  it  legally  owes  money,  recovery  upon  the  bond 
may  be  had  for  the  full  nominal  value.  The  defendants  cannot  avail 
themselves  of  any  depreciation  in  the  marketable  value  of  the  converted 
paper  or  securities.  Pendleton  v.  Bank  of  Kentucky,  1  T.  B.  Monr.  (Ky.) 
171.  This  is  the  only  exception,  if  indeed  even  this  must  necessarily  be 
regarded  as  such,  to  the  general  rule,  that  the  bank  can  recover  only  the 
amount  of  its  real  and  actual  loss.  Bank  of  Washington  v.  Barrington, 
2  Pa.  St.  27. 

(c)  Pleading  and  Practice.  —  1.  The  precaution  which  should  be  ob- 
served by  defendants  in  a  suit  wherein  the  plaintiffs  seek  to  recover  the 
amount  of  an  alleged  deficit  has  already  been  noticed  (p.  95).  A  few 
more  points  deserve  mention. 

In  suits  for  breach  on  the  part  of  the  officer  of  the  condition  of  his 
bond,  it  is  sufficient  to  aver  non-performance  in  the  words  of  the  bond. 
The  specific  acts  reUed  on  as  constituting  the  breach  and  sustaining  the 
allegation  of  it  may  be  made  when  required  at  a  later  stage  in  the  pro- 
ceedings. Pendleton  w.  Bank  of  Kentucky ,  supra ;  Chetwood,  at  the  suit 
of  the  President,  etc.,  of  the  State  Bank,  2  Halst.  (N.  J.)  32. 

The  defendants  cannot  deny  the  contents  of  the  bond,  set  out  in  or 
made  a  part  of  the  plaintiff's  declaration,  after  they  have  admittedly 
their  plea  its  execution,  dehvery,  and  approval.  So  if  the  bond  recites 
that  the  principal  is  cashier,  etc.,  or  describes  or  designates  him  as  cashier, 

100 


PLEADING    AND    PRACTICE  §  42 

etc.,  a  surety,  who  has  admitted  the  whole  bond  in  his  pleadinfjs,  cannot 
thereafter  deny  the  faet  that  the  principal  really  filled  the  office  which 
was  thus  stated  or  designated  in  it.  Milburn  t'.  State  of  Maryland,  1  Md. 
1 ;   State  Bank  v.  Chetwood,  3  Halst.  (N.  J.)  1. 

It  has  been  declared  in  general  terms  in  California,  though  not  in  a 
banking  case,  that  official  bonds  are  joint  and  several.  People  v.  Jenkins, 
17  Cal.  500.  In  fact,  the  bond  may  be  made  either  joint  or  several,  or 
both,  by  its  own  phraseology.  TIk;  California  decision  can  only  be  re- 
garded as  intimating  that  the  tendency  of  the  courts,  in  all  cases  where 
the  language  is  doubtful  or  reasonal)ly  admits  of  the  construction,  is  to 
regard  such  undertakings  as  joint  and  several.  Where  this  is  the  sound 
construction,  the  bank  may  either  sue  any  one  of  the  parties  singly,  or  it 
may  sue  them  all  together.  But  it  cannot  sue  any  intermediate  number. 
Its  option  is  strictly  confined  to  a  suit  against  one  only,  or  against  the 
whole.  Of  course,  if  it  neglects  this  rule,  and  does  sue  more  than  one 
party  and  less  than  all,  the  defendants  can  only  take  advantage  of  the 
error  by  a  plea  in  abatement,  and  will  waive  it  by  a  plea  to  the  merits. 
Minor  v.  Mechanics'  Bank,  1  Pet.  36,  7  L.  ed.  47.  Where  a  bond  is  given 
by  a  principal  in  a  certain  sum,  and  by  two  sureties  in  a  much  less  sum 
each,  the  obligation  of  the  sureties  is  several ;  either  one  of  them  may  be 
sued  singly,  and  recovery  may  be  had  from  him  to  the  full  amount  of  said 
less  sum,  provided  this  is  not  greater  than  the  amount  of  the  loss  or  injury 
sustained.     Stetson  c.  City  Bank,  12  Ohio  St.  577. 

Answer  by  defendants  that  the  officer  had  made  and  executed  his 
promissorj^  note  in  full  satisfaction,  and  that  it  had  been  accepted  and 
received  in  full  satisfaction,  was  held  to  be  sufficiently  met  by  a  denial 
only  of  the  making  and  executing.  Morris  Canal  &  Banking  Co.  v.  Van 
Vorst,  3  Zabr.  (N.  J.)  98. 

2.  Where  the  obligation  of  the  officer  and  his  sureties  is  joint,  and 
they  are  jointly  sued  thereon,  the  admissions  and  declarations  of  the 
officer  are  admissible  in  evidence  against  all  the  defendants  alike.  Am- 
herst Bank  v.  Root,  2  Met.  (Mass.)  522 ;  Pendleton  v.  Bank  of  Kentucky, 
1  T.  B.  Monr.  (Ky.)  171.  But  the  language  in  the  Massachusetts  case 
cited  points  directly  to  the  important  qualification  that  this  joint  char- 
acter of  the  obligation  and  of  the  suit  must  be  taken  to  be  essential  to  the 
operation  of  the  rule ;  and  that  if  the  undertaking  of  the  surety  were  a 
separate  and  independent  one,  and  probably  even  where  it  was  joint  and 
several  and  he  alone  was  sued  upon  it,  precisely  the  opposite  doctrine 
would  obtain.  This  view  of  the  law  is  hardly  sustained  by  the  Kentucky 
case  cited ;  and  Grant  says  that  the  English  principle  is,  that  "whatever 
is  evidence  available  against  the  principal  is  available  against  the  surety." 
But  though  he  makes  this  statement  so  broadl3%  he  cites  no  authority 
which  sustains  it  quite  to  its  full  extent.  The  case  which  he  gives  de- 
clares simply  that,  in  a  suit  against  the  surety  after  the  death  of  the 
principal,  entries  by  the  latter,  in  his  official  books,  of  receipts  of  money, 
were  evidence  in  belialf  of  the  bank  that  these  sums  had  been  received, 
upon  the  ground  that  the  bond  itself  also  guaranteed  the  faithful  keeping 
by  the  same  officer  of  these  very  books.  Grant  on  Bankers  and  Banking, 
p.  257,  citing  Whitnash  v.  George,  8  B.  &  C.  556. 

In  suit  against  the  principal  and  sureties  on  a  cashier's  bond,  their 
liability  being  by  the  terms  of  the  bond  several  and  not  joint,  it  was  held 
that,  under  the  Practice  Act  of  Massachusetts,  all  three  might  be  joined 
as  parties  defendant  in  one  and  the  same  action.  Grocers'  Bank  r.  King- 
man, 16  Gray  (Mass.),  473. 

101 


§  42  OFFICIAL   BONDS   AND    LIABILITIES   OF   SURETIES 

3.  It  cannot  be  set  up  in  defence  to  a  suit  upon  a  bond  that  the  bank 
commenced  operations  in  a  manner  contrary  to  its  charter ;  neither  that 
it  has  failed  to  perform  its  public  duties  in  redeeming  its  circulating 
notes.  Such  matters  cannot  be  introduced  thus  indirectly,  neither  are 
they  available  for  the  purpose  of  absolving  a  debtor  from  his  liability. 
Hughes  V.  Bank  of  Somerset,  5  Litt.  (Ky.)  45.  Nor  is  it  a  defence  that 
the  bank  had  no  authority  to  estabhsh  the  branch  bank  at  which  the  cashier 
was  engaged.  Morehead  Banking  Co.  v.  Tate,  122  N.  C.  313,  30  S.  E.  341 
(1898).  ,    ^ 

Two  or  three  English  cases  should  be  noticed  in  this  connection  before 
dismissing  the  subject. 

A  clerk  who  had  fraudulently  misappropriated  considerable  sums,  died 
before  discovery,  leaving  considerable  personalty  and  no  will.  His  widow 
deposited  the  personalty  with  the  banking-house  and  took  out  letters  of 
administration.  She  then  sought  to  recover  the  personalty,  which  the 
bankers  sought  to  retain.  She  sued  them,  and  they  filed  a  bill  against 
her,  asking  for  an  injunction  and  for  leave  to  administer  on  the  estate. 
It  was  held  to  be  no  answer  to  the  bill  to  reply  that  it  alleged  a  felony, 
and  that  no  civil  remedy  lay  in  respect  thereof.  Wickham  v.  Gatrill, 
2  Sm.  &  G.  353. 

The  father  of  a  banker's  clerk  transferred  stock  into  the  name  of  the 
banker,  in  order  to  cover  defalcations  of  his  son.  Held,  that  this  was  a 
composition  of  a  felony  to  prevent  a  prosecution.  Semble,  that  the  father 
could  not  recover  the  value  of  the  stock,  nor  obtain  an  order  for  its  trans- 
fer back  to  himself.     Claridge  v.  Hoare,  14  Ves.  Jun.  59. 

A  clerk,  who  had  embezzled,  prior  to  conviction  deposited  with  the 
banking-house  certain  title  deeds  which  he  possessed,  and  transferred  to 
them  some  policies  of  insurance  upon  his  life,  as  security,  so  far  as  they 
would  go,  for  the  money  taken.  The  bankers,  however,  thereafter  pushed 
the  prosecution  to  conviction,  whereupon  the  clerk  sought  to  recover  back 
what  he  had  transferred.  The  court  said  that  the  amount  which  the  clerk 
had  embezzled  was  a  debt  owing  from  him  to  his  employers ;  that  it  con- 
stituted a  good  and  sufficient  consideration  for  his  transfer  to  them  of  the 
aforesaid  securities  ;  and  that  they  were  entitled  to  hold  and  reaUze  upon 
these.  Chowne  v.  BayUs,  31  Beav.  351 ;  Grocers'  Bank  v.  Kingman,  16 
Gray  (Mass.)  473. 

Pendency  of  a  suit  by  a  bank  against  its  cashier,  for  breach  of  his 
bond  in  permitting  an  overdraft,  does  not  affect  the  bank's  right  to  set 
up  the  overdraft  as  a  counter  claim  to  a  demand  by  the  cashier's  as- 
signee. St.  Louis  School  Board  v.  Broadway  Savings  Bank  Estate,  84 
Mo.  56  (1884). 

In  an  agreement  and  mortgage,  given  to  indemnify  a  bank  for  the  thefts 
of  an  officer,  the  word,  "indebtedness",  covers  not  only  the  thefts  of  the 
officer,  but  also  those  of  his  employees  occurring  by  his  connivance  or 
negligence.  Latimer  v.  Veader,  20  App.  Div.  (Hun,  N.  Y.)  418  (1897). 
(d)  Surety's  Right  to  Demand  and  Notice.  — 1.  No  demand  need 
be  made  upon  a  surety  prior  to  bringing  suit  against  him.  Pierce  v.  Wil- 
liams, 23  L.  J.  Exch.  322 ;  Grocers'  Bank  v.  Kingman,  16  Gray  (Mass.) 
473.  Neither  is  he  entitled  to  prompt  notice  of  a  loss  covered  by  his  ob- 
ligation. The  bankers  may  continue  to  employ  the  principal  and  cloak 
the  fact  of  the  loss  so  long  as  they  like,  saying  nothing  about  it  to  the 
surety,  and  concealing  it  even  from  their  own  employees  by  a  false  entry 
on  their  books  of  a  loan  to  the  clerk  of  the  amount.  Grant,  p.  259,  citing 
Peel  V.  Tatlock,  1  Bos.  &  P.  419.     This  law  was  practically  established  by 

102 


sueety's  right  to  demand  and  notice  §  42 

the  jury,  who  seem  to  have  thought  that  there  was  nothing  in  the  obligor's 
contract  with  the  bank  which  i)ut  it  under  any  obligation  to  look  after 
his  interests  in  the  way  of  notifying  him  of  the  occurrence  of  a  loss.  Nor 
is  the  rule  devoid  of  reason,  for  the  surety  incurs  no  risk  on  the  ground 
of  being  deprived  of  the  opportunity  at  once  to  withdraw  and  annul  his 
suretyship,  and  so  to  save  himself  from  further  loss ;  for  we  have  already 
seen  that  no  new  lial)ility  can  accrue  against  him  if  the  bank  continues 
to  employ  the  officer  after  knowledge  of  his  misconduct.  And  even  if  this 
last  rule  should  ever  be  construed,  as  is  within  the  bounds  of  possibility,  to 
apply  only  to  cases  where  the  officer's  misconduct  has  been  fraudulent, 
or  otherwise  \\Tongful  in  its  character,  and  not  to  apply  where  his  default 
has  been  simply  the  result  of  incompetence,  ignorance,  or  carelessness, 
still  it  is  not  improbable  that,  if  the  sureties  wish  to  secure  the  right  to  be 
notified  even  of  such  acts,  they  must  insert  express  stipulations  to  that 
effect  in  their  undertaking  with  the  bank.  If  they  neglect  to  take  such 
precautions  in  their  own  interest,  the  law  may  well  refuse  to  interfere  to 
protect  them  from  the  results  of  their  own  laches,  except  in  cases  which 
are  tainted  with  actual  wrong-doing. 

2.  Where  the  contract  of  the  surety  stipulated  for  notice  to  be  given 
to  the  surety  on  discover}^  of  fraud  or  dishonesty  on  the  part  of  the  princi- 
pal, the  bank  is  not  required  to  exercise  any  diligence  to  watch  this  par- 
ticular employee,  and,  knowledge  on  the  part  of  the  bank's  cashier  of  any 
misconduct  of  the  principal  (he  being  a  co-employee)  is  not  imputable 
to  the  bank  itself.  Fidelity  Co.  v.  Gate  City  Bank,  97  Ga.  637-041,  25 
S.  E.  392  (1895). 

3.  A  bond  requiring  the  bank  to  give  notice  of  cashier's  fraud,  "as 
soon  as  practicable  after  such  act  shall  have  come  to  the  knowledge  of  the 
employer",  does  not  require  notice  of  any  act  of  cashier  that  might  involve 
loss,  unless  the  bank  has  knowledge,  not  merely  suspicion,  of  such  facts  as 
would  justify  a  careful  and  prudent  man  in  charging  another  with  fraud 
and  dishonesty.  American  Surety  Co.  v.  Pauly,  170  U.  S.  133,  147,  42 
L.  ed.  977,  987,  18  Sup.  Ct.  552,  563  (1897).     See  also  p.  153. 

When  a  bond  requires  "  immediate  notice  "  to  be  given  to  the  surety  upon 
discovering  default  of  an  officer,  the  word  "  immediate  "  means  within  a 
reasonable  time,  and  it  is  proper  to  leave  to  the  jury  the  question  whether 
or  not  a  notice  given  within  ten  to  seventeen  days  after  discovery  of  default 
is  given  with  reasonable  promptness.  Fidelity  etc.  Co.  v.  Courtney,  186 
U.  S.  342,  46  L.  ed.  1193,  22  Sup.  Ct.  833  (1902);  Employers'  Liability 
Assur.  Corp.  v.  Stanley  Deposit  Bank,  149  Ky.  735,  149  S.  W.  1025  (1912). 

4.  Where  the  loss  was  discovered  in  the  latter  part  of  May  and  proofs 
of  loss  were  mailed  to  surety  company  on  June  24,  and,  no  objection  was 
made  upon  receipt  either  as  to  their  being  received  in  time  or  their  suffi- 
ciency it  was  held  that  notice  was  given  "as  soon  as  practicable"  as  re- 
quired bv  the  bond  in  (3)  supra.  American  Surety  Co.  v.  Pauly,  supra. 
See  Fidelity  etc.  Co.  v.  Courtney,  186  U.  S.  342,  46  L.  ed.  1193,  22  Sup. 
Ct.  833  (1902). 


103 


CHAPTER  IV 

BY-LAWS   AND    THEIR   EFFECT 

§  43.    By-Laws. 

Power  to  make  is  inherent,  at  common  law,  in  the  stockholders, 

though  often  given  to  directors  in  the  organic  law. 
Extent  of  the  power. 
A  valid  by-law  must  be 

Passed  by  the  proper  authority. 

Not  contrary  to  the  charter  or  statute  law,  nor  public  poUcy, 
nor  beyond  the  charter  powers,  nor  against  common  right, 
nor  unreasonable. 
Examples  of  good  by-laws,  n.  10. 
EiJect  by  By-Laws. 

(a)  As  to  members, 

as  by-laws, 
as  contracts. 

(b)  As  to  third  parties, 

directly, 
indirectly. 
(o)  Enforcement  by  By-Laws. 
Invalid  By-Laws,  n.  7,  8,  9. 
Establishing  a  Uen  on  stock.     §  698. 
Of  savings  banks.      §  620. 
amendment  of.      §  620. 
•  as  to  production  of  pass-book.     §  620  b. 

part  of  contract  with  depositor.      §  620  a. 
payment  contrary  to.      §  620  e. 

§  43.  By-Laws  and  their  Effect.  —  The  power  to  make  by-laws 
for  the  government  of  the  corporate  affairs  is  at  common  law 
inherent  ^  in  the  body  of  stockholders,^  but  is  often  expressed  in 
the  charter  or  statute  ^  and  reposed  in  the  board  of  directors,^  and 
when  the  organic  law  gives  the  power  for  purposes  named,  power 
to  make  them  for  other  purposes  is  impliedly  excluded.^ 

By-laws  to  be  valid  must  be,  —  (1)  Passed  by  the  proper  author- 

1  §  43.     Norris  v.  Staps,  Hob.  2106. 

2  Union  Bank  v.  Ridgely,  1  Harr.  &  G.  (Md.),  324;  Fed.  Res.  Act. 
Part  II,  §  104. 

3  See  Part  II.  "  Child  v.  Hudson  Bay  Co.,  2  P.  Wms.  207. 

104 


BY-LAWS    AND    THEIR    EFFECT  §  43 

ity,  as,  if  the  power  lies  with  the  directors,  a  majority  is  necessary 
to  constitute  a  quorum  to  pass  by-laws,^  unless  a  special  provision 
alters  this  common  law  rule.^  (2)  Not  inconsistent  with  charter 
or  statute  law,^  nor  beyond  the  powers  given  in  the  organic  law,^ 
but  the  bank  may  renounce  by  by-law  a  privilege  given  by  the 
organic  law,  but  not  a  duty  imposed  by  it.  (3)  Not  in  violation 
of  public  policy  or  common  right,  as  settled  by  the  principles  of 
the  common  law,  unless  such  infringement  is  expressly  authorized 
by  the  organic  law.^  (4)  Not  unreasonable.  The  power  is  for 
the  benefit  of  the  whole  corporation,  and  all  by-laws  that  are  un- 
equal, oppressive,  vexatious,  or  plainly  detrimental  to  the  interests 
of  the  bank  are  void,^  but  the  unreasonableness  must  be  demon- 
strated ^°    and    the    question    is    for    the    court. ^^      This    covers 

5  Cahill  V.  Kalamazoo  Ins.  Co.,  2  Dougl.  (Mich.)  124. 

«Hoyt  V.  Shelden,  3  Bosw.  (N.  Y.)  2G7.  A  by-law  specifying  tho 
number  of  directors  constituting  a  quorum  held  valid. 

^Kennebec  R.  Co.  v.  Kendall,  31  Me.  470;  Iloyt  v.  Thompson,  19 
N.  Y.  207;  Corydon  Deposit  Bank  v.  McClure,  HlKy.  481,  133  S.  W. 
201  (1911).  Such  by-laws  as  the  following  are  void  as  inconsistent  with, 
or  beyond  the  powers  granted  in  the  charter:  —  (1.)  Bj'-laws  creating  a 
new  office.  Rex  v.  Ginever,  6  T.  R.  732.  (2.)  Giving  a  vote  to  one  not 
entitled,  or  restricting  the  right  of  voting.  Rex  v.  Bird,  13  East  384 ; 
MeCullough  V.  Annapolis  R.  Co.,  4  Gill  (Md.)  58.  (3.)  Altering  the 
mode  of  election  or  qualifications  for  eligibility  to  of&ce,  as  requiring  a 
certain  number  of  shares  for  admission,  or  office,  or  giving  a  vote  for 
every  share.  Taylor  v.  Griswold,  2  Green  (N.  J.)  223  ;  Powell  r.  Regem, 
2  Bro.  P.  C.  298.  (4.)  Imposing  a  hability  for  debts  of  the  corpora- 
tion. 13  Met.  (Mass.)  539.  (5.)  A  by-law  embracing  not  only  members, 
but  strangers  beyond  the  legislation  of  the  bank,  would  be  void.  Dodwell 
V.  Oxford,  2  Vent.  34. 

8  Taylor  v.  Griswold,  2  Green  (N.  J.)  223. 

"  As  a  by-law  that  mistakes  in  paj^ment  will  not  bo  rectified  after  the 
person  leaves  the  bank.  Farmers'  Bank  v.  Smith,  19  Johns.  (N.  Y.)  115. 
Bj'-laws  taking  away  the  right  of  members  to  legal  redress.  Player  v. 
Archer,  2  Sid.  121.  Retrospective  by-laws  are  void,  both  at  common  law 
and  under  the  United  States  Constitution,  being  ex  post  focto,  as  the  bank 
has  only  such  powers  as  the  legislature  gave,  and  the  State  could  not 
give  a  power  it  did  not  itself  possess.  Howard  v.  Savannah,  T.  Charlt. 
(Ga.)  173.  A  by-law  levying  taxes,  or  depriving  of  property,  is  void.  Un- 
less so  pro\ided  in  the  articles  of  association  or  other  organic  law,  a  com- 
pany cannot  interfere  with  the  rights  of  property  and  dealings  with  third 
persons,  as  by  creating  a  lien  on  stock,  or  refusing  to  transfer  until  tlie 
stockholders'  debt  to  the  company  is  paid,  and  a  bona  fide  purchaser  with- 
out notice  of  such  by-law  can  compel  the  company  to  transfer  the  stock 
to  him  on  its  books.     Driscoll  v.  West  Bradley  Alanuf.  Co.,  59  N.  Y.  96. 

"  Tho  bank  cannot  by  its  by-law  tie  tho  chancellor's  hands  or  disable 
itself  from  performing  its  duties  to  others."  Letcher's  Trustee  v.  German 
National  Bank,  134  Ky.  24,  119  S.  W.  236  (1909). 

10  Paxson  V.  Sweet,  1  Green  (N.  J.)  196. 

"  Commonwealth  v.  Worcester,  3  Pick.  (Mass.)  462. 

105 


§  43  BY-LAWS   AND   THEIR   EFFECT 

much  of  the  same  ground  as  (3),  and  is  subject  to  the  same 
exception. 

a.  EfEect  of  By-Laws  on  Members.  —  1.  A  valid  by-law  binds  ^^ 
each  member  as  though  a  part  of  the  charter,  even  though  he  was 
not  a  member  when  the  by-law  was  passed/^  and  the  bank  may 
enforce  the  penalty  by  suit  in  an  action  of  debt  or  assumpsit ;  ^^  and 
there  may  be  other  methods  of  enforcement  besides  pecuniary 
penalties,  as  by  suspension  of  the  power  of  voting,^^  but  not  by 
imprisonment  nor  forfeiture  of  goods,  as  of  the  shares  of  the  mem- 
ber, unless  such  power  is  specially  given  in  the  organic  law.^® 

For  examples  of  binding  by-laws,  see  note  12. 

2.  An  invalid  by-law  has  no  effect  whatever  as  a  hy-law  upon 
anybody.  But  as  a  contract  it  may  be  good  as  against  members 
or  others  who  assent  to  it,^^  but  the  assent  must  be  actual.  The 
assent  of  absent  members  is  only  presumed  in  reference  to  legal 
votes  of  a  corporate  meeting.^^  Of  course  this  contract  rule  can 
apply  only  to  by-laws  void  merely  because  they  infringe  on  rights 
which,  though  secured  by  common  law,  are  still  such  that  the 
owner  can  waive  or  part  with  them  by  agreement ;  no  by-law  void 
because  contrary  to  charter,  statute,  public  policy,  or  morality, 
can  take  effect  as  a  contract  or  otherwise.^^ 

h.  EfEect  of  By-Laws  on  Third  Persons.  —  The  effect  of  invalid 
by-laws  has  just  been  noted. 

Valid  by-laws  have  no  effect,  as  by-laws,  on  strangers,  that  is, 
persons  not  members  of  the  corporation,  unless  by  statute  they 
have  been  made  obligatory  on  such  persons.^" 

12  The  bank  may  enforce  its  right  to  the  service  of  members  by  a  by- 
law imposing  a  penalty  on  those  who  refuse  to  serve  in  office,  or  to  take 
the  oath  of  office,  or  members  who  refuse  to  attend  meetings.  Rex  v. 
Weymouth,  7  Mod.  374 ;  Tobacco  Pipe  Makers  v.  Woodroflfe,  7  B.  &  C. 
838.  So  the  refusal  to  continue  in  office.  Planters'  Bank  v.  Lamkin, 
R.  M.  Charlt.  (Ga.)  34. 

13  Susquehanna  Ins.  Co.  v.  Perrine,  7  Watts  &  S.  (Pa.)  348.  A  member 
assents  by  the  fact  of  membership  to  all  valid  by-laws,  whether  he  knows 
of  them  or  not. 

1^  Tidd's  Prac.  3,  4.         ^^  Commonwealth  v.  Cain,  5  S.  &  R.  (Pa.)  510. 

"  Barter  v.  Commonwealth,  3  Penn.  &  W.  (Pa.)  253 ;  Hart  v.  Albany, 
9  Wend.  (N.  Y.)  571 ;  Cotter  v.  Doty,  5  Ohio  395 ;  Mobile  v.  Yuille,  3 
Ala.  137 ;   State  v.  Morris  R.  Co.,  23  N.  J.  L.  360. 

1^  Cooper  V.  Frederick,  9  Ala.  738;  Slee  v.  Bloom,  19  Johns.  (N.  Y.) 
456 ;   Stetson  v.  Kempton,  13  Mass.  282. 

1*  Insurance  Co.  v.  Connor,  17  Pa.  St.  136 ;  Stetson  v.  Kempton,  13 
Mass.  282. 

19  Adley  v.  Whitstable  Co.,  17  Ves.  323. 

20  As  in  Soper  v.  Harvard  College,  1  Pick.  (Mass.)  177,  where  a  State 

106 


BY-LAWS   AXD    THEIR    EFFECT  §  43 

But  such  by-laws  may  indirectly  affect  third  persons.  Just  as 
any  contract  or  arrangement  between  A.  and  B.  may  affect  the 
dealings  of  C.  with  either,  by  limiting  the  power  of  A,  or  B.,  or  by 
reason  of  C.'s  knowledge  of  the  arrangement  and  contracts  in  ref- 
erence to  it.  In  the  same  way  as  a  usage  peculiar  to  a  single  bank 
may ,2^  —  (1)  by  bearing  on  the  actual  authority  -  of  an  officer 
in  dealings  with  such  persons ;  (2)  by  determining  the  right  of  a 
member  to  deal  in  a  certain  way  with  such  third  persons,  and  bind 
the  rights  of  the  bank  thereby,  as  in  case  of  by-laws  concerning 
the  transfer  of  stock ;  (3)  by  entering  into  transactions  so  as  to 
affect  parties  who  employ  the  bank  to  act  for  them  whether  they 
know  of  the  })y-laws  or  not ;  ^^  (4)  by  affecting  transactions  into 
which  such  persons  enter,  being  reasonably  aware  that  the  bank 
will  be  a  factor  in  the  transaction,  and  having  actual  knowledge 
of  the  by-law ;  ^^  (5)  and  by  the  consent  in  any  other  way  of  the 
said  third  person  to  be  bound  by  the  said  by-laws. 

A  by-law  may  be  the  root  from  which  will  come  a  usage,  that 
shall  grow  into  common  law,  and  roof  all  with  its  shade. 

statute  had  forbidden  innkeepers  to  give  credit  to  the  students,  in  viola- 
tion of  any  rules  of  the  College. 

21  See  §  9  e. 

2-  A  person  dealing  with  a  corporation  officer,  whose  duties  are  regu- 
lated by  the  by-laws,  is  chargeable  with  notice  of  the  limitations  of  his 
authority  contained  in  charter  and  by-laws  (Dabney  r.  Stevens,  40  How. 
Pr.  N.  Y.  341),  unless  the  bank  has  held  out  the  officer  to  such  person  as 
having  more  authority  than  is  actually  the  ease,  and  even  this,  though  of 
superior  force  to  by-laws  and  private  instructions,  cannot  give  third 
persons  a  right  to  infer  authority  bevond  charter  limits.  Marsh  v.  Fulton 
County,  10  Wall.  676,  19  L.  ed."l046;  Clark  v.  Des  Moines,  19  Iowa  199. 
Every  one  must  take  notice  of  the  restrictions  in  the  articles  of  association 
and  the  rest  of  the  organic  law. 


107 


CHAPTER  V 

BUSINESS   OF   THE   BANK.  —  TIME   AND   PLACE 

§  44.     The  Six  Questions. 
§  45.     Time.     When  can  a  bank  do  business. 
Beginning.     II.  §§  12,  17. 
Doing  business  before  it  is  authorized. 

"Exercise  of  Privilege"  requires  a  de  jure  corporation. 
Ordinary  business,  a  de  facto  corporation. 
Only  the  State  can  object.      §  726  d,  e;    §  758  cases. 
End  of  business.     §§  763,  766 ;  II.  §  46. 
(o)  Banking  hours.     §§  646,  647. 
Judicial  cognizance  of. 

Reasonableness  of,  —  what  is  reasonable  as  to  banking 
business  may  not  be  reasonable  as  a  limitation  upon 
the  business  of  others,  as  delivery  by  an  express  com- 
pany. 
§  46.     Place.     §§  69  a,  168;  II.  §§  41,  108  g,  141  L. 

Legal  home  in  State  where  created  or  located. 
Cannot  take  its  franchises  into  another  sovereignty,  but  may 
do  ordinary  business  in  another  State  through  agents,  if  it 

(a)  has  power  to  do  the  business  under  its  charter,  and  there 
is  nothing  to  prevent  in  the  law  of  its  own  State  or  that 
in  which  it  undertakes  to  do  the  business. 

(b)  May  buy  a  bill  of  exchange  in  another  State. 

(c)  May  hold  land. 

(d)  Cannot  issue  bank  notes  in  another  State. 

(e)  Nor  have  an  agency  for  deposit. 

(/)  Place  of  a  national  bank  is  the  locality  named  in  its  organ- 
ization certificate. 

§  44.  Six  Questions  naturally  arise.  —  When  can  the  bank  do 
business?  Where  must  it  be  done?  What  business  can  it  do? 
How  is  the  business  to  be  done?  What  rights,  duties,  and  habil- 
ities  arise  in  doing  it  ?  and,  What  is  the  effect  of  the  acts  of  a  bank 
beyond  its  authority  ? 

§  45.    Time.  —  A  bank  can  begin  business  as  soon  as  it  has 

obtained  its  charter  and  fulfilled  the  antecedent  conditions  of  its 

organic  law,   if  any.     Under  the   State   statutes  generally,   the 

organization  certificate  must  be  duly  filed,  and  a  specified  portion 

108 


TIME  §  45 

of  the  capital  paid  in.^  Under  the  National  Banking  Act  the  ex- 
ecution of  the  organization  certificate  makes  the  bank  a  body 
corporate,  but  no  business  except  that  incidental  to  its  own  internal 
organization  can  be  done  until  authorized  by  the  comptroller  t(j 
commence  the  business  of  banking.-  And  under  sec.  5134  of  the 
Act,  a  National  Bank  is  precluded  from  leasing  a  banking  house 
before  it  is  authorized  to  do  business,  and  in  such  case  may  set  up 
the  plea  of  ultra  vires  against  a  claim  for  rent.^" 

Bank  Doing  Business  before  it  is  Authorized 

If  a  bank  in  fact  enters  upon  the  exercise  of  business  powers 
before  it  has  a  right  to  (as  if  by  some  irregularity  or  informality  it 
is  not  legally  constituted  a  bank  with  the  legal  powers  of  one),  no 
objection  on  this  ground  can  be  raised  by  any  private  person  to 
avoid  a  just  liability  arising  from  such  transaction,^  nor  can 
the  bank  raise  such  objection  when  sued.^"  If  the  contract  is  ex- 
ecutory, then  and  only  then  may  2iltra  vires  be  set  up  as  a  defense 
(see  Ultra  Vires) ;  but  if  the  act  of  the  bank  is  the  exercise  of  a 
piivilege  (or  power  to  do  an  act  of  a  nature  beyond  the  right  of  an 
individual,  and  in  contravention  of  the  common  rights  of  others, 
which  only  the  sovereign  can  do  or  authorize),  it  is  not  enough  for  it 
to  be  a  de  facto  corporation,  it  must  be  a  corporation  de  jure  ;*  for 
no  one  shall  infringe  upon  the  liberties  or  property  of  others  except 
when  duly  authorized.     See  §  726. 

This  reason  does  not  apply  to  the  cases  above,  in  which  a  de 
facto  bank  lends  money,  receives  deposits,  or  does  other  acts  in 
the  nature  of  contract,  and  which  do  not  involve  the  exercise  of 
privilege.     Justice   between  the  parties  in  such  matters  is  not 

1  §  45.  R.  L.  of  Mass.  c.  115,  §  3.  Ono  half  must  be  paid  in  specie,  and 
examined  by  the  commissioners.  Same  with  national  bank.  See  Part  II. 
§14. 

*  See  Part  II.  §  8.     Long  v.  Citizens'  Bank,  8  Utah  104,  29  Pac.  878. 
^oMcCormick  v.  Market  National  Bank,  1G2  111.  100,  44  N.  E.  381; 

Suberger  v.  McCormic-k,  178  111.  404,  53  N.  E.  340  (1899). 

s  Allison  V.  Hubbell,  17  Ind.  559 ;  Southern  Bank  r.  Williams,  25  Ga. 
534;  Bank  of  Port  Jefferson  v.  Darling,  91  Hun  (N.  Y.)  236;  Bair  v. 
Bank,  27  Neb.  577,  43  N.  W.  347  (1895) ;  Piatt  Valley  Bank  v.  Hard- 
ing, 1  Neb.  461;  Missouri  Valley  Land  Co.  v.  Bushnell,  11  Neb.  192, 
8  N.  W.  389 ;  Exchange  National  Bank  v.  Capps,  32  Neb.  242,  49  N.  W. 
243  (1891). 

^o  Kellogg  V.  Douglass  Bank,  Same  v.  Latham,  Same  v.  Chemical  Na- 
tional Bank,  58  Kan.  43,  48  Pac.  587  (1897). 

*  N.  Y.  Cable  Co.  v.  Mayor,  etc.,  of  N.  Y.  143,  10  N.  E.  146. 

109 


§  45  BUSINESS   OF   THE    BANK  —  TIME    AND    PLACE 

affected    by  any  question   of    the    bank's  proper   organization. 
§  726. 

The  bank  can  never  take  advantage  of  its  own  wrong  to  avoid 
Habihty  for  tort,  or  on  a  contract  impHed  upon  the  facts,  or  any 
just  Habihty  in  the  case.  For  instance,  stockholders  cannot  es- 
cape their  usual  liability  to  redeem  circulation  because  of  irregu- 
lar organization  of  the  bank.^ 

The  termination  of  a  bank's  power  to  do  business  will  be  con- 
sidered under  the  heads  of  Dissolution  (§  760)  and  Forfeiture 
(§  722).  It  may  be  noted  here,  that  the  mere  happening  of  such 
a  breach  of  law  as  may  cause  forfeiture  may  not  of  itself  affect  the 
business  powers  of  the  bank.  Its  subsequent  acts  are  valid,  for 
the  State  may  waive  the  forfeiture,  and  the  right  of  the  bank  to 
continue  its  business  remains  until  forfeiture  is  judicially  declared. 

All  these  rules  may  be  altered  by  express  legislation. 

(a)  Banking  Hours.  —  Between  the  boundaries  above,  the  bank 
may  adopt  reasonable  (and  what  is  reasonable  varies  according  as 
the  rule  affects  only  banking  business  or  the  business  of  others  as 
well)  rules  and  usages  concerning  the  hours  of  each  day  within 
which  it  will  do  business.  Such  a  usage  will  be  judicially  recog- 
nized. The  remainder  of  this  section  is  devoted  to  these  two 
points,  the  judicial  recognition  and  the  reasonableness  of  banking 
hours. 

Judicial  Cognizance 

Whether  or  not  the  courts  will  take  judicial  cognizance  of  what 
are  banking  hours  in  any  particular  place  is,  of  course,  a  question 
which  must  be  decided  specially  concerning  that  particular  place.^" 
Undoubtedly,  no  court  would  take  judicial  cognizance  of  the  bank- 
ing hours  of  any  place  not  lying  within  the  area  of  the  jurisdiction 
of  the  court.^^  The  English  courts  take  judicial  notice  of  w^hat 
are  banking  hours  in  the  "  city",  so  called,  of  London ;  ^  but  in 
other  parts  of  London,  and  in  other  cities  and  towns,  the  hours 
must  be  proved.''     The  fact  of  what  was  the  hour  for  closing  a  cer- 

5  McDougald  v.  Bellamy,  18  Ga.  411. 

5°  If  the  cotu-t  should  take  judicial  notice  of  the  usual  banking  hours  it 
must  also  take  judicial  notice  that  banks  sometimes  depart  from  their 
usual  custom  and  accommodate  their  customers  after  business  hours. 
Lowry  National  Bank  v.  Seymour,  91  S.  C.  305,  74  S.  E.  648  (1912). 

5*  See  Columbia  Banking  Company  v.  Bowen,  134  Wis.  218,  114  N.  W. 
451  (1908). 

6  Parker  v.  Gordon,  7  East  385 ;   Jameson  v.  Swinton,  2  Taunt.  224. 
^  Hare  v.  Henty,  10  C.  B.  n.  s.  65. 

110 


TIME  §  45 

tain  bank  in  the  city  of  New  York  was  also  found,  as  an  essential 
fact,  by  the  court,  in  reporting  a  case  for  decision  of  questions  (jf 
law.^ 

"  Banking  hours  "  are  so  far  recognized  by  the  courts  that  any 
transaction  in  the  ordinary  course  of  banking  Inisiness,  which  is 
to  be  had  with  the  bank  upon  any  day,  must  be  had  within  "  bank- 
ing hours  "  upon  that  day.  Thus,  a  notice  left  with  a  bank  after 
expiration  of  such  hours  on  any  day  is  operative  as  notice  only 
at  and  from  such  later  time  as,  in  the  ordinary  course  of  business, 
it  is  opened  and  read.^ 

ReasonnhJeiiess 

If  a  bank  should  say  it  would  pay  deposits  only  during  a  certain 
five  minutes  each  day,  that  might  be  considered  unreasonable, 
and  when  the  limitation  affects  the  time  within  which  others  may 
perform  their  peculiar  business,  as,  for  example,  when  an  express 
company  may  deliver  packages  to  the  bank,  a  dift'erent  standard 
of  reasonableness  applies  from  what  is  proper  when  the  rule  only 
affects  the  hours  within  which  the  public  may  avail  themselves  of 
the  facilities  of  the  bank. 

A  rule  that  the  bank  "would  not  receive  deposits  after  three 
o'clock  would  be  reasonable,  and  though  the  officers  should  remain 
in  the  bank  an  hour  or  two  they  would  not  be  bound  to  recei\e 
deposits  after  that  time ;  but  when  the  rule  regulates,  not  banking 
business,  but  the  business  of  a  carrier,  for  example,  the  conven- 
ience of  the  latter  must  be  considered  as  well  as  that  of  the  bank. 

In  a  Wisconsin  case/°  the  bank  had  after  banking  hours  received 
packages  coming  on  a  certain  train  by  express  many  times,  the 
teller  being  usually  the  receiving  officer.  The  express  agent  on 
the  day  of  the  trouble  offered  a  package  to  the  teller,  in  the  bank 
after  hours,  but  at  such  time  as  they  had  been  often  before  re- 
ceived, the  package  having  come  on  the  train  just  mentioned. 
The  teller  said,  "  Fred,  you  will  have  to  take  the  package  back 
w4th  you,  for  the  cashier  has  gone  to  tea."  The  courts  said, 
that  what  are  reasonable  hours  for  receiving  deposits,  discounting 
bills,  etc.,  are  not  necessarily  reasonable  hours  for  receiving  express 
packages,  and  a  bank  cannot  declare  it  will  not  receive  from  a 

8  Salt  Springs  National  Bank  v.  Burton,  58  N.  Y.  430. 

9  Calislior  v.  Forbes,  41  L.  J.  Ch.  5(j. 

1"  Marshall  v.  American  Express  Co.,  7  Wis.  1. 

Ill 


§  45  BUSINESS   OF   THE    BANK  —  TIME    AND    PLACE 

carrier  after  what  it  calls  banking  hours,  and  thereby  thrust  on 
him  a  continuance  of  his  extraordinary  responsibility ;  the  carrier 
after  such  offer  is  a  gratuitous  bailee. 

In  Kentucky  the  court  said,  in  substance :  "In  the  absence  of 
proof  of  usage  in  New  Orleans  as  to  delivery  within  banking  hours, 
or  of  any  reference  to  banking  hours  in  the  contract  with  the 
carrier,  we  do  not  perceive  that,  as  matter  of  law,  the  right  to 
deliver  a  box  of  specie  is  restricted  to  banking  hours.  If  in  making 
or  offering  to  make  the  delivery  the  convenience  of  the  -person  who  is  to 
receive,  and  the  safety  of  the  commodity  after  it  is  received,  are  to  be 
regarded,  as  they  probably  shoidd  be,  to  a  reasonable  extent,  it  would 
seem  sufficient  if  the  offer  were  made  at  any  time  of  the  day  when 
the  business  houses  of  the  city  were  open,  and  when  convenient 
means  were  at  hand  for  the  safe  transportation  of  the  article  from 
the  wharf."  11 

Discussion  of  these  Cases 

In  this  case  the  consignee  of  the  specie  teas  not  a  bank,  but  a 
private  person,  and  though  he  desired  to  deposit  in  bank,  nothing 
had  been  said  to  the  carrier  about  delivery  with  reference  to  this 
purpose.  But  suppose  a  bank  has  a  vault  with  a  time  lock,  would 
it  be  reasonable  to  hold  good  a  delivery  after  that  lock  was  set, 
even  though  some  of  the  officers  might  be  found  in  the  bank? 
And  an  offer  to  deliver  when  the  bank  is  shut  and  the  officers  gone 
is  clearly  bad.^^  If,  as  the  Kentucky  judge  said  above,  the  con- 
venience of  the  consignee  and  the  safety  of  the  commodity  are  to 
be  regarded,  it  would  seem  clear  that,  when  the  bank  has  closed 
its  vaults  and  the  officer  who  can  open  them  is  gone,  or  if  they  are 
fastened  with  time  locks,  it  would  not  be  reasonable  to  hold  the 
bank  bound  to  receive  the  money,  unless,  as  in  the  Wisconsin  case, 
there  was  a  custom  to  receive  after  hours}^  A  grocer  is  not  obliged 
to  stay  at  his  place  of  business  to  receive  express  matter  after  the 
hours  usual  in  mercantile  business.  Why  should  a  banker  have  to 
be  ready  beyond  the  hours  recognized  as  usual  for  the  bank  to  be 
open  and  do  business?  Of  course,  if  he  is  at  the  bank,  and  can 
receive  the  package  v/ithout  any  further  inconvenience  than  re- 
opening his  safe,  he  should  do  so.     The  fair  thing  would  seem  to 

"  3  Dana  (Ky.)  91.  12  Merwin  v.  Butler,  17  Conr.  138. 

"  In  Wisconsin  the  business  hours  of  banking  has  reference  to  the 
general  custom  at  the  place  of  the  particular  transaction.  Columbia 
Banking  Company  v.  Bowen,  134  Wis.  218,  114  N.  W.  451  (1908). 

112 


PLACE  §  46 

be,  not  that  a  bank  must  receive  after  the  ordinary  banking  hours 
or  lose  all  redress  except  for  gross  negli<j;ence  of  the  carrier ;  nor 
that  the  carrier  continues  an  insurer,  but  that,  after  the  consignee 
knows  of  the  arrival  of  the  package,  the  carrier  is  held  to  ordinary 
diligence,  no  more  nor  less,  that  is,  a  warehouse  liability,  until  the 
banking  hours  of  the  next  day,  when  the  bank  can  with  convenience 
and  safety  receive  the  money. 

§  46.  Place.  —  A  bank  has  its  legal  home  ^  in  the  State  by 
which  it  is  created,  or,  in  case  of  a  national  bank,  the  State  in 
which  it  is  located  or  organized.'"  Its  domicil  ^  is  there  and  it  is 
a  citizen  ^  of  that  State  in  reference  to  suing  in  any  State  or  Federal 
court ;  it  cannot  transfer  its  franchises  ^^  into  any  other  sover- 
eignty ;  "  it  exists  by  force  of  the  law  creating  it,  and  where  that 
ceases  to  operate  it  can  have  no  existence."  * 

But  such  ordinary  business  ■*"  as  its  organic  laic  gives  it  poicer  to 
do,  it  may,  by  its  agents,  transact  in  any  other  State,  unless  pro- 
hibited by  its  charter,  or  by  the  laics  *^  or  policy  of  such  other  State. ^ 

1  §  46.  The  language  of  Waite,  C.  J.,  in  Ex  parte  Schollenberger,  9G 
U.  S.  369,  24  L.  ed.  853. 

i«  Linton  v.  Childs,  105  Ga.  567,  32  S.  E.  617  (1898) ;  National  Bank  v. 
Golland,  14  Wash.  502,  45  Pac.  315  (1896). 

2  Adams  v.  Railroad,  6  H.  &  N.  404  ;  Maclaren  v.  Stainton,  16  Beav.  279. 

3  See  Green's  Ultra  Vires  (1880),  p.  4;  Ducat  v.  Chicago,  48  111.  172; 
Fargo  V.  McVicker,  38  How.  Pr.  (N.  Y.)  1.  But  in  other  respects  than  the 
right  of  bringing  suits,  a  corporation  has  no  status  in  States  as  a  citizen 
of  its  creator. 

^  A  corporation  cannot  migrate  beyond  its  own  State.  Runyan  v. 
Lessee  of  Coster,  14  Pet.  122,  131,  10  L.  ed.  382.  The  corporation  it.self 
cannot  act  validly  beyond  the  territory  of  its  sovereign,  and  the  first  meet- 
ing in  New  York  of  a  Maine  corporation  is  void.  But  the  directors  may 
act  validly  in  another  State,  as  where  the  directors  of  a  Vermont  corpora- 
tion met  in  Massachusetts  and  granted  mortgages,  the  action  was  valid. 
Arras  V.  Conant,  36  Vt.  745.  See  Galveston  R.  R.  Co.  v.  Cowdrey,  11 
Wall.  459,  20  L.  ed.  199. 

*  Bank  of  Augusta  v.  Earle,  13  Pet.  519,  10  L.  ed.  274. 

'•''  A  foreign  corporation  suing  on  a  negotiable  instrument  is  not  doing 
business  within  the  State  under  the  New  York  banking  laws.  (Laws  of 
1892,  Chap.  689,  sees.  31,  32.)  Citizens'  State  Bank  v.  Cowles,  89  App. 
Div.  281  (1903),  86  N.  Y.  S.  38. 

■**  Banking  Corporations  and  those  corporations  which  are  within  the 
contemplation  of  the  banlcing  laws  of  Michigan  are  not  within  the  pro^^- 
sions  of  the  statute  prescribing  the  conditions  on  which  foreign  corpora- 
tions may  be  admitted  to  do  l>usiness  in  Michigan.  New  York  Mortgage 
Co.  V.  Secretary  of  State,  150  Mich.  197,  114  N.  W.  82  (1907). 

^  See  on  the  general  principle,  Paul  v.  Virginia,  8  Wall.  168,  19  L.  ed. 
357 ;  Ex  parte  SchoUenberger,  96  U.  S.  369 ;  24  L.  ed.  853 ;  Newburg 
Petroleum  Co.  v.  Weare,  27  Ohio  St.  343 ;  Fawcett  v.  Mitchell  etc.  Co., 
133  Ky.  361,  117  S.  W.  956  (1909). 

VOL.  1  —  8  113 


§  46  BUSINESS   OF   THE    BANK  —  TIME    AND    PLACE 

Agencies  for  specific  purposes,  as  for  the  redemption  of  bills  or 
the  dealing  in  bills  of  exchange  ^  may  be  established  in  other  places. 
In  these  cases,  it  is  for  the  convenience  of  the  public  that  such 
should  be  the  case7  But  there  is  no  case  which  holds  that  an 
agency  for  the  exercise  of  the  more  important  and  valuable  func- 
tions, such  as  issuing  circulating  paper  or  discounting  notes,  or  an 
agency  designed  to  carry  on  the  general  business  of  banking,  would 
be  regarded  as  legal.  For  such  nominal  establishment  of  agencies 
might  easily  result  in  the  practical  establishment  of  a  network  of 
branch  banks  ^"  throughout  the  home  State  or  in  other  States^'' 

States  differ  in  their  corporation  laws  ;  some  restrict  the  capital ; 
some  make  the  stockliolders  individually  liable ;  some  require 
deposits  with  the  State  for  the  security  of  the  public.  Of  course 
no  State's  comity  will  extend  to  allow  the  corporations  of  other 
states  in  which  no  such  laws  exist,  to  come  and  undermine  such 
regulations.  Such  a  State  will  say  to  foreign  corporations,  "  If 
you  wish  to  do  business  here,  you  must  put  yourselves  under  my 
laws." 

Officers  Doing  Business  aivay  from  the  Bank 

Some  business,  as  receiving  deposits,  certifying  ^  checks,  and 
giving  information  of  most  kinds,^  must  be  done  at  the  banking 
house, ^'^  or  place  set  apart  for  those  purposes  by  the  bank,  and 
cannot  be  done  so  as  to  bind  the  company  by  an  officer  away 
from  the  bank ;  *  other  business,  as  receiving  information,  and  col- 

6  See  (o),  p.  115,  and  (e),  p.  116. 

7  City  Bank  of  Columbus  v.  Beach,  1  Blatchf.  (C.  C.)  425 ;  Bank  of  Au- 
gusta V.  Earle,  13  Pet.  519,  10  L.  ed.  274;  People  v.  Oakland  County 
Bank,  1  Dougl.  (Mich.)  282  ;  Tombigbee  R.  R.  Co.  v.  Kneeland,  4  How.  16, 
11  L.  ed.  855. 

'"  Banks  cannot  establish  a  branch  bank  in  the  absence  of  statutory 
authority.     Bruner  v.  Citizens'  Bank,  134  Ky.  283,  120  S.  W.  345  (1909). 

In  Washington  the  statute  allowing  "branch  banks"  authorizes  do- 
mestic banks  to  establish  branches.  State  v.  Engle,  50  Wash.  207,  90 
Pac.  1045  (1908).     See  also  same  case  for  the  meaning  of  "branch  bank." 

7^-  Quoted  in  Bruner  v.  Citizens'  Bank,  134  Ky.  283,  120  S.  W.  345 
(1909). 

8  A  bank  can  reject  an  acceptance  of  a  cashier  made  away  from  the 
bank,  if  before  his  return  anything  happens  that  would  make  such  ac- 
ceptance improper,  except  as  against  a  bona  fide  purchaser  without  notice. 
Bullard  v.  Randall,  1  Gray  (Mass.)  605.     See  however  (/),  p.  120. 

9  Merchants'  Bank  v.  Rudolf,  5  Neb.  527.     See  p.  121. 

8"  This  may  be  a  department  store.     Jones  v.  Cook,  174  Mo.  100,  73 
S.  W.  489  (1903). 
*See  §  168. 

114 


PL.\CE  §  46 

lecting  debts,  may  be  done  by  an  officer  away  from  the  bank  ;  ^''  the 
question  is,  "  Does  the  proper  performance  of  the  business  require 
any  knowledge  or  apphances  that  can  only  be  fully  possessed  at 
the  office?  "10 

May  Buy  a  Bill  of  Exchange  in  Another  State 

(a)  The  Chief  Justice  of  tlie  Ignited  States  Supreme  Court  has 
said,  "  Natural  persons  through  the  intervention  of  agents  are 
continually  making  contracts  in  countries  in  which  they  do  not 
reside,  and  where  they  are  not  personally  present  when  the  con- 
tract is  made ;  and  nobody  has  ever  doubted  the  validity  of  these 
agreements.  And  what  greater  objection  can  there  be  to  the 
capacity  of  an  artificial  person,  by  its  agents,  to  make  a  contract 
within  the  scope  of  its  limited  powers,  in  a  sovereignty  in  which 
it  does  not  reside,  provided  such  contracts  are  permitted  to  be 
made  by  it  by  the  laws  of  the  place?  The  corporation  must  no 
doubt  show  that  the  laws  of  its  creation  gave  it  authority-  to  make 
such  contracts,  through  such  agents.'  ^°° 

In  this  case,  a  Georgia  bank  having  power  to  purchase  bills  of 
exchange  had  by  its  agent  bought  a  bill  in  Alabama.  The  Circuit 
Court  decided  that  a  Georgia  bank  could  not  exercise  its  powers 
of  discounting  in  another  State,  but  the  Supreme  Court,  in  a 
powerful  opinion,  of  which  the  above  is  a  fragment,  reversed  the 
Circuit  decision,  holding  that  the  comity  of  nations  was  admin- 
istered by  the  courts  of  the  various  States,  and  acknowledged  by 
them  as  a  proper  ground  of  judgment,  and  that  when  the  organic 
law  of  the  bank  allows  it  to  make  such  contract  in  another  State, 
and  such  transaction  is  not  contrary  to  the  law,  policy,  or  interests 
of  such  State,  there  is  no  reason  for  refusing  to  sustain  the  contract. 
This  was  done  in  this  case,  establishing  a  rule  that  has  been  fol- 
lowed in  New  York,  Missouri,  INIassachusetts,  Louisiana,  and 
other  States,  and  may  be  regarded  as  settled  law.^O" 

9*  Quoted  in  Bruner  v.  Citizens'  Bank,  134  Ky.  283,  120  S.  W.  345 
(1009),  which  holds  that  a  bank  cannot  establish  branch  banks  unless 
specially  authorized. 

'» See  on  this  subject  "  Cashier  ",  §  168. 

'""Bank  of  Augusta  r.  Earle,  13  Pet.  GO,  10  L.  ed.  354. 

""•  A  foreign  banking  corporation  purchasing  a  note  in  the  State,  but 
having  no  purpose  to  do  any  other  act  in  the  State,  is  not  "transacting 
business"  in  the  State.  Commercial  Bank  v.  Sherman,  28  Or.  572,  45 
Pac.  658  (1896) ;  Bank  of  British  Cohimbia  v.  Page,  6  Or.  431 ;  Hacheny 
V.  Leary,  12  Or.  40,  7  Pac.  329.    The  bringing  of  an  action  on  a  negotiable 

115 


§  46  BUSINESS   OF   THE    BANK  —  TIME   AND    PLACE 

(6)  The  corporation  must  show  that  the  law  of  its  creation 
gave  it  authority  to  make  such  contracts  as  those  it  seeks  to 
enforce.  Yet,  as  in  case  of  a  natural  person,  it  is  not  necessary 
that  it  should  actually  exist  in  the  sovereignty  in  which  the  con- 
tract is  made.  It  is  sufficient  that  its  existence,  as  an  artificial 
person,  in  the  State  of  its  creation,  is  acknowledged  and  recognized 
by  the  State  or  nation  where  the  dealing  takes  place,  and  that  it 
is  permitted  by  the  laws  of  that  place  to  exercise  the  powers  with 
which  it  is  endowed." 

Holding  Land  in  Other  States 

(c)  In  those  States  where  there  are  no  general  statutes  or 
settled  policy  restricting  them  in  this  respect,  corporations  of  other 
States  may  purchase  and  hold  lands  ad  libitum,  provided  their 
charters  give  them  the  competent  power.^^ 

Notes  Issued  in  Another  State 

(d)  In  Virginia,  it  was  decided  that  no  recovery  could  be  had 
upon  notes  there  issued  by  a  banking  corporation  of  another 
State,  through  an  agency  established  in  Virginia,  inasmuch  as 
such  banking  operations  were  contrary  to  the  policy  of  the  statute 
against  unincorporated  banking  companies ;  though  it  was  ad- 
mitted that  notes,  originally  negotiated  and  indorsed  in  Virginia, 
and  that  contracts  ancillary  to  banking  operations,  might  legally 
be  made  there  by  such  a  corporation. ^^ 

Agency  for  Deposits  in  Another  State 

(e)  Having  an  agency  to  receive  deposits  in  another  county 
than  that  of  the  bank's  location,  contrary  to  charter,  is  a  cause 

instrument  is  not  "doing  business"  within  the  State.  Citizens'  State 
Bank  v.  Cowles,  89  App.  Div.  281  (1903),  86  N.  Y.  S.  38. 

11  Commercial  Bank  of  Vicksburg  v.  Sloeomb,  14  Pet.  60,  10  L.  ed.  354  ; 
Ir\ine  v.  Lowry,  14  Pet.  293,  10  L.  ed.  462.  And  see  Bank  of  Augusta 
V.  Earle,  13  Pet.  584,  10  L.  ed.  306 ;  Ohio  Railroad  Co.  v.  Wheeler,  1  Black 
286,  17  L.  ed.  130. 

1^  Silver  Lake  Bank  v.  North,  4  Johns.  Ch.  (N.  Y.)  370 ;  Lumbard  v. 
Aldrich,  8  N.  H.  34;  Lathrop  v.  Commercial  Bank  of  Scioto,  8  Dana 
(Ky.)  119;  Bank  of  Washtenaw  v.  Montgomery,  2  Scam.  (111.)  428,  2 
Kent,  Com.  284,  285;  New  York  Dry  Dock  v.  Hicks,  5  McLean,  111; 
Farmers'  Loan  Co.  v.  McKinney,  6  id.,  1.  The  burden  is,  however,  upon 
the  corporation  or  those  claiming  under  it,  to  show  that  by  its  charter 
it  is  a  body  politic  authorized  to  take  or  convey  lands.  Lumbard  v. 
Aldrich,  8  N.  H.  34. 

13  Bank  of  Marietta  v.  Pindall,  2  Rand.  (Va.)  465. 

116 


PLACE  §  4G 

of  forfeiture,  though  an  agency  to  redeem  bills  is  not.'^  So  it  is 
unlawful  for  a  national  bank  of  New  Jersey  to  have  an  agent  to 
receive  deposits  in  Philadelphia.^' 

A  bank  within  the  sphere  of  its  action  may  bind  itself  to  do 
any  act  in  any  place,^^  even  if  it  is  in  another  State.^^" 

National  Bank's  Locus 

(J)  The  place  named  in  the  organization  certificate  fixes  the 
locality  of  a  national  bank/"  and  its  general  business  must  be  done 
there ;  ^^  but  this  provision  is  to  be  construed  reasonably.  "  The 
business  of  every  bank  away  from  its  office  —  frequently  large  and 
important  —  is  unavoidably  done  at  the  proper  place  by  the 
cashier  in  person ;  or  by  correspondents  or  other  agents."  So, 
where  a  cashier  bought  gold  and  paid  for  it  by  certifying  checks 
at  the  counter  of  another  bank,  it  was  held  proper. ^^ 

A  national  bank  in  another  State  cannot  have  an  officer  of 
discount  or  deposit  in  New  York.^'' 

A  national  bank  cannot  make  a  valid  contract  for  the  cashing 
of  checks  upon  it,  at  a  different  place  from  that  of  its  residence, 
through  the  agency  of  another  bank.^^ 

But  representations  that  a  note  is  good,  made  by  a  cashier  in 
another  city,  bind  the  bank.-^ 

"  People  V.  Oakland  County  Bank,  1  Doug.  (Mich.)  282. 
"  National  Bank  of  Camden  v.  Pierce,  18  Alb.  Law  J.  16. 

16  Bank  of  Utica  v.  Smedes,  3  Cow.  (N.  Y.),  684;  McCall  t;.  Byram 
Manufacturing  Co.,  6  Conn.  428. 

"«  Fawcett  v.  Mitchell,  13.3  Ky.  361,  117  S.  W.  956  (1909). 

17  Cooke  V.  State  National  Bank,  52  N.  Y.  96;  National  Bank  v.  Gal- 
land,  14  Wash.  502,  45  Pac.  315  (1896). 

18  Burton  v.  Burley,  12  Leg.  News  178;    s.  c,  9  Rep.  301. 

i»  Merchants'  National  Bank  r.  State  National  Bank,  10  Wall.  604, 
19  L.  ed.  1008. 

20  National  Bank  of  Fair  Haven  v.  The  Phoenix  Bank,  6  Hun  (N.Y.)  71. 

"  Armstrong  v.  Second  National  Bank,  38  Fed.  883  (Ohio). 

22  Houghton  V.  First  National  Bank,  26  Wis.  663 ;  Bissell  «;.  First 
National  Bank,  69  Pa.  St.  415. 


117 


CHAPTER  VI 

BUSINESS   POWERS" 

§  47.     Business  Powers,  Express  or  Implied,  Original  and  Incidental. 

(0)  History  is  a  proper  guide  as  to  what  constitutes  banking 

business. 
(6)  Fundamentals,  banks  not  created  for  traffic,  but  to  receive 
deposits  and  lend  money  for  the  accommodation  of  the 
public  and  the  profit  of  stockholders,  and  power  to  issue 
money  is  sometimes  added. 
§  48.     The  Banking  Powers. 

(1)  To  receive  deposits,  special,  specific,  and  general,  and  give 

security.     §§  171,  191. 

(2)  To  loan  money  on  real  or  personal  security,  etc.      §§  74-76, 

75  d,  125, 128,  160, 173,  357,  753,  755,  761 ;  II.  §§  35, 129. 

§  49.  (3)  To  buy  and  sell   exchange,    coin,  and  bullion,  to  sell  its 

property,  deal  in  checks,  and  to  purchase  bills  and  notes. 

§§  72,  73. 

§  50.  (4)  To   discount   negotiable   paper   and   negotiate   the   same. 

§§72,73;    §9,  n.  9;    §§117,125,134. 
§  51.  (5)  To  give  certificates  of  deposit,  and  a  prohibition  against 

issuing  notes  to  circulate  as  money  does  not  affect  this 
power.     §§  296-309;  II.  §  78. 
§  52.  (6)  To  act  as  agent  in  some  financial  dealings,  collection,  re- 

mission, etc.      §§213,264. 
§  53.  (7)  To  issue  bank  notes,  if  the  power  is  specially  conferred. 

§633. 
Incidental  Powers. 
§  54.  Unless  restricted,  a  bank  may  do  any  act  to  accomplish  the  ends 

of  its  creation  that  an  individual  could  do  for  the  same  end. 
§  55.  Holding  real  estate,  general  rule.      §  12,  n.  4;    §§  74-76,  169; 

II.  §§  28,  128. 

Statutes  of  mortmain. 
Devise. 
§  56.  Making  contracts.     §  12,  (5),  (6),  (7),  n.  3,  4,  5,  9,  10,  §§  70, 

144  d,  e,  rn,  162,  169,  170,  722,  744. 
Test  of  its  power. 
Modern  tendency  is  to  liberality. 
A  contract  is  presumed  to  be  for  a  proper  purpose.     II.  §  128. 
Agreement  to  recover  stolen  deposit  good. 
§  57.  May  settle  claims. 

°  See  Fed.  Res.  Act.     Part  II.  §  104. 

118 


WHAT    BUSINESS   CAN    A    BANK    DO  ?  §  47 

§  58.  May  take  goods  on  credit. 

§  59.  May  deal  in  government  securities.     National  bank  may  not 

loan  on  its  own  stock.     State  bank  may.     Any  bank  can  loan 
on  other  stocks,  but  not  buy  and  sell  them.      §§  77  a,  104; 
II.  §  35. 
§  60.  To  save  a  debt,  may  even  carry  on  temporarily  a  foreign  busi- 

ness.     §§  77  a,  b,  78. 
§  61.  Surplus  capital  may  be  used  in  other  business.     §  GO.     Ta.x  on. 

II.  §  141,  p,  t. 
§  62.  Alienation  of  Property.     §  721. 

Gift.     §  65. 
§  63.  May  borrow  on  time  when  reasonably  necessary  in  the  conduct 

of  the  business  of  the  bank,  and  negotiable  paper  or  mortgage 
securUij  may  be  given.      §§116  a,  160  a,  b. 
§  64.  May  draw  checks,  and  indorse  them,  or  any  other  paper  prop- 

er!}' coming  to  it.      §§  154,  158. 
^  65.  A  bank  cannot  lend  its  credit.     It  cannot  be  a  guarantor  or 

suret  J'  where  it  has  no  interest.     It  cannot  indorse  for  accom- 
modation, but  may  warrant  goods,  or  guarantee  or  indorse 
negotiable  paper.      §§  156,  158,  745  a,  748. 
§  66.  Dividends,  Surplus.     §§  128,  699  e,  708,  716,  717  ;  II.  §§  33,  34, 

35,  50  c,  112,  135. 
§  67.  Abandonment  of  a  part  of  its  franchises. 

§  68.     Restrictions  on  the  Powers  of  a  Bank. 
§  69.  Express  Restrictions  as  to 

(a)  Place.     §  168. 

(6)  Time.     §  168. 

(c)  Traffic. 

(d-0,  (n,  o)     Debts  and  Loans.     §§128,  753,   755,  761;    II. 

§§  29,  35,  36,  129. 
(0  and  (m)     Real  Estate.     §  12,  n.  4,  §§  74-76, 169 ;  II.   §§  28, 

128. 
(n,  o)  Interest.     §  12,  n.  15,  §§  309,  750  ;  II.  §§  30,  130, 

150  c. 
{p—u)  Circulation.      §  633. 

{v)  Capital.      §§  14,  127  ;  II.  §§  12-15,  37,  38,  81,  113. 

§  70.  {w)  Form  of  contract.      §§  12  (6),  (7),  98  L,  144,  162, 

169,  170,  722,  744. 
§  71.  Common  Law  Restrictions. 

§47.  What  Business  can  a  Bank  do?  —  The  business  powers 
of  a  bank  are  either  express  or  implied,  and  are  conveniently 
divided  into  (1st)  Primary  or  Principal,  or  Banking  Powers,  for 
the  exercise  of  which  it  is  created,  and  (2nd)  Incidental  Powers,  or 
such  as  are  necessary  or  usual  and  convenient  for  the  attainment 
of  the  purposes  of  its  creation. 

It  is  necessary  to  confer  in  distinct  terms  in  the  charter  or  act 
of  incorporation  only  those  powers  which  the  company  could  not 
otherwise  exercise,  or  those  concerning  which  there  might  be 
some  doubt.  Various  powers  have  been  at  difYerent  times  de- 
clared by  the  courts  to  be  inherent,  and  to  be  properly  enjoyed 

119 


§  47  BUSINESS   POWERS 

by  banking  associations  simply  by  virtue  of  their  creation  and 
existence  as  such,  and  for  the  designated  end  of  conducting  the 
banking  business.  But  powers  of  this  nature,  being  based  only 
upon  a  legal  implication,  must  be  used  only  in  a  manner  and  for 
purposes  strictly  consistent  with  such  restrictions,  and  in  further- 
ance of  such  duties  as  are  specifically  prescribed  by  law. 

(a)  In  regard  to  matters  not  clear  upon  statute  or  binding 
decisions,  it  is  a  proper  method  of  ascertaining  what  is  legitimately 
within  the  scope  of  the  business  of  banking,  and  what  are  the 
powers  of  corporations  formed  for  the  purpose  of  carrying  on  that 
business,  to  refer  to  the  history  of  banking  and  the  definitions  of 
lexicographers.^ 

The  powers  of  a  bank,  so  far  as  established  by  statutes  and 
decisions,  will  be  of  course  judicially  ^  noticed  by  the  courts  ;  and, 
as  the  business  of  bankers  is  part  of  the  law  merchant,  courts 
judicially  notice  the  universal  custom  of  bankers. 

(6)  The  heart  of  the  law  of  banking  is  that  a  bank  has  such 
powers  as  are  requisite  for  the  safe  and  convenient  attainment 
of  the  purposes  of  its  incorporation,  the  chief  of  these  being  to 
Ijrovide  a  ylace  of  safety  in  which  the  public  may  keep  money  and, 
other  valuables,  and  to  lend  its  own  money, ^  and  that  of  others  deposited 
with  it  (unless  specially  deposited)  for  a  yrofii,'^  and  to  act  as  agent 
in  the  remission  and  collection  of  money.  If  it  is,  by  its  organic 
law,  a  bank  of  issue,  it  has  one  more  fundamental  purpose,  namely, 
to  provide  the  public  with  a  convenient  currency  in  the  shape  of 
promissory  notes  intended  to  circulate  as  money. 

1  §  47.     Pattison  v.  Syracuse  National  Bank,  80  N.  Y.  94. 

So  the  existence  and  nature  of  a  corporate  power  may  sometimes  be 
even  in  this  advanced  state  of  the  law  a  question  of  fact,  though  usually 
one  of  law. 

2  In  England,  it  has  been  declared  by  Lord  Campbell  that  the  nature 
of  the  business  of  bankers  is  a  part  of  the  law  merchant,  and  wall  be  judi- 
cially noticed  by  the  courts.  Bank  of  Australasia  v.  Breillat,  6  Moore,  P. 
C.  173.  It  is  the  same  in  the  United  States :  men  of  business  are  pre- 
sumed conclusively  to  know  the  system  by  which  nearly  all  banks  in  the 
country  transact  monetary  affairs,  by  checks,  drafts,  and  certificates  of 
deposit,  and  courts  take  judicial  notice  of  such  customs.  British  & 
American  Mortgage  Co.  v.  Tibballs,  63  Iowa  468,  19  N.  W.  319. 

3  It  is  money,  not  its  credit,  that  a  bank  is  to  lend.  There  is  too  much 
business  done  already  on  baseless  credit  to  need  to  create  corporations  for 
the  purpose.  Johnston  Bros.  v.  Charlottesville  National  Bank,  3  Hughes 
657. 

*  A  bank  is  to  be  conducted  for  the  benefit  of  its  stockholders,  as  well 
as  for  that  of  the  public,  and  it  cannot  (unless  every  stockholder  assents) 
give  away  its  money,  or  the  use  of  it. 

120 


THE    BANKING    POWERS  §  48 

It  will  be  a  great  aid  to  a  clear  understanding  of  the  cases  to 
keep  these  foundation  facts  in  view,  especially  in  reading  the 
decisions  relating  to  usury.  Every  transaction  of  a  bank  that  is 
really  a  i^arting  with  its  money  for  a  time  is  regarded  as  a  loan 
so  far  as  usury  is  concerned,  and  the  bank  will  not  be  allowed  to 
make  more  than  lawful  interest  taken  in  advance,  although  an 
individual  might  make  a  greater  profit  by  an  exactly  similar  i)ro- 
ceeding.  It  is  not  the  purpose  of  banking  to  make  a  profit  by 
trafficking,  as  a  merchant  does,  but  allowing  the  public  to  use 
the  bank's  funds  for  a  fair  return. 

But  a  bank  is  entitled  to  receive  indemnity  for  expense  it  incurs, 
as  in  the  remission  or  collection  of  money,  and  may  make  a  reason- 
able charge  for  labor  and  service,  and  if  by  the  express  terms  of 
a  contract  the  principal  is  hazarded,  as  in  case  of  a  bottomry  loan, 
the  bank  may  charge  for  this  risk.  These  are  none  of  them 
charges  simply  for  the  use  or  forbearance  of  money,  and  so  are  not 
within  the  usury  laws. 

The  business  of  a  bank  is  not  "  traffic",  or  buying  and  selling 
to  gain  by  advance  in  the  price  received  over  that  given,  nor 
speculation  of  any  kind,  but  receiving  deposits  and  lending  money 
for  the  accommodation  of  the  public  and  the  profit  of  the  stock- 
holders.^ 

This  is  the  root  from  which  grows  most  of  the  law  of  banking. 

§  48.  The  Banking  Powers  are  those  which  are  either  funda- 
mental parts  of  the  business,  or  have  become  so  linked  with  them 
as  to  be  identified  with  the  exercise  of  the  banking  franchises." 

The  United  States  statutes  constitute  the  measure  of  the  au- 
thority of  national  banks,"  and  they  cannot  rightfully  exercise  any 
5  "The  business  of  banking,  as  defined  by  law  and  custom,  consists  of 
the  issuance  of  notes  payable  on  demand  intended  to  circulate  as  money 
where  the  banks  are  banks  of  issue;  in  reeei\ang  deposits  payable  on 
demand;  in  discounting  commercial  paper;  making  loans  of  money  on 
collateral  security;  buying  and  seUing  bills  of  exchange;  negotia.ting 
loans,  and  dealing  in  negotiable  securities  issued  by  the  government.  State 
and  national  and  municipal  and  other  corporations."  ISIercia  v.  Burget, 
36  Ind.  App.  453,  75  N.  K.  1083  (1905),  quoting  from  Mercantile  Bank  v. 
New  York,  121  U.  S.  138,  30  L.  ed.  895,  7  Sup.  Ct.  826.  See  also  Earle  r. 
American  Sugar  Refining  Company,  74  N.  J.  Eq.  751,  71  Atl.  391  (1908) ; 
State  V.  People's  National  Bank,  75  N.  11.  27,  70  Atl.  .542  (1908). 

"  §  48.  They  include  the  power  to  borrow  when  necessary  to  meet 
pressing  demands.  Wyman  v.  Wallace,  201  U.  S.  230,  50  L.  ed.  738,  26 
Sup.  Ct.  495  (1905). 

0  National  banks  may  act  as  county  depository  of  school  funds  and 
mav  make  arrangements  with  the  State  the  same  as  with  any  other  de- 
positor.    Charlton  v.  Cousins,  103  Te.x.  116,  124  S.  W.  422  (1910). 

121 


§  48  BUSINESS   POWERS 

powers  except   those  expressly  granted,  or  which  are  incidental 
to  carrying  on  the  business  for  which  they  are  estabhshed."" 
The  same  is  true  with  regard  to  banks  in  Kentucky  .°* 

Deposits 

1.  A  bank  may  receive  special/  specific,^  and  general  ^  deposits, 
and  give  security  for  them.^"    See  §  63. 

0°  California  Bank  v.  Kennedy,  167  U.  S.  362-366,  42  L.  ed.  198,  17 
Sup.  Ct.  831  (1897) ;  Logan  Bank  v.  Townsend,  139  U.  S.  67,  73,  35  L.  ed. 
107,  11  Sup.  Ct.  496;  Bailie  v.  Farmers'  National  Bank,  97  111.  App.  66 
(1901)  ;  Commercial  National  Bank  v.  First  National  Bank,  97  Tex.  536, 
80  S.  W.  601  (1904) ;  Sturdevant  Bros.  v.  Farmers'  etc.  Bank,  69  Neb.  220, 
95  N.  W.  819  (1903).  See  also  Gause  v.  Commonwealth  Trust  Co.,  196 
N.  Y.  134,  89  N.  E.  476,  24  L.  R.  A.  (n.  s.)  967  (1909) ;  State  v.  German 
Sav.  Bank,  103  Md.  196,  63  Atl.  481  (1906) ;  Ai-kansas  VaUey  etc.  R.  Co. 
V.  Farmers'  etc.  Bank,  21  Okla.  322,  96  Pac.  765,  129  Am.  St.  Rep.  782 
(1908) ;  McBoyle  2).  Union  National  Bank,  162Cal.277, 122  Pac.  458  (1911) ; 
Merchants'  National  Bank  v.  Wehrmann,  69  Ohio  St.  160,  68  N.  E.  1004 
(1903). 

They  do  not  authorize  national  banks  to  act  as  a  broker  in  lending  the 
money  of  others,  Bryon  v.  First  National  Bank,  75  Or.  296,  146  Pac.  516 
(1915),  or  to  buy  drafts  without  bills  of  lading  attached.  First  National 
Bank  v.  First  National  Bank,  247  Pa.  St.  40,  92  Atl.  1076  (1915). 

But  it  may  exercise  such  incidental  powers,  and  so  it  may  contract  with 
the  State  to  pay  the  tax  which  is  due  the  State  from  its  depositors.  State  v. 
Clement  National  Bank,  84  Vt.  167,  78  Atl.  944,  1912D  Ann.  Cas.  22,  n. 

"''  The  statute  should  be  construed  strictly  for  the  benefit  of  stockholders 
and  protection  of  depositors,  and  so  the  attempt  to  secure  the  payment  of  a 
depositor  by  pledging  the  assets  of  the  bank  is  ultra  vires  and  void.  Com- 
mercial Banking  etc.  Co.  v.  Citizens'  Trust  etc.  Co.,  153  Ky.  566,  156  S. 
W.  160,  1915C  Ann.  Cas.  409,  n.,  45  L.  R.  A.  (n.  s.)  950  n. 

1  In  Whitney  v.  First  National  Bank  of  Brattleboro,  50  Vt.  388,  the 
court  held  that  a  national  bank  had  no  power  to  receive  special  deposits 
without  profit,  and  if  it  did  it  was  not  responsible  for  their  safe  keeping, 
even  though  received  with  the  acquiescence  of  directors.  The  officer 
receiving  is  the  depositor,  not  the  bank. 

In  First  National  Bank  v.  Ocean  National  Bank,  60  N.  Y.  279,  the 
court  questioned  the  power  of  national  banks  to  receive  special  deposits,, 
but  if  the  directors  sanctioned  the  receipt  of  them  the  bank  would  be 
bound.  This  was  one  degree  above  the  zero  of  logic  in  the  Vermont 
case,  and  in  National  Bank  v.  Graham,  79  Pa.  St.  106,  the  court  (disagreeing 
expressly  with  50  Vt.)  held  that  the  directors  could  authorize  or  sanction 
the  receipt  of  special  deposits  as  being  a  part  of  the  immemorial  usage  of 
banldng,  —  indeed  it  was  the  root  from  which  grew  the  whole  business. 

Conclusive  Decision.  And  now  the  question  is  set  at  rest  by  the  Supreme 
Coiu-t  of  the  United  States  in  First  National  Bank  of  Carlisle  v.  Graham, 
100  U.  S.  699,  25  L.  ed.  750,  where  it  is  held  that  a  National  Bank  may 
receive  special  deposits  gratuitously.  §  8  of  the  National  Banking  Act 
gives  power  to  carry  on  the  business  of  banking  by  "receiving  deposits"  ; 
and  special  deposits  are  as  tridy  deposits  as  any  other,  and  as  truly  a  part 

122 


THE    BANKING    POWERS  §  48 

Loan 

2.  Subject  to  the  usury  laws  '  and  charter  restrictions  ^  (if  any) 
a  bank  may  loan^"  money  on  security,^  real®"  or  personal/*  or 

of  banking  business  as  it  is  written  down  in  the  history  and  usage  of  the 
commercial  centuries. 

R.  S.  §  5228.  Besides,  the  R.  S.  §  5228  speaks  expressly  of  the  return  of 
''special  deposits"  in  case  of  dissolution,  and  it  is  difficult  to  imagine  why 
they  should  be  returned  if  never  received.  The  construction  put  on  this 
by  the  State  courts,  that  it  referred  only  to  money  deposited  for  payment 
of  notes  or  other  specific  deposits,  is  entirely  untenable  ;  both  "deposits" 
and  "special  deposits",  clearly  include  gratuitous  bailments  for  safe 
keeping,  and  the  courts  have  no  right  to  cut  them  down  or  amputate  a 
part  of  the  rights  Congress  has  given  to  national  banks. 

-  See  §  200.  The  authority  to  receive  specific  and  general  deposits  is 
universally  admitted.  American  National  Bank  v.  Presnall,  48  Pac.  556 
(1897). 

3  See  §  288. 

'«  An  indemnity  bond  given  to  induce  the  deposit  of  public  funds  of  the 
county  in  a  certain  bank  is  not  void  as  against  public  policy  and  may  be 
enforced.  Weddington  w.  Jones,  41  Tex.  Civ.  App.  468,  91  S.  W.  818 
(1900).  The  bond  is  a  continuing  obligation  as  long  as  the  public  funds 
are  placed  in  the  bank,  and  a  surety  is  liable  thereon  unless  he  has  ter- 
minated his  obligation  by  proper  notice.  Snattinger  v.  Topeka,  80  Kan. 
341,  102  Pac.  508  (1909). 

"  A  bank  must  not  in  any  transaction  gain  more  than  lawful  mterest 
for  the  time  it  is  out  of  its  money. 

A  clause  in  the  charter  of  a  bank  authorizing  it  to  lend  money  on  such 
terms  and  rates  as  might  be  agreed  upon,  has  been  held  not  to  convey 
authority  to  charge  a  rate  higher  than  tliat  allowed  by  the  general  law  of 
the  State  regulating  interest.  Simonton  v.  Lanier,  71  N.  C.  498;  Seneca 
Co.  Bank  v.  Lamb,  20  Barb.  (N.  Y.)  595.  The  discount  charged  in  buy- 
ing notes  should  not  exceed  the  rate  of  interest  allowed  by  law  in  case  of 
a  loan.     Salmon  Falls  Bank  v.  Leyser,  116  Mo.  551,  22  S.  W.  504. 

5  A  Massachusetts  State  bank  must  not  have  debts  due  in  at  any  time 
to  a  greater  amount  than  double  the  capital  paid  in  (not  including  debts 
due  from  another  bank,  or  from  the  State  or  the  United  States).  R.  L. 
c.  115,  §§33,  34. 

Either  the  capital,  or  the  capital  and  deposits,  of  the  corporation,  ac- 
cording to  the  regulations  prescribed  in  the  charter,  may  serve  as  the 
basis  upon  which  loans  and  discounts  may  be  made.  Special  deposits  can 
never  serve  as  such  basis,  or  be  included  as  a  part  of  it.  Even  where  the 
statutory  phrase  is  "the  moneys  actually  deposited  for  safe-keeping",  it 
will  be  construed  to  mean  only  general  deposits,  and  not  to  include  any 
description  of  such  as  are  in  fact  special.  Foster  v.  Essex  Bank,  17  Mass. 
479. 

5"  Cottondale  State  Bank  v.  Oscamp  Nolting  Co.,  64  Fla.  36,  59  So.  566 

(1912). 

6  A  Massachusetts  bank  cannot  make  a  loan  in  any  other  way  than  on 
demand.     It  must  be  payable  at  once,  or  it  is  void.     R.  L.  c.  115,  §  51. 

In  Pennsylvania  an  act  of  incorporation  allowed  a  corporation  to  hold 
lands  "mortgaged  or  conveyed  to  it  in  satisfaction  of  debts  i)reviously 
contracted."     It  was  held  that  a  conveyance  in  trust,  or  any  conveyance 

123 


§  48  BUSINESS   POWERS 

without  other  security  than  the  right  of  action  against  the  bor- 
rower,^ <=  as  in  the  case  of  overdrafts  by  agreement  with  the  directors, 
but  this  is  looked  on  with  disfavor  by  the  courts. 

A  national  bank  cannot  take  real  estate  ^  security  by  a  convey- 
ance to  itself  at  the  time  of  the  loan,  or  for  future  loans,  but  only 
for  debts  previously  contracted,  although  if  it  does  take  concur- 
rent security  by  trust  deed,  mortgage,  etc.,  only  the  United  States 
can  object,''  and  the  bank  can  successfully  sustain  a  suit  for  fore- 
closure unless  its  sovereign  interferes,  though  it  exceeded  its 
powers  and  violated  the  supreme  law  of  the  land  in  taking  the 
mortgage.^ 

A  law  enacted  for  the  benefit  of  banks  and  their  depositors 
cannot  be  set  up  as  a  defence  by  a  borrower  from  the  bank.^ 

that  would  put  the  corporation  in  possession,  would  violate  the  law ;  it 
could  not  take  the  title  to  the  land,  legal  or  equitable,  except  for  previous 
debt^.  But  any  conveyance  merely  with  a  view  to  raising  money  by  sale 
of  the  land,  and  not  to  give  the  corporation  the  ownership,  was  good. 
Baird  v.  Bank  of  Washington,  11  S.  &  R.  (Pa.)  411.  But  see  Chautauqua 
Bank  v.  Risley,  19  N.  Y.  369. 

A  bank  may  loan  money  to  residents  or  non-residents  and  take  notes 
or  other  security,  whether  it  be  for  the  purpose  of  discount  or  to  secure  a 
debt.      Fawcett  v.  Mitchell  etc.  Co.,  133  Ky.  361,  117  S.  W.  956  (1909). 

Stock  Security.  A  national  bank  cannot  loan  on  its  own  stock.  Part  II. 
§  35.  But  a  Massachusetts  bank  may  to  the  extent  of  one  half  the  paid 
capital.     R.  L.  c.  115,  §  31. 

A  national  bank  may  take  and  hold  a  chattel  mortgage  to  secure  an 
antecedent  debt.  First  National  Bank  of  Skowhegan  v.  Maxfield,  83  Me. 
576,  22  Atl.  379. 

6°  See  §  74  et  seq. 

«^  The  bank  may  sell  such  property  and  apply  the  proceeds  thereof  to 
its  debt ;  or,  with  the  consent  of  the  mortgagor,  it  may  sell  the  collateral 
at  private  sale  and  guarantee  the  title,  quality,  soundness  or  healthful 
condition  of  such  security  and  it  is  liable  on  such  guarantee  as  a  natural 
person  would  be.     State  Bank  v.  Dody,  71  Kan.  98,  79  Pac.  1092.     (1905.) 

^^  When  a  bank  loans  money  to  a  treasurer  of  a  town  to  pay  town  orders 
upon  his  agreement  to  deposit  with  the  bank  accepted  town  orders,  the 
bank  is  entitled  to  the  town  orders  that  are  found  among  the  private 
papers  of  the  town  treasurer  at  his  death,  covering  the  amount  that  he  had 
overdrawn.  New  Haven  v.  Weston,  87  Vt.  7,  86  Atl.  996,  46  L.  R.  A. 
(n.  s.)  921,  n.  (1912). 

■^  Savings  Bank  v.  Burns,  104  Cal.  473,  38  Pac.  102 ;  Lexington  v. 
Union  National  Bank,  22  So.  291  (1897) ;  Bank  v.  Flathers,  45  La.  Ann.  75, 
12  So.  243  ;  National  Bank  ;;.  Whitney,  103  U.  S.  99,  26  L.  ed.  443  ;  Fortier  v. 
National  Bank,  112  U.  S.  439,  28  L.  ed.  764,  5  Sup.  Ct.  234  ;  Hennessy  v.  St. 
Paul,  54  Minn.  219,  223,  55  N.  W.  1123 ;  Bank  v.  Trexler,  174  Pa.  St.  497, 
34  Atl.  195  ;  Fifth  National  Bank  v.  Pierce,  117  Mich.  376,  75  N.  W.  1058 
(1898).  See  Part  II.  §  28.  National  Bank  v.  Matthews,  98  U.  S.  625, 
25  L.  ed.  188;  Schuyler  National  Bank  v.  Gadsden,  191  U.  S.  451,  48  L. 
ed.  258,  24  Sup.  Ct.  129  (1903).     See  §  74,  note  7". 

124 


PURCELVSE,    SALE    OR   DISCOUNT    OF   XEGOTIABLE    PAPER         §  49 

The  practical  workings  of  this  apparently  so  unjust  rule  are 
about  the  same  as  if  the  rational  law  were  put  in  its  place,  as  we 
shall  see  when  we  come  to  si)eak  of  Ultra  vires} 

Purchase,  Sale  or  Discount  of  KegcAiahle  Paper 

§  49.  3.  A  bank  may  buy  '  and  sell  exchanp;e,-  coin,  and  bullion, 
and  unless  restricted  ^  it  can  sell  ^  any  negotiable  paper  or  other 

8  See  §  722. 

>  §  49.     See  this  expanded,  §§  72-74. 

The  powers  treated  here  are  usually  expressly  granted,  though  they  are 
so  identified  with  tlie  business,  as  methods  of  earrjang  out  its  fundamental 
purposes,  that  they  are  inherent. 

-  Suppose  N.  in  New  York  owes  P.  in  Paris,  it  is  e.xpensive  to  send 
coin  across  the  water.  So  N.  finds  Y.  in  New  York,  who  is  a  creditor  of 
S.  in  Paris,  and  N.  pays  Y.  money  here,  taking  from  Y.  an  order  directed 
to  S.  to  pay  N.  or  order  the  debt  S.  owes  Y.  N.  orders  pajment  to  P.  or 
order,  and  sends  the  bill  to  P.  So  two  debts  are  paid  without  transfer  of 
coin.  Now,  if  there  are  more  debtors  in  New  York  of  Paris  creditors  than 
there  are  creditors  of  Paris  debtors,  bills  on  Paris  will  l)e  in  demand,  and 
N.  will  have  to  pay  a  little  more  than  the  actual  coin  with  which  he  could 
pay  his  debt  if  he  had  it  in  Paris.  This  is  called  a  qyremium,  and  will  never 
be  more,  of  course,  than  the  cost  including  risk  of  sending  the  coin.  But 
if  there  are  more  creditors  than  debtors  in  New  York,  the  creditors  will 
compete,  and  to  save  the  expense  and  trouble  of  collecting  their  foreign 
debts  will  take  a  little  less  than  an  actual  equivalent.  This  is  called  a 
discount. 

This  premium  and  discount  are  both  called  exchange,  and  the  rate  of 
exchange  is  the  amount  of  premium  it  will  cost  to  replace  a  sum  of  money 
in  one  country  by  an  equal  sum  in  another,  or  it  is  the  difference  in  value 
of  the  same  amount  of  money  in  the  two  countries  by  reason  of  their 
distance. 

Now  the  power  of  a  bank  to  "buy  exchange"  (see  Part  II.  §  8)  means 
simply  the  right  to  buy  bills  of  exchange  at  the  current  rate  of  discount 
or  premium,  and  does  not  give  power  to  buy  bills  at  anj^  agreed  price,  as 
an  individual  may.  It  is  the  ''exchange"  that  is  to  be  bought  or  sold, 
not  the  l)ill  itself,  except  in  that  partial  meaning  of  the  word  purchase,  to 
acquire  title. 

See  Fed.  Res.  Act.     Part  II.  §  154. 

'  A  national  bank  cannot  sell  bills  of  exchange  payable  in  another 
place  for  tnore  than  the  rate  of  exchange  on  sight  drafts  plus  lawful  inter- 
est (see  Part  II.  §  30),  and  no  overcharge  for  service,  risk,  or  exchange  by 
any  bank  will  be  sustained.  Merchants'  Bank  v.  Sassee,  33  Mo.  ZnO; 
Bank  of  United  States  v.  Davis,  2  Hill  (N.  Y.)  451.  Bills  payable  in  the 
same  place  will  not  be  apt  to  sell  for  Tuore  than  their  value :  men  will  not 
give  SlOO  cash  for  $.50  in  the  same  i)lace,  and  there  seems  to  be  no  reason 
why  banks  should  not  have  the  power  to  sell  negotiable  pajier  they  may 
hold  for  as  much  less  than  its  face  as  the  parties  may  agree,  just  as  indi- 
viduals may;  but  the  distinctions  as  to  what  are  sales  and  what  are 
loans  must  be  carefully  attended  to.      (See  text  following  this  reference.) 

Unconstitutional  Restriction.  A  State  declaring  "it  shall  not  be  law- 
ful for  any  bank  to  transfer  any  note,  or  other  evidence  of  del>t",  is  uncon- 

125 


§  49  BUSINESS   POWERS 

property  to  which  it  has  properly  acquired  a  title ;  but  whether  it 
can  purchase  ^"  negotiable  payer  is  one  of  those  questions  that  has 
got  tangled  up  in  the  double  meanings  of  words,  as  well  as  having 
inherent  difficulties,  and  has  been  much  litigated. 

Purchase  is  used  in  two  senses :  1st,  simply  to  indicate  acquire- 
ment of  title  by  any  means  other  than  descent ;  2d,  to  indicate 
that  sort  of  transaction  which  among  individuals  is  not  subject  to 
the  control  of  usury  laws. 

If  this  distinction  is  kept  in  mind  the  cases  on  this  subject 
become  clear, 

(a)  If  A.  gives  B.  money,  and  B.  gives  A.  his  note  for  the  debt, 
this  is  a  loan,  not  a  purchase  in  the  second  sense,  and  must  not 
violate  the  usury  statutes. 

(6)  If  A.  transfers  B.'s  note  to  C.  by  indorsement  generally, 
so  that  A.  becomes  bound  on  the  note,  there  is  great  conflict  of  opin- 
ion whether  it  is  to  be  considered  a  sale  or  a  loan  as  to  usury.  The 
best  opinion  is,  that,  as  the  statutes  against  usury  apply  only  to 
loan  or  forbearance  of  money,  and  as  they  are  to  be  construed 
strictly,*  such  a  transfer  (unless  a  mere  cloak  for  usury  ^),  not 
involving  any  primary  liability  of  A.,  is  not  a  loan,  but  differs 
therefrom  in  the  fact  that  C.  cannot  claim  the  money  uncondi- 
tionally of  A.,  but  must  with  due  diligence  pursue  B.,  and  the 
risk  and  expense  involved  in  this  is  an  important  consideration 
additional  to  what  occurs  in  case  of  a  loan,  and  may  well  be  taken 
into  account  in  the  price  of  transfer.® 

stitutional,  as  to  banks  already  in  possession  of  such  power.  Planters' 
Bank  v.  Sharp,  6  How.  301,  12  L.  ed.  447. 

3"  See  Fed.  Res.  Act.  Part  II.  §  154. 

^  They  are  relics  of  barbarous  ages,  when  men  did  not  know  that  the 
use  of  money  was  as  valuable  a  consideration  as  the  use  of  land,  and  they 
are  to-day  mere  weapons  with  which  revenge  and  bad  faith  may  bruise  the 
friend  who  has  aided  them.  Men  make  no  greater  charge  than  the  laws  of 
nature  proclaim  the  money  is  worth,  and  that  will  continue  to  be  charged 
and  obtained,  though  the  legislature  devote  themselves  exclusively  to  pre- 
venting it.     A  usury  law  is  a  blot  upon  the  statute-books  of  any  State. 

^  As  it  would  be  if  B.  gave  his  note  to  A.  for  the  accommodation  of  the 
latter,  receiving  no  value,  and  C,  knowing  this  fact,  bought  at  greater 
discount  than  allowed  by  law  on  loans,  for  in  effect  this  is  lending  money 
on  B.'s  promise  to  pay  a  sum  so  much  greater  as  to  make  it  usurious.  A. 
is  not  a  real  party  in  the  matter.     Whitworth  v.  Adams,  5  Rand.  (Va.)  333. 

6  Usury.  National  Bank  of  Michigan  v.  Green,  33  Iowa  141  (1871) ; 
State  Bank  v.  Coquillard,  6  Ind.  232.  Binghamton  Trust  Co.  v.  Clark,  32 
App.  Div.  (Hun,  N.  Y.)  151  (1898).  This  is  the  opinion  of  Prof.  Parsons, 
2  Notes  &  Bills  429  (see  also  2  Contracts,  425),  and  of  Daniel,  Neg.  Inst. 
623.     And  so  far  as  it  narrows  usury,  it  is  the  best  opinion ;    the  fact  is, 

126 


PURCHASE,    SALE    OR   DISCOUNT   OF   NEGOTIABLE    PAPER         §  49 

The  same  applies  to  the  transaction  between  the  drawer  and 
payee  of  a  bill  of  exchange :   the  drawer  is  only  secondarily  liable. 

however,  that  all  distinctions  on  usurj-  arc  irrational.  If  it  did  not  make 
such  terrible  confusion  and  useless  litijjation,  it  would  be  ludicrous  to  see 
how  the  judges  flounder  about,  and  put  down  all  sorts  of  inconsistencies  in 
the  reports,  trying  to  deterniine  what  constitutes  the  sin  of  usury. 

A  bank  lends  A.  money,  and  takes  B.'s  note  for  it  indorsed  by  A.  This 
is  just  the  same  as  if  A.  kept  B.'s  note  and  gave  the  bank  his  own  for  the 
same  time,  e.xcept  that  the  bank  instead  of  A.  now  has  the  trouble  and 
expense  of  collecting  from  B. 

If  A.  indorses  without  recourse,  still  (supposing  B.  to  be  as  good  as  A. 
and  as  near)  as  to  the  bank  the  transaction  is  exactly  the  same  as  if  it 
took  A.'s  note ;  the  bank  has  parted  with  so  much  money  for  a  time 
certain,  on  the  promise  of  some  one  to  pay  it. 

Now  if  the  object  of  usury  laws  is  to  prevent  the  owner  of  money  from 
making  more  than  a  certain  per  cent  (say  six),  by  foregoing  ])ossession 
of  it,  then  all  sales  and  indorsements  by  which  the  person  who  pays  the 
money  will  reap  a  return  of  more  than  six  per  cent  are  usurious. 

If,  however,  the  purpose  of  usury  laws  is  to  prevent  oppression  of  the 
one  to  whom  the  money  is  paid,  then,  as  it  cannot  be  oppression  to  take 
for  a  thing  what  it  is  really  worth  to  him  and  to  others  (and  any  law 
which  compels  one  to  take  less  for  the  use  of  his  property',  or  for  giving  up 
his  rights,  than  they  are  fairly  worth,  is  unjust,  as  it  takes  away  property 
from  one  and  gives  it  to  another  without  a  full  equivalent),  it  follows 
that,  if  six  per  cent  is  proper  for  A.  to  pay  for  the  use  of  the  monej'  when 
he  gives  his  own  note,  it  is  proper,  and  not  oppressive  for  him,  to  pay  a 
little  more  than  he  indorses  over  B.'s  note,  instead  of  giving  his  own  and 
keeping  B.'s,  for  he  thereby  is  relieved  of  the  ti^ouble  and  expense  of 
collecting  B.'s  note;  and  when  he  indorses  wathout  recourse,  he  may 
properly  pay  a  little  more  yet,  for  the  risk  of  B.'s  insolvencj'  is  removed 
from  him ;  and,  carrying  out  the  analysis,  if  he  can,  by  using  the  money, 
draw  from  the  bosom  of  the  earth  twenty  or  forty  per  cent  return  more 
than  he  could  without  it,  why  is  it  oppression  to  ask  him  twelve  or  fifteen 
per  cent  ? 

What  gentle  oppression  it  is  to  ask  one  half  of  the  gain  mj'  money 
has  enabled  him  to  realize,  and  which  I  might  myself  have  obtain(>d  ! 
No,  the  oppression  is  in  taking  away  the  liberty  of  contract,  and  saying 
to  me,  "No  matter  how  great  return  your  monej^  may  bring,  nor  what  the 
variations  in  risk,  you  can  never  take  more  than  six  per  cent." 

Tlie  fact  is,  that  the  use  of  power,  whether  it  be  in  the  shape  of  money, 
lands,  or  goods,  ought  to  be  paid  for  at  its  fair  value,  which  varies  with 
the  circumstances  of  every  case. 

Usury  laws  are  built  on  no  firmer  foundation  than  fog.  and  in  the  light 
of  analysis  vanish  like  the  meadow  mists  in  the  morning  sun.  All  that 
is  necessary  for  protection  against  extortion  is  the  rule  that  applies  to  all 
contracts,  namely,  that  gross  inadequacy  of  consideration  is  evidence  of 
fraud.  Conscienceless  advantage  must  not  be  taken,  nor  in  case  of  a  bona 
fide  contract  should  improvidence  or  weak-mindedness  (except  of  chil- 
dren and  married  women)  be  protected  or  kept  from  exterminating  it.self. 
The  common  law  and  equity  are  adequate,  and  the  real  effect  of  usury 
laws  is  to  make  honest  men  pay  more  for  their  money  than  they  ought, 
in  order  to  cover  losses  that  may  occur  through  advantage  being  taken  of 
the  usury  statutes  by  rascality. 

127 


§  49  BUSINESS   POWERS 

But  in  other  States  such  a  transfer  by  indorsement  is  held  to  be 
usurious ;  some  allowing  the  holder  to  recover  against  all  parties 
but  the  indorser ;  ^  others  hold  that  the  transfer  is  void,  gives  no 
title,  and  no  recovery  is  possible.^ 

(c)  If  A.  transfers  B.'s  paper  to  C.  by  delivery  (if  it  is  payable 
to  bearer),  or  by  indorsement  without  recourse,  this  (unless  merely 
a  cover  for  usury)  is  a  sale,  and  may  be  for  any  price  on  which  the 
parties  agree.^ 

Now  the  question  is.  Can  a  bank  purchase  negotiable  paper  as 
a  private  individual  may  ?  ®° 

First,  it  is  clear  that  a  bank  may  purchase  in  the  sense  of 
acquiring  title ;  ^"  if  a  note  is  deposited,  credited  as  cash,  and  drawn 
against,  the  bank  is  a  holder  for  value ;  discounting  even  in  its 
most  limited  sense,  that  of  mere  lending,  gives  title,  and  buying 
exchange  involves  the  purchase  of  bills  of  exchange.  See  Part  II. 
§30. 

Second,  a  bank  may  have  power  to  purchase  at  any  agreed 
price,  according  to  the  terms  of  its  organic  law  ;  but  it  may  be  laid 
down  as  an  almost,  if  not  quite,  universal  principle,  that  all  trans- 
fers of  negotiable  paper  to  a  bank  are  subject  to  usury  laws,  and 
that  it  has  no  right  to  take  paper  at  a  greater  reduction. 

Third,  if  a  bank  does  take  at  a  greater  discount,  then  in  case  of 

^  Collier  v.  Nevill,  3  Dev.  (N.  C.)  31.  No  intermediate  illegality  can 
affect  the  liability  of  maker  or  acceptor.     Armstrong  v.  Gibson,  31  Wis.  61. 

8  Whitworth  v.  Adams,  5  Rand.  (Va.)  419. 

9  Nicholes  v.  Fearson,  7  Pet.  109,  8  L.  ed.  624. 

9°  A  bank  may  buy  negotiable  paper  in  the  sense  of  acquiring  absolute 
title  to  it,  but  is  not  free  as  to  price,  as  an  individual  is. 

If  a  national  bank  passes  money  to  A.  and  takes  A.'s  own  note,  or  the 
note  of  B.  indorsed  by  A.,  either  generally  or  without  recourse,  the  bank 
must  not  gain  more  than  what  would  be  lawful  interest  for  money  in  any 
case.     II.  §  30. 

But  if  it  does  buy  or  loan  so  as  to  gain  more,  its  title  to  the  paper  is 
not^ffected. 

No  one  can  deny  its  title  but  the  United  States. 

A  State  bank,  and  under  New  York  law,  a  trust  company,  may  by  its 
organic  laws  be  able  to  purchase  as  an  individual  can. 

But  as  it  is  no  part  of  Banldng  business  to  "traffic"  in  merchandise 
or  financial  securities,  and  as  the  fundamental  fact  in  each  of  the  three 
methods  of  acquiring  paper  is  the  same  as  regards  the  bank,  the  tendency 
is  to  hold  the  bank  up  to  the  usury  standard  in  all  transactions. 

If  it  transgresses,  most  States  hold  its  title  as  to  prior  parties  good. 
See  cases  supra. 

9«  Taft  ;;.  Quinsigamond  National  Bank,  172  Mass.  363,  52  N.  E.  387 
(1899) ;  Salmon  Falls  Bank  v.  Leyser,  116  Mo.  51,  22  S.  W.  504 ;  Kansas 
National  Bank  v.  Quinton,  18  Pac.  20  (1897). 

128 


PURCHASE,    SALE    OR   DISCOUNT   OF   NEGOTIABLE    PAPER         §  49 

a  State  bank  the  consequence  may  be  that  it  cannot  recover  on 
the  paper,  the  transaction  bein^  held  void,  or  it  may  be  able  to 
recover  as  to  all  i)rior  i)arties,  and  only  liable  to  the  immediate 
transferrer.  In  the  case  of  a  national  bank,  the  best  opinion  is, 
that  a  transfer  in  either  of  the  ways  a,  h,  c,  above,  may  be  made ; 
and,  if  usurious,  the  penalty  prescribed  by  the  National  Banking 
Act  is  the  only  consequence;  the  bank's  title  is  not  affected,  and 
prior  j:)arties  may  be  held.^^ 

But  in  Maryland  and  Minnesota  it  has  been  held  that  "  dis- 
counting "  does  not  include  any  transaction  but  a  loan  ;  therefore 
a  national  bank  has  no  power  to  acquire  title  by  transfer  without 
recourse,  or  in  any  way  in  which  the  transferrer  is  not  responsible, 
and  that  such  transfer,  being  ultra  vires,  gives  no  title,  and  the 
bank  cannot  recover  on  the  pa})er.  These  are,  however,  in  both 
branches  reasonless  decisions,  and  as  to  the  latter  point  jMinnesota 
has  altered  her  mind,  and  in  Marjdand  the  dissent  was  much 
stronger  than  the  opinion,  and  the  later  decision,  in  57  ]\Id.  128, 
is  inconsistent  with  the  Lazear  case.     (See  Ultra  vires,  §  722.) 

The  word  discount,  by  the  usage  of  the  commercial  world  and 
the  common  voice  of  all  the  dictionaries,  means  simply  to  buy  at 
a  reduction,  and  a  loan  is  only  one  species  of  discount.  It  needs 
only  to  look  at  the  National  Banking  Act  to  see  that  Congress 
used  the  word  in  its  broad  sense.  If  it  means  only  loan,  then  it 
is  useless  in  the  eighth  section ;  for  the  clause  giving  power  to 
loan  money  on  personal  security  covers  it.  The  thirtieth  section 
provides  a  penalty  for  any  usurious  transaction ;  but  it  has  been 
repeatedly  held  that  transactions  in  violation  of  this  section  are 
not  void,  and  the  defect  can  be  taken  advantage  ^°  of  in  no  other 
way  than  the  one  there  provided.  And  even  though  the  act  did 
not  give  power  to  take  by  absolute  transfer,  the  weight  of  authority 
and  reason  is  that  recovery  can  nevertheless  be  had  on  the  paper. 

See  for  the  expansion  of  this  matter,  §  48 ;  and  for  the  last 
point,  see  Ultra  vires,  §  722.     See  also  §  61. 

"■Nicholson  v.  National  Bank,  92  Ky.  257,  17  S.  W.  627  (1891); 
Prescott  National  Bank  v.  Butler,  157  Mass.  548,  32  N.  E.  909  (1893). 

1"  Gates  V.  First  National  Bank  of  Montgomery,  100  U.  S.  239,  25  L.  ed. 
580 ;  National  Exchange  Bank  v.  Moore,  2  Bond  170 ;  Prescott  National 
Bank  v.  Butler,  57  Mass.. 548,  32  N.  E.  999  (1893).  See  Usury,  Part  II. 
§  134. 


129 


§50  BUSINESS   POWERS 

Discount.     Negotiate 

§  50.  4.  A  bank  may  discount  {i.e.  deduct  from  the  face  of  the 
debt  the  amount  of  lawful  interest  on  its  face  from  the  time  of  tak- 
ing by  the  bank  till  maturity)  and  negotiate  (i.e.  "  transfer,  sell, 
pass ",  sometimes  further  meaning  "  procure  by  arrangement 
with  another,  settle  by,  and  arrange  for  ")  bills  of  exchange,  notes,, 
and  other  evidences  of  debt."  These  are  inherent  powers  identified 
with  banking  as  necessary  and  convenient  methods  of  carrying 
out  its  fundamental  purpose  of  lending  money.  Discounting  °"  is 
a  part  of  the  general  business  of  banking,  and  could  be  done  even 
without  specific  authority  conferred  in  the  incorporating  act.^  The 
holding  back  of  interest  in  advance  is  implied  in  the  phrase  itself ; 
it  is  a  part  of  the  definition  of  the  word.  But  the  bank,  though 
it  can  thus  secure  a  slight  increase  in  the  actual  amount  of  money 
which  it  receives  in  payment  for  the  use  of  its  funds,  can  do  it  in 
no  other  shape  and  to  no  greater  extent  than  precisely  this.^ 
Though  if  the  priticijial  is  risked  expressly  {i.e.  its  payment  made 
to  depend  on  a  contingent  event),  the  bank  can  charge  extra  for 
this  risk.2 

«  §  50.     See  Borrowing,  §  63.     See  Fed.  Res.  Act.     Part  II.  §  151. 

"^  Discounting  includes  acquisition  by  way  of  purchase  or  loan.  Morris 
V.  Third  National  Bank,  142  Fed.  25  (1905).  See  Seendahl  v.  First  State 
Bank,  155  N.  W.  794,  N.  D.  (1916). 

1  Fleckner  v.  Bank  of  United  States,  8  Wheat.  338,  5  L.  ed.  631.  See 
Citizens'  Bank  etc.  Co.  v.  Thornton,  174  Fed.  752  (1909) ;  Mine  etc. 
Supply  Co.  V.  Stockgrowers'  Bank,  173  Fed.  859  (1909).  But  it  is  not 
exclusively  a  banking  operation.  Chase  etc.  Co.  v.  National  Trust  etc.  Co., 
215  Fed.  633  (1914). 

2  It  may  take  not  one  particle  more  than  the  legal  rate  of  interest,  but 
it  may  discount,  that  is  to  say,  "count  off",  and  keep  this  out  of  its  pay- 
ment at  the  time  when  it  hands  over  the  balance  of  the  loan  to  the  bor- 
rower. This  is  the  meaning  and  the  only  meaning  of  the  words  "upon 
banking  principles",  or  "according  to  banking  principles  and  usages", 
sometimes  appended  to  the  word  "discount"  in  charters  and  organic 
laws.  The  addition  signifies  nothing  more  than  the  word  ' '  discount ' '  would 
alone  imply,  and  is  in  fact  mere  surplusage.  M'Lean  v.  Lafayette  Bank, 
3  McLean  587  ;  Creed  v.  Commercial  Bank,  11  Oliio  489.  No  court  will 
support  the  reservation  of  more  than  the  legal  rate  of  interest,  upon  the 
ground  that  this  excessive  rate  is  customarily  reserved  by  all  the  banks  in 
the  neighborhood.  Niagara  County  Bank  v.  Baker,  15  Ohio  St.  68  ;  New 
York  Firemen's  Ins.  Co.  v.  Elv,  2  Cow.  (N.  Y.)  678,  707 ;  Dunham  v. 
Gould,  16  Johns.  (N.  Y.)  367. 

Contingency.  Custom  cannot  vary  statute.  At  least  no  baby  custom. 
An  old,  full-grown  custom  may,  like  that  of  discount  itself,  which  is  a  real, 
substantial  inroad  on  the  usury  law,  and  only  sanctioned  because  the 
common  sense  of  the  judges  is  superior  to  their  respect  for  the  statute ; 

130 


CERTIFICATE    OF   DEPOSIT  §  51 

Certificate  oj  Deposit 

§  51.  5.  As  involved  in  the  power  to  receive  deposits,  a  bank 
may  issue  certificates  of  deposits,  which  in  Massachusetts  ^  and 
Pennsylvania  -  are  not  regarded  as  negotiable  paper ;  but  in  other 
States  ^  they  are  considered  promissory  notes  (which  seems  clear 
upon  any  definition  ^  of  a  note  to  be  found  in  the  authorities), 
negotiable  under  the  same  limitations  ^  as  notes. 

They  are  used  to  save  carrying  money ;  but  as  they  do  not 
pass  by  delivery,  but  only  by  indorsement,  they  are  not  intended 
to  circulate  as  money  in  the  sense  of  a  banking  law,  such  as  the 
National  or  New  York  law,  and  therefore  the  prohibition  in  those 
acts  of  issuing  notes  to  circulate  as  money  other  than  those  pr()\ided 
for  or  named  in  said  acts,  does  not  interfere  with  the  power  of  a 
bank  to  issue  certificates  of  deposit.^ 

as  is  shown  again  in  cases  where  repayment  is  made  expressly  to  depend 
on  contingent  events,  as  loans  on  bottomry  and  respondentia.  Thorndike 
V.  Stone,  11  Pick.  (Mass.)  183. 

1  §  .51.     Shute  V.  Pacific  National  Bank,  136  Mass.  487,  Coburn,  J. 

2  Gillespie  v.  Mather,  10  Pa.  St.  28 ;  Patterson  v.  Poindexter,  6  Watts 
&  S.  (Pa.)  227. 

^  IMinnesota,  Michigan,  North  Carolina,  Iowa,  Georgia,  Vermont, 
Connecticut,  Illinois,  Wisconsin,  Indiana,  Alabama,  and  California.  The 
United  States  Supreme  Court  also  held  a  certificate  of  deposit,  "paya- 
ble to  order  upon  return  of  this  certificate",  to  be  negotiable.  Miller  v. 
Austen,  13  How.  218,  14  L.  ed.  119.     See  §  296. 

^  A  promissory  note  "is  an  open  promise  in  writing  by  one  person  to 
pay  another  therein  named,  or  to  his  order,  or  to  bearer,  a  specified  sum 
of  money,  absolutely  and  at  all  events."     Daniel,  Neg.  Inst.,  §  28. 

^  Of  course,  if  it  is  payable  in  "current  funds",  or  anything  else  than 
money,  it  may  not  generally  be  held  negotiable  (otherwise  in  Indiana  and 
New  York).  The  words  "value  received"  are  necessary  in  Missouri. 
International  Bank  v.  German  Bank,  3  IMo.  App.  367.  If  there  are  no 
words  of  promise,  it  is  a  simple  receipt. 

The  words  "on  return  of  this  certificate"  do  not  affect  the  contract 
as  to  negotiabiHty ;  it  creates  no  further  condition  than  is  attached  to  an 
ordinary  note,  except  perhaps  the  statute  of  limitations  does  not  run  until 
demand  made.     See  §  296. 

6  Miller  v.  Austen,  13  How.  218,  14  L.  ed.  119;  Pelham  v.  Adams,  17 
Barb.  (N.  Y.)  384. 

"A  certificate,  issued  by  a  national  bank,  stating  that  a  person  named 
has  deposited  in  the  bank  a  certain  sum,  payable  to  the  order  of  himself 
on  the  return  of  the  certificate  properly  indorsed,  and  understood  lietween 
the  bank  and  the  depositor  not  to  be  payal>le  until  a  future  day  agreed 
upon,  is  not  in  violation  of  the  United  States  Rev.  Stats.  §  5183,  forbid- 
ding national  banks  to  issue  any  other  notes  to  circulate  as  money  than 
such  as  are  authorized  by  its  provisions. 

"If  the  United  States  Revised  Statutes  forbade  the  issue  of  any  other 
notes  whatever  than  such  as  were  therein  authorized,  it  would  be  diffi- 
cult to  hold  this  certificate  to  be  legal.     Miller  v.  Austen,  13  How.  218, 

131 


§  51  BUSINESS   POWERS 

They  may  be  payable  on  demand,  or  on  time,  if  the  circum- 
stances justify  the  bank  in  borrowing  on  time  (see  §  63),  unless 
there  is  a  restriction  ^  in  the  organic  law  or  by  statute.  If  a  bank 
cannot  issue  its  negotiable  promissory  note  on  time,  neither  can 
it  issue  a  negotiable  certificate  of  deposit  of  this  description.  If 
the  note  would  be  void,  so  likewise  is  the  certificate.  If,  however, 
the  bank  is  empowered  to  issue  promissory  notes,  subject  only  to 
the  restriction  that  it  shall  issue  none  which  are  designed  to  pass 
into  circulation  as  currency,  but  only  such  as  become  necessary 
in  the  ordinary  course  and  conduct  of  its  affairs,  and  are  strictly 
business  paper,  then  it  may  issue  certificates  of  deposit,  whether 
payable  on  demand  or  otherwise,  subject  only  to  the  same  restric- 
tion. By  reason  of  the  ease  with  which  such  instruments  may 
be  used  for  circulation,  the  courts  have  often  been  rigid  in  scruti- 
nizing them,  and  applying  the  strict  letter  of  the  law  to  them ; 
but  they  have  never,  that  we  have  found,  substantially  modified 
or  departed  from  the  general  principles  above  laid  down.^ 

14  L.  ed.  119.  But  assuming  that  it  might  fall  within  the  general  designa- 
tion of  a  note,  it  cannot  be  considered  as  a  note  intended  to  circulate  as 
money,  within  the  meaning  of  the  statute.  It  requires  to  be  indorsed. 
It  was  understood  not  to  be  payable  till  a  certain  future  date.  It  is  not  in 
a  sum  adapted  for  general  circulation  as  money.  The  form  of  the  instru- 
ment, and  the  incidents  above  mentioned,  show  that  it  was  not  intended 
to  circulate  as  money  between  individuals,  and  between  government  and 
individuals  for  the  ordinary  purposes  of  society.  Craig  v.  Missouri,  4  Pet. 
410  432  7  L.  ed.  903;  Briscoe  v.  Kentucky  Bank,  11  Pet.  257,  314,  318, 
9  l!  ed.  709;  Virginia  Coupon  Cases,  114  U.  S.  269,  284,  29  L.  ed.  185, 
191,  5  Sup.  Ct.  903.  See  also  Merchants'  Bank  v.  State  Bank,  10  Wall. 
6O4!  648,  19  L.  ed.  1008,  1019,  where  it  was  held  that  certified  checks  do 
not'fall  within  a  similar  prohibition."  Hunt,  appellant,  141  Mass.  515, 
6  N.  E.  554. 

7  By  Mass.  R.  L.  c.  115,  §  40,  no  promise  to  pay  money  at  a  future  day 
certain  can  be  issued  by  a  bank,  except  for  money  borrowed  of  the  State 
or  a  Massachusetts  savings  bank,  or  for  money  deposited  by  an  assignee 
of  insolvency.  Under  a  statute  against  the  circulation  of  bills  and  notes 
not  payable  on  demand,  a  bank  has  no  power  to  issue  time  certificates  of 
deposit,  and  if  it  does  they  are  void. 

8  Curtis  V.  Leavitt,  15  N.  Y.  19 ;  Leavitt  v.  Palmer,  3  Comst.  (N.  Y.) 
19 ;  Barnes  v.  Ontario  Bank,  19  N.  Y.  152 ;  Bank  of  Orieans  v.  Merrill,  2 
Hill  (N.  Y.)  295;  Southern  Loan  Co.  v.  Morris,  2  Barr  (Pa.  St.)  175; 
Craig  V.  State  of  Missouri,  4  Pet.  433,  7  L.  ed.  911 ;  Kilgore  v.  Bulkley,  14 
Conn.  362  ;  LaughUn  v.  Marshall,  19  111.  390  ;  Bank  of  Peru  v.  Farnsworth, 
18zrf.,563;  Lindsey  w.  McClelland,  18  Wis.  481 ;  White  r.  Franklin  Bank, 
22  Pick.  (Mass.)  181 ;  Bank  of  Chillicothe  v.  Dodge,  8  Barb.  (N.  Y.)  233  ; 
Bank  Commissioners  v.  St.  Lawrence  Bank,  3  Seld.  (N.  Y.)  513 ,  Cate  v. 
Patterson,  25  Mich.  191 ;  Pardee  v.  Fish,  60  N.  Y.  265 ;  Miller  v.  Austen, 
13  How.  218,  14  L.  ed.  119;  Poorman  v.  Mills,  35  Cal.  118,  and  other 
California  cases  therein  cited. 

132 


BANK   AS   AGENT  §  52 

Bank  as  Agent 

§  52.  6.  A  bank  may  act  as  agent  in  some  financial  dealings, 
as  receiving  money  to  pay  notes/  engaging  to  remit  ^  or  collect 
money/  and  procuring  and  exchanging  government  securities.^ 
The  bank  can  charge  for  these  services ;  but  in  these  dealings,  as 
in  others,  the  courts  will  see  that  a  bank  does  not,  under  cover  of 
a  charge  of  service,  obtain  more  than  lawful  interest  for  the  use 
of  its  money. 

If  a  bank  undertakes  to  remit  to,  or  to  collect  in,  a  distant  place, 
it  has  a  right  to  charge  a  reasonable  sum  to  cover  the  rate  of  ex- 
change, and  the  labor  and  risk  to  which  it  may  be  put,^     Such  a 

1  §  52.  See  Specific  Deposit,  §  206.  Collecting  is  part  of  the  banking 
business.  Tyson  v.  State  Bank,  6  Blaekf.  (Ind.)  22.5  ;  Paint  Co.  v.  National 
Bank,  4  Utah  353,  9  Pac.  709  (188G)  ;  Taft  v.  Quinsigamond  National  Bank, 
172  Mass.  363,  52  N.  E.  387  (1899)  ;  Keyes  v.  Bank,  .52  Mo.  App.  323  ;  King 
V.  Miller,  53  Or.  53,  97  Pac.  542  (1908) ;  Knapp  v.  Saunders,  15  S.  D.  464, 
90  N.  W.  137  (1902)  (collection  of  rents  due  and  paj^able  under  tlie  terms 
of  a  lease).  If  the  cashier  of  the  bank  acted  for  the  bank  in  the  collection 
of  a  draft  drawn  against  grain  shipped  by  the  defendant  and  the  bank 
received  the  benefit  of  the  transaction  it  would  be  under  a  legal  duty  to 
account  to  the  defendant  even  though  the  cashier  exceeded  his  authority  in 
assuming,  on  behalf  of  the  bank,  to  act  as  agent  for  defendant  in  the  trans- 
action.   First  National  Bank  v.  Bakken,  17  N.  D.  224, 116N.  W.  92  (1908). 

If  a  deed  is  left  with  a  bank  to  be  delivered  upon  the  payment  of  a 
certain  sum  the  bank  is  liable  for  delivering  the  deed  upon  payment  of  a 
less  sum.  Porter  v.  Packers'  National  Bank,  95  Neb.  223,  145  N.  W.  255 
(1914). 

-  A  national  bank  can  deal  in  and  exchange  government  securities. 
Van  Leuven  v.  First  National  Bank,  54  N.  Y.  671.  Buying  United  States 
bonds  is  highly  meritorious,  as  they  are  intended  to  enal)le  the  govern- 
ment to  raise  money,  and  banks  have  so  long  acted  as  agents  of  the  United 
States  Treasury  in  the  business  of  investing  their  own  as  well  as  cus- 
tomers' money  in  government  bonds,  without  objection  from  directors  or 
stockholders,  and  with  the  sanction  of  the  general  government,  that  it 
would  be  unjust  now  for  the  courts  to  hold  the  business  ultra  vires.  Cald- 
well V.  National  Mohawk  Valley  Bank,  64  Barb.  (N.  Y.)  3.33. 

Misapplication  of  Funds.  The  owner  of  real  estate  on  which  an  eleva- 
tor was  being  constructed  borrowed  money  from  a  loan  association  and 
secured  its  payment  by  mortgage.  The  money  was  to  be  paid  for  the  ma- 
chinery in  order  that  the  mortgage  might  not  be  subject  to  a  mechanic's 
lien.  The  monej'  was  sent  to  a  bank  with  directions  to  pay  a  certain 
claim  for  machinery.  The  bank  ai^plied  the  money  in  payment  of  a  debt 
owing  it  by  the  contractor.  A  lien  on  the  elevator  was  afterwards  fore- 
closed by  the  company  furnishing  the  machinery.  Held  that  the  mort- 
gagee may  recover  from  tli(>  bank  tliat  misapplied  the  remittance  without 
showing  that  the  plaintiff  i)aid  the  claim  for  macliinery  or  foreclosed  the 
mortgage.  Winfield  National  Bank  v.  Railroad  etc.  Sa\'ing  Asso.,  71 
Kan.  584,  81  Pac.  202  (1905). 

3  Merchants'  Bank  v.  Sassee,  33  Mo.  350. 

133 


§  52  BUSINESS   POWERS 

charge,  though  in  the  form  of  a  percentage,  is  not  interest,  and  is 
not  usurious.  But  it  must  be  made  bo7ia  fide.  If  the  charge 
for  labor  or  risk  is  excessive,  or  if  charges  are  made  for  exchange 
when  the  bank  is  not  really  obliged  to  pay  anything  on  this  ac- 
count, or  if  credit  is  not  given  for  exchange  where  nevertheless 
the  bank  actually  receives  something  on  account  of  it,  then  the 
form  of  the  charge  will  be  regarded  as  only  colorable,  and  it  will 
be  considered  that  usurious  interest  has  been  taken  or  reserved/ 

Issuing  Bank   Notes 

§  53.  7.  A  bank  has  no  inherent  authority  to  issue  "  bills  ^  or 
notes  designed  to  circulate  as  money.  It  is  unlike  those  powers 
previously  considered  in  this  section ;  the  right  must  be  expressly 
given.     See  Part  II.  §§8,  21. 

Such  notes  miist  be  negotiable  by  mere  delivery,  payable  imme- 
diately on  demand,  in  business  hours,  at  any  time  after  issue,  and 
without  interest. 

A  bank  has  no  authority  express,  incidental  or  implied  to 
enter  into  a  contract  of  partnership  or  for  the  building  of  levees.^ 

§  54.  Incidental  Powers  of  Banks  are  such  as  are  necessary  or 
convenient  in  the  conduct  of  the  business  set  forth  above,  but  not 
themselves  so  continuously  or  peculiarly  essential  to  the  attain- 
ment of  the  fundamental  objects  of  the  corporation  as  to  be  con- 
sidered a  part  of  the  business  of  banking." 

General  Principle 

It  is  a  general  principle  °"  that,  for  the  purpose  of  accomplishing 
the  objects  of  its  creation,  a  corporation  may  act  and  deal  in  the 

4  Bank  of  the  United  States  v.  Davis,  2  Hill  (N.  Y.)  451. 

»  §  5.3.  The  word  "issue"  has  a  "restricted,  special  and  almost  techni- 
cal meaning,  relating  exclusively  to  the  monied  currency  of  the  country." 
Lusk  V.  Stoughton  State  Bank,  135  Wis.  311,  115  N.  W.  813  (1908). 

1  See  chapter  on  Bank  Bills,  §  633,  and  see  Part  II.  §  21,  and  R.  L.  c. 
115,  §  40,  as  to  bank  notes  of  a  State  bank. 

2  Interstate  Trust  etc.  Co.  v.  Reynolds,  127  La.  193,  53  So.  520  (1910). 
0  §  54.     Before  a  bank  can  exercise  any  power  not  expressly  given,  it 

should  be  clearly  established  that  such  power  is  essential  to  the  proper 
conduct  of  its  business  and  necessary  to  enable  it  properly  to  enjoy,  use 
and  carry  out  its  express  powers.  Commercial  Banking  etc.  Co.  v.  Citi- 
zens' Trust  etc.  Co.,  153  Ky.  566,  156  S.  W.  160,  1915C  Ann.  Cas.  166, 
n.,  45  L.  R.  A.  (n.  s.)  950,  n.  Where  a  power  would  enable  a  bank  to 
perpetuate  a  fraud  it  is  not  an  express  power,  id. 
""  See  Restrictions,  §  68. 

134 


HOLDING   REAL   ESTATE  §  o5 

same  manner  that  a  natural  person  would,  if  he  sought  to  accom- 
plish the  same  end.  It  may  borrow  money  for  those  purposes, 
contract  for  labor  and  materials,  make  purchases,"*  and  give  notes, 
bills,  bonds,  and  mortgages  in  payment  or  as  security  therefor.^ 

Proceedings,  though  such  as  are  usually  ultra  vires,  will  be 
proper  if  they  are  (1)  necessitated  by  circumstances  essential  to 
the  corporate  well-being,  (2)  could  not  have  been  foreseen  to  be 
necessary  at  the  inception  of  the  corporation,  (3)  are  not  expressly 
forbidden,  (4)  do  not  amount  to  a  course  of  dealing,  but  are  mat- 
ters of  temporary  management.  As  if  a  banker  lends  money  on  a 
ship  and  freight,  and  is  obliged  to  foreclose  his  security,  he  may, 
and  should  as  a  prudent  man,  operate  the  ship  temporarily.  See 
§78. 

Holding  Real  Estate 

§  55.  The  statutes  of  mortmain  took  away  the  common  law 
power  of  holding  real  estate.*  By  it  "  all  conveyances  by  deed 
or  will  of  realty  to  a  body  corporate,  or  for  its  use,  are  void,  unless 
sanctioned  by  charter  or  act  of  Assembly."  ^  This  is  law  in 
Pennsylvania,  but  in  other  States  a  corporation  may  acquire  and 
hold  real  estate  so  far  as  is  necessary  and  convenient  for  the  pur- 
poses of  their  creation  ;  but  not  for  objects  wholly  foreign.- 

Power  is  usually  expressly  given  to  own  realty  sufficient  for 
a  place  of  business.'  A  national  bank  cannot  take  realty  as  con- 
current '  security  for  a  loan,  but  may  as  a  substantially  subsequent 
security,  and  State  banks  are  sometimes  restricted  in  the  same 
way.  Any  bank  may  take  real  estate  to  save  a  debt,  and  may 
sell  any  realty  to  which  it  acquires  title.  The  effect  of  exceeding 
its  powers,  and  buying  or  taking  land  beyond  its  authority,  is 

""•  A  national  bank  may  take  an  absolute  assignment  of  a  claim  for 
collection,  and  agree  to  pay  the  proceeds  or  a  part  thereof  to  another.  Such 
a  transfer  passes  the  legal  title.  King  v.  Miller,  53  Or.  53,  97  Pac.  542 
(1908). 

1  Frye  v.  Tucker,  24  111.  180;  Smith  v.  Law,  21  N.  Y.  299;  Clark  v. 
School  District,  3  R.  I.  199. 

*  §55.     See  §  74. 

1  3  Binney,  App.  026.  But  see  Farmers'  Deposit  National  Bank  r. 
W.  Pa.  FuefCo.,  215  Pa.  St.  115,  04  Atl.  374,  114  Am.  St.  Rep.  949  (1906). 

2  First  Parish  in  Sutton  v.  Cole,  3  Pick.  (Mass.)  239 ;  State  v.  Com- 
missioners of  Mansfield,  3  Zab.  (N.  J.)  510;  Riley  i'.  City  of  Rochester, 
5  Seld.  (N.  Y.)  64.     See  §  72  et  seq. 

^  See  Part  II.  §  28.  And  the  courts  are  very  liberal  in  their  construction 
of  such  authority.     See  §  49. 

135 


§55 


BUSINESS    POWERS 


usually  in  this  countrj^  no  more  than  the  risk  of  forfeiture  of  fran- 
chise at  suit  of  the  sovereign.^"    The  title  is  good.     §§  74,  722. 

Bequest 
A  corporation  may  receive  personal  property  by  bequest.* 

Contracts 

§  56.  A  bank  has  po\^er  to  make  all  such  contracts  as  are  neces- 
sary or  usual  as  direct  means  ^  to  attain  the  objects  of  its  incor- 
poration, and  no  other.^" 

3« Farmers'  Deposit  National  Bank?'.  W.  Pa.  Fuel  Co.,  215  Pa.  St. 
115,  64  Atl.  374,  114  Am.  St.  Rep.  949  (1906). 

*  The  common  law  right  of  taking  personal  property  by  bequest  was, 
we  believe,  always  enjoyed  by  corporations  equally  with  individuals,  and 
a  bequest  to  a  corporation  of  its  own  stock  is  as  valid  as  a  bequest  of  any- 
thing else.  Atk.  R.  37  ;  2  Bro.  58 ;  Phillips  Academy  v.  King,  12  Mass. 
546;  In  the  Matter  of  Howe,  1  Paige  Ch.  (N.  Y.)  214;  M'Cartee  v. 
Orphan  Asylum  Society,  9  Cow.  (N.  Y.)  437 ;  Rivanna  Navigation  Co. 
V.  Dawsons,  3  Gratt.  (Va.)  19. 

1  §  56.  If  the  means  are  reasonably  and  directly  adapted  to  the  ends  for 
which  the  bank  exists,  they  are  proper ;  but  indirect  means  are  not  allow- 
able, though  they  aid  the  same  ends ;  e.g.  a  bank  cannot  buy  and  sell 
stocks  to  raise  money  to  lend  or  to  retrieve  its  fortunes,  nor  engage  in  any 
outside  business  or  securities  except  to  save  debt,  or  invest  surplus,  nor 
purchase  land  to  prevent  competition.     See  Restrictions,  §  68. 

A  bank  may  hold  cattle  as  a  pledge  for  the  payment  of  an  overdraft. 
Farmers'  Bank  v.  Wabash  R.  Co.,  119  Mo.  App.  1,  95  S.  Vf.  286  (1906). 

i»  A  bank  cannot  go  into  the  mining  business,  and  a  contract  that 
expressly  requires  it  to  do  so  is  beyond  its  powers.  Weston  v.  Estey,  22 
Col.  334,  45  Pac.  367  (1896) ;  nor  can  it  enter  into  a  contract  of  partner- 
ship for  the  building  of  levees.  Interstate  Trust  Co.  v.  Reynolds,  127  La. 
193,  53  So.  520  (1910) ;  nor  can  it  legally  make  a  contribution  for  the 
purpose  of  inducing  the  construction  of  a  railroad,  and  a  note  or  contract 
executed  by  an  Oklahoma  bank  as  a  subscription  for  such  purpose  is  ultra 
vires  and  void,  and  the  courts  will  not  enforce  it.  Arkansas  etc.  Ry.  v. 
Farmers'  etc.  Bank,  21  Okla.  322,  96  Pac.  765,  129  Am.  St.  Rep.  782 
(1908).  State  banks  cannot  purchase  interests  in  partnership  firms  and 
become  partners  thereof,  nor  can  they  indulge  in  the  commercial  business 
of  an  electric  light  company.  Home  State  Bank  v.  Vandolah,  188  111. 
App.  123  (1914). 

A  bank  cannot  go  into  the  creamery  business.  Rankin  v.  Emigh,  218 
U.  S.  27,  .54  L.  ed.  915,  30  Sup.  Ct.  672  (1910) ;  nor  can  it  pledge  its  assets 
to  secure  the  payment  of  a  depositor.  Commercial  Banking  etc.  Co.  v. 
Citizens'  Trust  etc.  Co.,  153  Ky.  566,  156  S.  W.  160,  1915C  Ann.  Cas. 
166  n.,  45  L.  R.  A.  (n.  s.)  950  n. 

A  national  bank  has  no  power  whatever  to  deal  in  merchandise  of  any 
kind,  and  if  the  legal  effect  of  purchasing  drafts  with  bills  of  lading  at- 
tached is  a  sale  of  the  goods  represented  by  the  transaction  it  is  ^dtra  vires. 
Leonhardt  v.  Small,  117  Tenn.  153,  96  S.  W.  1051,  119  Am.  St.  Rep.  994, 

136 


CONTRACTS  §  56 

Test  of  Right  to  Contract 

"  In  deciding  whether  a  corporation  can  make  a  particular 
contract,  we  are  to  consider,  in  the  first  phice,  whether  its  charter, 
or  some  statute  binding  upon  it,  forbids  or  permits  it  to  make 
such  contract.  And,  if  the  charter  and  vahd  statute  law  fire 
silent  on  the  subject,  in  the  second  ])lac-e,  wliether  the  pf)wcr  to 
make  such  a  contract  may  not  be  implied  on  the  part  of  the  cor- 
poration, as  directly  or  incidentally  necessary  to  enable  it  to  fulfil 
the  purpose  of  its  existence,  or  whether  the  contract  is  entirely 
foreign  to  that  purpose."  ^ 

Modern  Tendency  Liberal 

The  modern  tendency  is  to  liberal  construction  of  corporate 
power  to  contract.  The  English  decisions  are  clear  that,  yrinm 
facie,  all  its  contracts  are  valid,  and  the  burden  is  on  the  party 
objecting  to  show  that  the  law  by  which  it  is  created  expressly 
or  by  necessary  imi:)lication  prohibits  it ;  and  the  drift  in  the 
United  States  is  in  the  same  direction,  away  from  the  strict  rule 
that  held  the  power  limited  to  that  conferred  or  necessarib"  im- 
plied.^ 

A  Contract  is  Presumed  to  he  for  Proper  Purpose 

1.  When  the  charter  of  a  corporation  authorizes  it  to  purchase 
land  for  some  specified  purpose,  in  the  absence  of  evidence  it  will 
be  presumed  that  any  land  purchased  by  it  was  acquired  for 
purposes  authorized  by  the  charter.  Even  if  a  corporation  is 
forbidden  by  its  charter  to  hold  or  take  a  title  to  real  estate,  a 
conveyance  of  land  to  it  is  not  void.  It  is  valid  until  vacated  by  a 
direct  proceeding  by  the  sovereign,  instituted  for  that  purpose.* 

6  L.  R.  A.  (n.  s.)  887  (190G).  See  Boyd  v.  Schneider,  124  Fed.  239  (1903). 
But  even  though  a  contract  for  building  bridges  is  idira  vires,  if  the  agent 
of  the  bank  purchases  groceries  which  are  used  in  carrying  out  the  contract 
and  the  bank  receives  the  proceeds  of  tlio  contract  it  is  estopped  to  deny 
liability  for  the  value  of  the  groceries  whether  it  made  a  profit  or  sustained 
a  loss  by  their  use.  National  Bank  v.  Purcell  Grocery  Co.,  34  Okla.  34, 
124  Pac.  603,  41  L.  R.  A.  (x.  s.)  494  (1912).  See  Griffin  v.  Wabash  R. 
Co.,  115  IMo.  App.  549,  91  S.  W.  1015  (190G),  where  the  facts  show  that 
the  bank  was  not  engaging  in  trade  within  the  meaning  of  the  statute. 
See  also  McLean  v.  City  State  Bank,  210  Fed.  21  (1913). 

-  Angell  &  Ames  on  Corporations,  §  256. 

3  Converse  v.  Norwich,  etc.  R.  R.  Co.,  33  Conn.  166-179. 

*  Mallett  V.  Simpson,  94  N.  C.  37. 

A  bond  of  a  national  bank,  given  to  secure  the  payment  of  certain  bonds 

137 


§  56  BUSINESS   POWERS 


Bank  may  Make  Agreement  to  Recover  a  Deposit  Stolen 

"  It  is  competent  for  a  national  bank  to  take  steps  for  the  re- 
covery of  its  property  stolen  by  burglars,  and  to  agree  to  take  like 
steps  for  the  recovery  of  the  property  of  others  deposited  with  it 
for  safe  keeping,  and  stolen  at  the  same  time ;  and  want  of  proper 
diligence,  care,  and  skill  in  performing  such  an  undertaking  is  ground 
of  liability  to  respond  in  damages  for  failure.  But  the  evidence 
in  this  case  failed  to  establish  either  such  an  agreement,  or  the 
want  of  diligence  and  care,  and  the  jury  was  properly  instructed 
to  return  a  verdict  for  defendant."  ^ 

"  As  to  the  second  cause  of  action,  the  facts  stated  in  the  com- 
plaint seem  to  us  to  be  sufficient,  if  proven,  to  constitute  a  legal 
liability  on  the  part  of  defendant.  It  would  certainly  be  com- 
petent for  a  national  bank  to  take  measures  for  the  recovery  of 
its  own  property  lost  in  the  way  described.  If  the  loss,  as  in  the 
present  case,  included  the  property  of  others,  and  it  was  deemed 
best,  having  reference  to  the  bank's  own  interest,  that  these 
measures  should  be  taken  by  the  bank  alone  for  itself  and  all 
concerned,  it  might  lawfully  undertake  to  act  for  others  thus 
jointly  concerned  with  itself,  as  well  as  for  itself  alone ;  and  want 
of  proper  diligence,  skill,  and  care  in  the  performance  of  such  an 
undertaking  would  be  ground  of  liability  to  respond  in  damages 
for  such  failure."  ^ 

2.  A  contract  whereby  a  person  is  to  furnish  a  national  bank 
with  a  certain  customer  in  consideration  of  which  the  bank  is  to 
turn  over  a  certain  amount  of  fire  insurance,  is  not  one  within 
the  powers  of  a  national  bank,  and  the  bank  may  avail  itself  of  the 
defence  of  ultra  vires  if  sued  upon  the  contract.^ 

and  mortgages  on  realty,  in  which  it  had  an  interest,  was  held  not  ultra 
vires.  Mutual  Life  Insurance  Co.  v.  Yates  Co.  National  Bank,  35  App.  Div. 
(Hun,  N.  Y.)  218  (1898). 

5  Wylie  V.  Northampton  Bank,  119  U.  S.  361,  30  L.  ed.  455,  7  Sup.  Ct. 
268. 

A  national  bank  may  represent  other  banks  which  have  transferred 
notes  and  mortgages  to  it  when  all  held  conflicting  mortgages  on  the  same 
property,  and  sue  on  such  notes  with  the  understanding  that  the  respective 
rights  between  the  banks  in  the  proceeds  collected  are  to  be  determined  by 
the  ultimate  result  of  another  suit  then  pending,  to  which  all  were  parties. 
Morris  v.  Third  National  Bank,  142  Fed.  25  (1905). 

«  Dresser  v.  Traders'  National  Bank,  165  Mass.  121,43  N.  E.  567  (1896)  ; 
Davis  V.  Old  Colony  Railroad,  131  Mass.  258. 

138 


STOCKS   AND    BONDS  §  59 

Settling  Claims 

§  57.  3.  It  may  make  all  arrangements  necessary  to  the  ad- 
vantageous settlement  of  claims,  by  or  against  the  company ;  as, 
for  example,  a  compromise  '  or  release.  But  if  the  arrangement 
involves  abandoiunent  of  the  bank's  claim  it  must  be  necessi- 
tated by  the  circumstances. 

Goods  on  Credit 

§  58.  4.  It  may  run  into  debt  by  account  with  a  merchant, 
overdraw  at  another  bank,  and,  in  general,  make  such  monetary 
arrangements  as  an  individual  may. 

Stocks  and  Bonds 

§  59.  5.  Any  bank  may  deal  in  Government  securities,  as  we 
have  seen.  (§  52.)  A  national  bank  cannot  buy  °  or  loan  on  the 
security  of  its  02vn  stock, '  but  State  banks  may,  so  far  as  not  pro- 
hibited,^  buy  and  sell  and  loan  upon  their  own  stock.-"  In  this 
country  the  general  rule  is,  that  any  bank  may  loan  on  the  secur- 
ity of   the   stocks  or   bonds  of   other  corporations,^  but  cannot 

1  §  57.  A  bank  may  take  stock  in  compromise  of  a  doubtful  debt 
owing  the  bank.  First  National  Bank  of  Charlotte  v.  National  Exchange 
Bank,  51  How.  Pr.  (N.  Y.)  320. 

»  §  59.     Burrows  v.  Niblack,  84  Fed.  (111.)  Ill  (1898). 

'  See  Part  II.  §  35. 

-  Mass.  R.  L.  c.  115,  §§  31-32,  allow  a  bank  to  loan  on  its  own  stock 
to  an  amount  not  beyond  one  half  the  paid  capital ;  but  it  must  not  pur- 
chase its  stock,  nor  hold  it  more  than  six  months  after  it  becomes  the 
property  of  the  bank  through  non-payment  of  the  loan. 

In  Minnesota  it  has  been  held  that  a  State  bank  cannot,  directly  or 
indirectly,  purchase  shares  of  its  own  stock.  St.  Paul  Trust  Co.  v.  Jenks, 
57  Minn.  248,  59  N.  W.  299. 

In  Kan:;as  the  Court  say  that  the  bank's  power  to  purchase  may  well 
be  doubted.  Abilene  State  Bank  v.  Strachan,  87  Kan.  577,  132  Pac.  200 
(1913).     See  also  Kassler  v.  Kyle,  28  Colo.  374,  65  Pac.  34  (1901). 

2°  See  §  77. 

'And  sell  them  if  necessary  to  save  the  debt.  Third  National  Bank 
of  Baltimore  v.  Boyd,  44  Md.'47;  Talmage  v.  Pell,  3  Seld.  (N.  Y.)  328; 
Dearbourn  v.  Union  National  Bank,  58  Me.  273  (1870);  Kennedy  v. 
Savings  Bank,  101  Cal.  495;  California  Bank  v.  Kennedy.  107  U.  S.  302, 
360,  307,  42  L.  ed.  200,  17  Sup.  Ct.  831  (Cal.  1897),  citing  National  Bank 
V.  Case,  99  U.  S.  028,  25  L.  ed.  448:  First  National  Bank  v.  National 
E.Kchange  Bank.  92  U.  S.  122,  128,  23  L.  ed.  079;  Latimer  v.  Citizens' 
State  Bank.  102  Iowa  102,  71  N.  W.  225  (1897);  Cliemical  National 
Bank  v.  Havermale,  120  Cal.  601,  .52  Pac.  1071  (1898) ;   Hotchlcin  v.  Third 

139 


§  59  BUSINESS   POWEES 

buy^"  and  sell  them/  except  to  save  a  debt,^  or  In  order  to 
deposit  them  under  a  law  requiring  such  stocks  to  be  given  as 
security  for  circulation,  or  by  reason  of  other  express  authority.^ 
But  although,  under  statute,  a  national  bank  is  not  authorized 
to  purchase  its  own  stock,  stock  so  purchased  is  not  void,  and 
where  a  subsequent  purchaser  acquires  the  stock  through  a 
simulated  holder  for  the  bank,  in  ignorance  of  the  fact  that 
the  bank  had  employed  its  funds  in  placing  the  stock,  in  the 
name  of  such  simulated  owner,  and  pays  therefor  in  good  faith, 
the  title  so  obtained  is  good  against  the  bank  and  its  creditors/ 
For  the  consequence  of  dealing  in  stock  beyond  its  power,  see 
Ultra  vires,  §  722. 

National  Bank,  219  Mass.  234,  106  N.  E.  974  (1914) ;  Corn  Exchange 
National  Bank  v.  Kaiser,  160  Wis.  199,  151  N.  W.  259,  (1915) ;  Fulton  v. 
National  Bank,  26  Tex.  Civ.  App.  115,  62  S.  W.  84  (1901). 

s«  The  banking  department  of  the  citizens'  bank  of  Louisiana  was  a 
new  creation  under  the  Act  of  1853.  It  was  not  liable  for  the  bonds  of 
the  State  in  aid  of  said  bank  and  having  the  power  of  conducting  a  general 
banking  business  it  had  the  capacity  to  purchase  as  an  investment  of 
separate  funds  or  in  current  business,  the  bonds  of  the  State  issued  in  aid 
of  the  citizens'  bank  the  same  as  any  other  bank  or  third  person  could. 
Hope  V.  Board  of  Liquidation,  108  La.  315,  32  So.  547  (1902). 

*  It  is  no  part  of  the  banking  business  to  engage  in  "traffic"  in  mer- 
chandise or  financial  securities,  nor  is  dealing  in  stocks  an  incident  of 
the  business  in  its  regular  course.  Sackett's  Harbor  Bank  v.  Lewis  Co. 
Bank,  11  Barb.  (N.  Y.)  213;  Weckler  v.  First  National  Bank,  42  Md. 
581  •  Franklin  Bank  of  Cincinnati  v.  Commercial  Bank,  36  Ohio  St.  350 ; 
First  National  Bank  v.  Hawkins,  174  U.  S.  364,  43  L.  ed.  1007,  19  Sup. 
Ct.  739  (1899) ;  Chemical  National  Bank  v.  Havermale,  120  Cal.  601,  52 
Pac.  1071  (1898)  ;  California  Bank  v.  Kennedy,  167  U.  S.  362,  42  L.  ed. 
198,  17  Sup.  Ct.  831  (Cal.  1897),  and  citations;  Hotchkin  v.  Third  Na- 
tional Bank,  219  Mass.  234,  106  N.  E.  974  (1914) ;  First  National  Bank  v. 
Converse,  200  U.  S.  425,  50  L.  ed.  537,  26  Sup.  Ct.  308  (1906). 

Under  the  Missouri  statute  a  State  bank  may  handle  negotiable  bonds. 
Mount  Vernon  Bank  v.  Porter,  52  Mo.  App.  24 i.     See  §  77. 

5  Union  National  Bank  v.  Hunt,  7  IMo.  App.  42 ;  Silver  Lake  Bank  v. 
North,  4  Johns.  Ch.  (N.  Y.)  370 ;  First  National  Bank  of  Charlotte  v. 
National  Exchange  Bank,  51  How.  Pr.  (N.  Y.)  320 ;  Latimer  v.  Citizens' 
State  Bank,  102  Iowa  162,  71  N.  W.  225  (1897). 

And  a  bank  cannot,  even  to  pay  a  debt,  take  shares  in  a  corporation 
organized  for  speculative  purposes.  First  National  Bank  v.  Converse,  200 
U."s.  425,  50  L.  ed.  537,  26  Sup.  Ct.  306  (1906) ;  or  in  a  partnership  or- 
ganized for  similar  purposes.  ISIerchants  National  Bank  v.  Wehrmann, 
232  U.  S.  295,  50  L.  ed.  1036,  26  Sup.  Ct.  613  (1906). 

6  See,  as  to  stocks  required  for  circulation  basis,  Mass.  R.  L.  c.  115, 
§  63.  In  absence  of  statutory  authority  one  corporation  cannot  hold 
stock  of  another.  Franklin  Bank  of  Cincinnati  v.  Commercial  Bank,  36 
Ohio  St.  350. 

7  Wallace  v.  Hood,  89  Fed.  (Kan.)  11  (1898). 

140 


ALIENATIOX    OF   PROPERTY.       GIFT  §  C2 

Saving  Debt 

§  60.  G.  To  save  a  debt,  a  bank  may  take  real  estate  or  per- 
sonal property,  by  conveyance  or  purchase  at  foreclosure  sale  of  a 
mortgage  held  by  it  as  collateral,  or  otherwise,  and  may  hcjld  su( h 
property,  not  permanently,  but  a  reasonable  time,  to  enable  it  to 
realize  advantageous  sale  of  it.^  A  bank  may  even  engage  tem- 
porarily ^  in  a  business  entirely  foreign,  in  order  to  save  its  claim, 
and  in  short  may  do  any  act  a  prudent  man  would  do  under  the 
same  circumstances  for  that  purpose.     See  §  78. 

Surplus  Capital.     Idle  Property 

§61.  7.  It  is  a  general  principle  that  a  corporation  may  in- 
vest surplus  capital,  that  it  is  unable  to  make  use  of  in  its  business, 
in  outside  investments ;  for  example,  a  bank  may  buy  ^  notes,  to 
sell  them  at  a  profit,  with  such  capital.  Any  property  which  it 
cannot,  by  reason  of  special  circumstances,  make  immediate  use  of 
to  advantage,  in  its  proper  business,  may  be  let  or  transferred.  A 
ferry  company  can  lease  one  of  its  steamers,^  a  hotel  company 
may  temporarily  let  a  part  of  its  building  for  offices,  and  no  doubt 
a  bank  may  rightfully  let  or  sell  on  the  same  principle. 

Alienation  of  Property.    Gift 

§  62.  8.  A  bank,  unless  restricted,  can  alienate  ^  or  mortgage  i" 
its  property,  real  or  personal,  in  whole  or  part,  but  7wt  its  fran- 

>  §  GO.     Stone  v.  Rottman,  1S.3  ^lo.  552,  82  S.  W.  76  (1904). 
2  A  bank  cannot  run  a  coal  Vnisiness  for  four  years  at  a  continual  loss. 
Stone  V.  Rottman,  183  Mo.  552,  82  S.  W.  76  (1904). 

1  §  61.      See  Lazear  v.  National  Union  Bank  (Md.),  12  Leg.  News,  64. 

2  Brown  v.  Winnisimmet  Co.,  11  Allen  (Mass.)  326. 

1  §  62.  Sharswood  in  8  Phil.  94.  Corporations  aggregate  have  at 
common  law  an  ineidental  right  to  alien  or  dispose  of  their  lands  and 
chattels,  unless  speeially  restrained  by  their  charters  or  by  statute.  Inde- 
pendent of  positive  law,  all  corporations  have  the  absolute  ji/s  disponeudi, 
neither  limited  as  to  objects,  nor  circumscribed  as  to  quantity.  Co.  Lit. 
44  a,  300  h;  1  Sid.  161,  note  at  the  end  of  the  ease.  The  case  of  Sut- 
ton's Hospital,  10  Co.  30  h;  1  Kyd  on  Corp.  108:  Com.  Dig.  tit.  Fran- 
chise, F.  11,  18  ;  2  Kent,  Com.  280  ;  Mayor  of  Colchester  v.  Lowten,  1  Ves. 
&  B.  226,  237,  240.  244  ;   Binnev's  case.  2  Bland  Ch.  (Md.)  142. 

By  statute  in  New  York  (c.  409,  1882,  §§  186,  187)  a  bank  cannot 
transfer,  assign,  or  convey  property  exceeding  SIOOO,  except  in  the  trans- 
action of  its  ordinarv  business  or  in  pursuance  of  a  previous  vote  of  the 
board  of  directors.  The  transfer  of  three  bills  at  one  time,  which  m  the 
aggregate  exceed  SIOOO,  is  a  violation  of  the  law,  although  no  one  of  the 

141 


R  62  BUSINESS   POWERS 

chises,  for  these  are  special  privileges  that  cannot  be  delegated 
nor  acquired  by  any  other  method  than  that  prescribed  by  statute, 
or  by  special  act  of  the  legislature.  But  a  bank,  being  instituted 
partly  for  the  benefit  of  its  stockholders,  cannot  give  away  its 
property  unless  with  the  consent  of  them  all.  A  donation  of  the 
funds  of  a  bank  in  aid  of  a  project  outside  the  regular  banking 
business  is  invalid,^  for  example  a  donation  to  induce  a  manufac- 
turing company  to  remain  in  town.=* 

Borrowing 

§  63.  9.  So  far  as  it  is  involved  in  receiving  deposits,  borrowing 
is  a  part  of  banking,  but  borrowing  stricto  sensu,  taking  a  loan  for 
a  definite  time,  instead  of  one  payable  on  demand  as  ordinary 
deposits  are,  is  not^  a  part  of  the  business  of  banking,  nor  a  neces- 
sary incident  thereof,  as  a  continuous  practice;  but  (like  every 
other  corporation  in  the  United  States)  a  bank^  has  ^  an  inherent 

bills  exceeds  the  stcatutory  amount.     Atkinson  v.  Rochester  Printing  Co. 
114  N.  Y.  168,21  N.  E.  178. 

1"  Roberts  v.  Washington  National  Bank,  11  Wash.  550,  40  Pac.  225 

(1895). 

2  Robertson  v.  Buffalo  County  National  Bank,  40  Neb.  235,  58  N.  W. 

715  (1894). 

3  McCrory  v.  Chambers,  48  111.  App.  445. 

1  §  03.  The  business  of  a  bank  is  to  lend,  not  borrow ;  to  discount  the 
notes  of  others,  not  to  get  its  own  discounted.  A  bank  under  certain 
circumstances  may  be  a  temporary  borrower  on  time,  and  give  its  note  on 
time ;  but  such  transaction  would  be  so  out  of  the  course  of  ordinary  and 
legitimate  banking  as  to  require  those  making  the  loan  to  see  to  it  that 
the  agent  acting  for  the  bank  had  special  authority  to  borrow  the  money. 
Adams  v.  Cook  Co.  National  Bank,  Blodgett,  J.,  quoted  Ball  on  National 
Banks,  54.  Even,  therefore,  if  it  be  conceded  that  it  is  within  the  powers 
of  the  board  of  directors  to  borrow  on  time,  it  is  yet  obvious  that  a  vice- 
president,  however  general  his  powers,  cannot  exercise  such  a  power 
unless  specially  authorized  so  to  do,  and  it  is  equally  obvious  that  per- 
sons dealing  with  the  bank  are  presumed  to  know  the  extent  of  the  general 
powers  of  the  officers.  Western  National  Bank  v.  Armstrong,  152  U.  S. 
346,  351,  352,  38  L.  ed.  470,  14  Sup.  Ct.  .572  (1893). 

A  national  bank  finding  itself  embarrassed  with  a  large  amount  of  assets 
much  in  excess  of  its  obligations,  yet  without  the  cash  to  make  payment  of 
those  which  are  due  and  urgent,  may  borrow  money  to  meet  these  pressing 
demands.  Wyman  v.  Wallace,  201  U.  S.  230,  50  L.  ed.  738,  26  Sup.  Ct. 
495  (1906).  See  Bryon  ?>.  First  National  Bank,  75  Or.  298,  146  Pac.  516 
(1915).  And  the  fact  that  the  bank  is  insolvent  at  the  time  does  not  im- 
pair its  right  to  negotiate  the  loan  and  give  security  therefor.  Harris  v. 
Randolph  County  Bank,  157  Ind.  120,  60  N.  E.  1025  (1901). 

2  City  Bank  of  Columbus  v.  Beach,  1  Blatchf.  (C.  C.)  425;  Bank  ci 
Augusta  V.  Earle,  13  Pet.  519,  10  L.  ed.  274 ;  People  v.  Oakland  County 
Bank,  1  Dougl.  (Mich.)  282 ;   Tombigbee  R.  R.  Co.  v.  Kneeland,  4  How. 

142 


BORROWING  §  G3 

right  to  borrow  money  whenever  it  is  reasonably  necessary  in  the 
proper  conduct  of  its  business,  unless  specially  restricted.^  The 
privilege  is  the  child  of  necessity,  and  is  limited  by  the  same 
necessity  or  intrinsic  propriety  which  gives  it  birth.  The  bor- 
rowing must  be  incidental  to  the  legitimate  banking  business  of  the 
association,  otherwise  the  act  is  ultra  vires;  as  if  the  money  is 
obtained  for  speculation."  Aside  from  the  theory  of  law,  as  no 
one  but  the  bank  can  well  judge  whether  a  loan  is  reasonably 
necessary  or  not,  the  practical  fact  is  that  a  bank  can  borrow 
whenever  it  wishes  to,  and  if  the  money  is  used  in  its  proper  busi- 
ness no  fault  will  be  found,  and  even  if  wrongly  applied  it  will 
not  affect  the  validity  of  the  loan  as  between  the  parties  ordinarily. 
(See  Ultra  vires.) 

For  express  statutory  provisions,  see  §  69. 

Negotiable  Instrument  on   Time.     Security  Mortgage,  etc. 

Whenever  a  bank  may  rightfully  borrow  on  time,  it  can  give 
its  negotiable  note  on  time,i  and  a  bank  may  secure  persons  who 
loan  it  money  by  deposit  *"  or  on  time  by  a  mortgage  of  its  property, 
(but  not  of  its  franchises,)  and  may  establish^  an  investment 
department,  in  which  certificates  issued  for  loans  and  deposits 
are  secured  by  the  transfer  to  a  trustee  of  negotiable  paper,  to  be 
held  by  him  solely  for  the  benefit  of  depositors  and  others  dealing 
with  the  bank,  and  thereby  give  them  precedence  over  its  general 
creditors  not  so  secured.  Such  a  power  is  a  mere  incident  of  the 
right  to  receive  deposits,  which  by  necessary  implication  gives 
power  to  assign  and  mortgage  negotiable  instruments  as  security 
for  them/  and  to  do  all  other  acts  that  the  nature  of  such  business 
16,  11  L.  ed.  855.  See  also  6  ISIo.  App.  333;  and  Donnell  v.  Lewis  Co. 
Savings  Bank,  80  Mo.  105. 

3  See  §  70. 

^Curtis  V.  Leavitt,  15  N.  Y.  9;  Barnes  v.  Ontario  Bank,  19  id.,  152; 
Leavitt  v.  Yates,  4  Edw.  Ch.  (N.  Y.)  134;  Safford  v.  Wyekoff,  4  Hill 
(N.  Y.)  442;   Talman  r.  Rochester  City  Bank,  18  Barb.  (N.  Y.)  123. 

*"  See  Commercial  Banldng  etc.  Co.  v.  Citizens'  Trust  Co.,  153  Ky.  566, 
156  S.  W.  160,  1915C  Ann.  Cas.  166,  n.,  45  L.  R.  A.  (x.  s.)  950,  n.,  to  the 
effect  that  a  bank  has  no  power  to  secure  deposits  unless  express  authority 
is  given  therefor  bv  statute.  See  Citizens'  Bank  ;;.  Bank  of  Waddy,  126 
Ky.  169,  103  S.  W.  249,  12S  Am.  St.  Rep.  282, 11  L.  R.  A.  (n.  s.)  598  (1907). 

5  Ward  r.  Johnson,  95  111.  215. 

Under  California  statutes  of  April  11,  1862,  a  bank  has  no  po\yer  to 
contract  any  debt  for  borrowed  money,  or  for  money  paid  out  at  its  re- 
quest in  discharge  of  its  obligations  to  a  depostior.  Such  a  contract  is 
7i.llra  vires  and  cannot  be  enforced.  Laidlaw  v.  Pacific  Bank,  137  Cal.  392, 
70  Pac.  277  (1912). 

143 


I  63  BUSINESS   POWERS 

involves,  on  the  principles  of  prudent  commercial  conduct.  The 
rediscounting  of  bills  and  notes  is  a  form  of  borrowing  money, 
and  is  not,  as  a  matter  of  law,  out  of  the  usual  course  of  business 
so  as  to  charge  every  one  connected  therewith  with  the  knowledge 
that  it  may  be  in  excess  of  authority.^ 

Checks  and  Indorsement 

§  64.  All  corporations  have  power  to  draw  checks  and  indorse 
them  and  any  other  negotiable  paper  properly  coming  to  them, 
as  when  they  receive  a  payment  in  that  form. 

Lending  Credit.     Guaranty.     Surety.     Accommodation 

§  65.  10.  Neither  as  included  in  its  powers  nor  incidental  to 
them  is  it  a  part  of  a  bank's  business  to  lend  its  credit.^  If  a  bank 
could  lend  its  credit  as  well  as  its  money,  it  might,  if  it  received 
compensation  and  was  careful  to  put  its  name  only  to  solid  paper, 
make  a  great  deal  more  than  any  lawful  interest  on  its  money 
would  amount  to.  If  not  careful,  the  power  would  be  the  mother 
of  panics,  and  if  no  compensation  was  received,  there  is  the  ad- 
ditional reason,  if  any  is  needed,  that  such  a  power  is  in  derogation 
of  the  rights  and  interests  of  stocldiolders,  and  at  all  events  could 
only  be  exercised  with  the  consent  of  all. 

Indeed,  lending  credit  is  the  exact  opposite  of  lending  money, 

6  Auten  V.  National  Bank,  174  U.  S.  125,  43  L.  ed.  920,  19  Sup.  Ct.  628 
(1899).  Another  United  States  case  has  held  that  a  rediscount  of  paper  is 
more  like  a  sale  than  a  borrowing.  U.  S.  National  Bank  v.  First  National 
Bank,  79  Fed.  296. 

Long  habit  of  a  bank  of  rediscounting  its  bills,  usage  of  other  banks 
in  the  locaHty  to  do  the  same,  and  knowledge  of  the  directors,  will  estop 
the  bank  to  deny  the  authority  of  the  officers  procuring  the  rediscount. 
Ibid. 

1  §  6.5.  A  national  bank  cannot  lend  its  credit.  It  has  no  power  on 
deposit  of  collateral  security  to  guarantee  the  obligation  of  the  person 
making  the  deposit.  SeUgman  v.  Charlottesville  National  Bank,  3  Hughes 
647.  The  counsel  argued  that  a  bank  could  borrow  money  to  aid  its 
customers,  but  the  court  said  that  lending  its  credit  was  another  thing, 
and  not  within  nor  incidental  to  any  of  the  specified  powers  of  the  bank. 
It  does,  upon  analysis,  seem  clear  that,  however  much  on  the  surface  of 
things  borrowing  to  lend  may  resemble  lending  credit,  there  is  a  substan- 
tial difference  in  just  the  points  that  make  lending  credit  objectionable. 
1st.  If  a  bank  lends  money  obtained  on  credit  it  only  puts  the  money 
in  its  possession  at  risk  once,  while  by  lending  credit  it  may  put  the  sarne 
money  under  an  indefinite  number  of  risks.  2d.  By  lending  money  it 
can  only  make  interest  on  money,  and  not  on  breath  and  ink,  as  it  could 
by  lending  credit. 
144 


LENDING    CREDIT  §  65 

which  is  the  real  business  of  a  bank,  for  while  the  latter  creates  a 
liability  in  favor  of  the  bank,  the  former  gives  rise  to  a  lia})ility  of 
the  bank  to  another. 

Accommodation  Surety 

It  is  uniformly  held,  therefore,  that  a  bank  cannot  be  an  ac- 
commodation indorser  or  acceptor,-  —  although  if  it  transcends 
its  power  in  this  respect,  it  does  not  follow  the  contract  is  void 
(see  Ultra  vires)  as  to  third  parties  without  notice,  though  it  will  be 
totally  void  in  the  hands  of  one  having  notice,  —  nor  be  surety  for 
another  in  any  business  in  which  it  has  no  interest  and  can  derive 
no  profit ;  as,  for  example,  the  guaranty  of  a  building  contract.^ 

2  Johnson  v.  Charlottes\'ille  National  Bank,  3  Hughes  G57 ;  National 
Bank  v.  Atkinson,  55  Fed.  465;  Bowen  v.  Needles  National  Bank,  87 
Fed.  430  (1898). 

'  "If,  in  the  course  of  its  business,  the  bank  finds  it  necessary  to  in- 
dorse for  transfer,  or  otherwise  specially  guarantee  negotiable  commercial 
paper,  (People's  Bank  v.  National  Bank,  101  U.  S.  181,  25  L.  ed.  907,)  it 
will  not  be  claimed  that  the  guaranteeing  of  other  -vsTitten  contracts  is  in- 
cluded within  any  of  its  powers,  general  or  special,  or  is  necessarily  inci- 
dental. It  is  no  part  of  the  business  of  a  bank,  nor  necessarily  incidental 
to  it,  to  guarantee  a  building  contract,  or  one  for  furnishing  building  ma- 
terials ;  and  the  defendants  had  no  power  to  make  the  guarantj'  which  is 
the  subject  of  this  action."  Norton  v.  Bank,  61  N.  H.  592;  Commercial 
National  Bank  v.  Pivie,  82  Fed.  799  (1897) ;  Bowen  v.  Needles  National 
Bank,  87  Fed.  430  (1898) ;  Watts  v.  WeUs,  7  Montreal  L.  R.  (Q.  B.)  387  ; 
First  National  Bank  ;;.  Munroe,  135  Ga.  014,  69  S.  E.  1123  (1910)  ;  Na- 
tional Bank  v.  Sixth  National  Bank,  212  Pa.  St.  238,  61  Atl.  889  (1905) ; 
Cottondale  State  Bank  v.  OskampNoltingCo.,  64  Fla.36,  59  So.  566  (1912) ; 
Mine  etc.  Supply  Co.  v.  Stockgrowers'  Bank,  173  Fed.  859  (1909) ;  Fi- 
delity etc.  Co.  V.  National  Bank,  48  Tex.  Civ.  App.  301,  106  S.  W.  782 
(1908)  ;  Merchants'  Bank  v.  Baird,  160  Fed.  642  (1908)  ;  Barron  r.  Mc- 
Kinnon,  179  Fed.  759  (1910)  ;  Commercial  National  Bank  r.  First  National 
Bank,  97  Tex.  536,  80  S.  W.  601  (1904) ;  First  National  Bank  r.  Com- 
mercial National  Bank,  99  Tex.  118,  87  S.  W.  1032  (1905) ;  First  National 
Bank  v.  American  National  Bank,  173  Mo.  153,  72  S.  W.  1059  (1903) ; 
Sturdevant  Bros.  v.  Farmers'  etc.  Bank,  69  Neb.  220, 95  N.  W.  819  (1903) ; 
Third  National  Bank  v.  St.  Charles  Sav.  Bank,  244  AIo.  554,  149  S.  W. 
495  (1912)  ;  Bailey  v.  Farmers'  National  Bank,  97  111.  App.  66  (1901)  ; 
Appleton  V.  Citizens'  Central  National  Bank,  116  App.  Div.  404  (1906), 
101  N.  Y.  S.  1027 ;  Fidelity  etc.  Co.  v.  National  Bank,  48  Tex.  Civ.  App. 
301,  106  S.  W.  782  (1908). 

But  if  a  cashi(>r  of  a  bank  makes  a  contract  of  guaranty  which  is  beyond 
his  power  and  authority,  and  the  bank  secures  a  profit  therefrom  it  cannot 
urge  its  non-liability  thereon  on  a  place  of  ultra  vires.  Crowder  State  Bank 
V.  JEtnn  Powder  Co.,  41  Okla.  394,  138  Pac.  392  (1914) ;  First  National 
Bank  v.  Greenville  Oil  etc.  Co.,  24  Tex.  Civ.  App.  645,  60  S.  W.  828  (1901). 
There  may  be  a  recovery  on  an  implied  contract.  Citizens'  Central  Na- 
tional Bank  v.  Appleton,  216  U.  S.  196,  54  L.  ed.  443,  30  Sup.  Ct.  364 
(1910). 

VOL.  1 —  10  145 


§  65  BUSINESS    POWERS 

May  Warrant  Goods,  and  Guarantee  or  Indorse  Negotiable  Payer 

But  a  warranty  of  goods  sold  by  the  bank,  or  an  indorsement  ^^ 
or  guaranty  ^  of  a  note  negotiated  by  it,  is  perfectly  lawful ;  for^ 
besides  being  rendered  necessary  and  proper  by  the  usual  habit 
of  business  and  by  the  nature  of  the  case,  such  transactions  are 
not  open  to  the  objections  above.  They  are  not  contracts  upon 
air  ;  the  bank  receives  value  and  has  a  real  interest ;  with  reason- 
able care  the  chance  of  loss  is  small,  no  greater  than  in  many 
other  acts  necessary  in  carrying  on  its  business,  (no  sum  of  money 
is  put  at  more  than  two  risks  ^  by  such  transactions,)  and  even 

3"  A  national  bank  in  negotiating  its  paper  can  bind  itself  for  payment 
thereof  by  its  indorsement  thereon.  First  National  Bank  v.  Munroe,  135 
Ga.  614,  69  S.  E.  1123,  32  L.  R.  A.  (n.  s.)  550  (1910) ;  State  v.  Corning 
Savings  Bank,  139  Iowa  338,  115  N.  W.  937  (1908). 

*  People's  Bank  v.  National  Bank,  101  U.  S.  181,  25  L.  ed.  907  ;  State 
V.  Corning  Savings  Bank,  139  Iowa  338, 115  N.  W.  937  (1908) ;  Merchants' 
Bank  v.  Baird,  160  Fed.  642  (1908) ;  Appleton  v.  Citizens'  Central  Na- 
tional Bank,  116  App.  Div.  404  (1906),  101  N.  Y.  S.  1027.  A  bank  may 
transfer  paper  by  indorsement  waiving  demand  and  notice,  and  there 
is  no  reason  why  it  should  not  give  a  guarantee  a  less  onerous  obligation. 
Where  a  president  of  a  bank  negotiates,  for  value,  certain  notes,  and  at 
the  same  time  executes,  in  the  name  of  the  bank,  a  written  guaranty  of 
payment,  his  authority  to  execute  such  guaranty  will  be  conclusively 
presumed  in  favor  of  a  purchaser  acting  without  notice  to  the  contrary. 
Thomas  v.  City  National  Bank,  40  Neb.  501,  58  N.  W.  943  (1894) ;  Rich 
V.  State  National  Bank,  7  Neb.  201. 

A  bank  may  make  a  guaranty  for  the  protection  of  its  own  rights  or 
as  an  incident  to  the  transaction  of  its  business.  Creditors'  Claim  etc. 
Co.  w.  Northwest  etc.  Co.,  81  Wash.  247,  142  Pac.  670  (1914).  But  the 
bank's  power  to  make  a  guaranty  is  limited  to  the  protection  of  its  own 
rights  or  to  an  incident  to  the  transaction  of  its  own  business.  Ayer  v. 
Hughes,  87  S.  C.  382,  69  So.  657  (1910).  It  may  guarantee  the  bonds  of 
a  railroad  company  of  which  it  owns  a  majority  of  stock  when  such 
guaranty  is  made  for  its  own  purposes  and  advantages.  Central  R.  & 
Banking  Co.  v.  Farmers'  Loan  etc.  Co.,  114  Fed.  263  (1902).  And  an  agree- 
ment to  honor  a  draft  drawn  upon  one  of  its  customers  in  payment  of 
a  car  load  of  berries  is  not  ultra  vires.  Farmers'  etc.  National  Bank  v. 
Illinois  National  Bank,  146  III.  App.  136  (1908). 

When  a  national  bank  guarantees  the  payment  of  a  sum  borrowed  by 
A.  in  order  that  it  may  receive  from  A.  what  he  owes  to  it,  it  is  liable  on 
the  guaranty  for  the  amount  which  it  has  received  from  the  amount  bor- 
rowed. Appleton  V.  Central  National  Bank,  190  N.  Y.  417,  83  N.  E.  470 
(1908). 

^  It  may  lend  the  money  received  for  the  goods  or  note,  one  risk ;  and 
the  warranty  constitutes  another,  but,  with  care  in  acquiring  the  property 
or  note,  not  a  large  one ;  and  at  any  rate  the  total  risk  is  only  such  as  is 
necessarily  incident  to  business  transactions,  and  no  door  is  opened,  as  in 
the  case  of  lending  credit,  to  the  indefinite  accumulation  of  risks  piled 
panic  high  on  a  narrow  foundation  of  cash  and  the  frail  ice  of  public 

146 


EXPRESS   RESTRICTIONS  §  69 

if  loss  occurs  it  is  attributable  to  the  carelessness  or  misfortune 
of  the  bank  in  acquiring  the  subject  matter,  not  in  guaranteeing 
it,  and  such  agreements  are  not  dangerous  to  the  financial  health 
of  the  community,  but  beneficial  to  it. 


Dividends.     Surplus 

§66.  11.  A  bank  can  pay  dividends  out  of  its  earnings  (and 
not  out  of  anything  else),  or  it  may,  and,  if  so  provided,  must  keep 
the  whole  or  a  part  of  its  profits  for  a  surplus  fund.^ 

§  67.  12,  In  the  absence  of  express  provision,  a  bank  may 
decline  to  enter  upon,  or  discontinue  the  exercise  of,  any  severable 
part  of  its  franchises  or  business  ;  for  example,  a  bank  may  receive 
special  deposits  or  not,  as  it  chooses,  or  act  as  a  collecting  agent 
or  not. 

But  continued  abandonment  of  its  entire  business,  or  neglect 
of  any  function  that  is  also  by  the  organic  law  a  duty,  may  be  a 
cause  of  forfeiture.     See  §§  68,  69,  and  722. 

§  68.  Restrictions.  —  Having  examined  what  a  bank  can  do, 
it  may  be  well  to  glance  briefly  at  the  law  from  the  opposite  })oint 
of  view,  and  note  what  a  bank  cannot  do.  When  you  ha\e  dri\en 
a  nail,  it  is  a  good  thing  to  hammer  it  a  little  on  the  under  side. 
This  region  of  No  Power  is  traversed  by  three  lines  in  different 
directions. 

1.  The  restrictions  are  such  as  exist  at  common  law,  or  are  ex- 
press, which  last  may  be  declaratory  of,  or  in  derogation  of,  the 
common  law. 

2.  They  may  be  absolute,  or  such  as  place  the  acts  to  which 
they  relate  beyond  the  power  of  the  bank  for  any  purpose  or  under 
any  circumstances ;  or  conditional,  allowing  the  act  under  some 
circumstances  or  for  special  purposes,  and  prohibiting  it  under  or 
for  others.  This  distinction  is  of  much  weight  in  considering  the 
law  of  ultra  vires. 

3.  Violation  of  any  restriction  may  or  may  not  cause  forfeiture, 
according  to  the  ])rinciples  set  forth  in  §  722  et  scq. 

§69.  Express  Restrictions.  —  These  must  be  looked  for  in  the 
organic  law  of  each  bank.  Each  charter  may  differ  from  every 
other ;  but  to  indicate  the  nature  of  the  limitations  to  be  expected, 

credulity,  that  may  at  any  time  give  way,  and  the  whole  structure  be 
engulfed. 

'  §  GG.     Bank  of  Utica  v.  City  of  Utica,  4  Paige  (N.  Y.)  399. 

147 


§  69  BUSINESS   POWERS 

we  will  enumerate  the  most  important  ones  found  in  the  National 
Banking  Law  and  in  the  statutes  of  Massachusetts,  adding  a  few 
words  about  restrictions  relating  to  the  formalities  of  contracts. 

Place 

(a)  Business  is  not  to  be  done  away  from  the  bank.^  (Mass. 
&  U.  S.) 

Time 

(b)  Bank  not  to  begin  business  till  one  half  the  capital  is  paid, 
and  the  organization  certificate  is  made,  and,  in  the  case  of  a 
national  bank,  not  until  the  comptroller  issues  his  authorization 
certificate.^     (Mass.  &  U.  S.) 

Traffic 

(c)  Not  to  engage  in  trade  or  commerce.^     (Mass.) 

Debts  and  Loans 

(d)  Not  to  go  into  debt  beyond  a  specified  limit.^  (Mass. 
&  U.  S.) 

(e)  Not  to  borrow  on  time,  except  from  the  State,  or  a  Massa- 
chusetts savings  bank,  or  in  the  way  of  deposit  by  an  assignee  in 
insolvency ;  ^  and  where  the  bank  cannot  borrow  on  time,  it  cannot 
issue  time  paper.     (Mass.) 

(/)  Not  to  make  a  loan  or  discount,  except  it  is  to  be  paid  on 
demand,  and  every  loan  or  discount  otherwise  made  is  expressly 
mid,  and  the  bank  forfeits  $500  for  each  offence.®     (Mass.) 

(g)  Not  to  allow  debts  due  to  itself  to  accumulate  beyond  a 
fixed  limit.^     (Mass.) 

(h)  Not  to  loan  on  security  of  its  own  stock  (Nat.),''  or  only 
to  a  limited  extent  (Mass.).^     (Mass.  &  U.  S.) 

1  §  69.  See  Part  II.  §  8,  and  Mass.  R.  L.  c.  115,  §  30,  no  loan  or  dis- 
count, or  issuance  of  note,  away  from  bank.     See  §  46. 

2  Mass.  R.  L.  c.  115,  §  3.     See  Part  II.  §§  8,  14. 

3  Mass.  R.  L.  c.  115,  §  38.     See  above,  §  47. 

'  See  Part  II.  §  36.  The  Mass.  R.  L.  c.  115,  §§  33,  34,  limit  debts 
due  to  or  from  (a)  bank  to  twice  paid  capital,  not  including  deposits  or 
debts  due  to  or  from  a  bank,  or  from  the  United  States  or  the  State. 

5  Mass.  R.  L.  c.  115,  §  40.  «  Mass.  R.  L.  c.  115,  §  51. 

7  See  Part  II.  §  35. 

*Mass.  R.  L.  c.  115,  §  31,  not  beyond  one  half  capital  paid  in. 

148 


EXPRESS   RESTRICTIONS 


69 


(i)  Not  to  allow  one  person  or  company  to  be  liable  to  the 
bank  to  a  greater  amount  than  one  tenth  of  the  bank's  capital.^ 

(U.  S.) 

(j)  Not  to  loan  to  its  officers  beyond  a  certam  limit,  unless  by 
vote  of  stocklioklers.^"     (Mass.) 

(k)  Not  to  loan  to  any  manufacturing  corporation  whose 
financial  officer  is  cashier  of  the  bank.^^     (Mass.) 

{k')    Not  to  loan  to  any  bank  examiner.""     (U.  S.) 

Real  Estate 

(l)  Not  to  take  real  estate  security  for  concurrent  or  future 
loans,  nor  hold  realty  for  other  than  the  specified  purposes.^^ 

(U.S.)  .       .    , 

(m)  Not  to  hold  more  real  estate  than  is  equivalent  to  twelve 
per  cent  of  its  capital,  except  what  it  receives  as  security  for  or  in 
paj-ment  of  debts.^^     (Mass.) 

Interest 

(n)   Not  to  take  interest,  or  discount,  beyond  a  specific  limit." 

(U.  S.) 

(o)  Not  to  pay  interest,  except  on  money  borrowed  of  the 
State,  or  of  a  Massachusetts  savings  bank,  or  an  assignee  in  in- 
solvency, or  on  debts  due  another  bank,  or  a  town  or  city  of  Mas- 
sachusetts.^^ 

Circulation 

(p)  Not  to  pledge  its  circulation  nor  use  it  in  any  way  to  in- 
crease its  capital. ^^     (U.  S.) 

(s)  Not  to  refuse  to  redeem  its  circulation,  under  penalty  of 
dissolution  and  forfeiture  of  the  bonds  it  has  deposited  with  the 
United  States.^^     (U.  S.) 

(0    Not  to  pay  out  certain  bills.^^     (U.  S.) 

(u)  Not  to  issue  more  than  a  given  quantity  of  notes  of  specified 
denominations.^^    $100  penalty.     (Mass.) 

9  See  Part  II.  §  29.  "  Mass.  R.  L.  e.  115,  §  53. 

"  Mass.  R.  L.  c.  115,  §  54. 

»<•  Fed.  Res.    Act.  Sec.  22,  Part  II.  §  189.         '■  See  Part  II.  §  28. 
13  Mass.  R.  L.  c.  115,  §  39.  "  See  Part  II.  §  30. 

15  Mass.  R.  L.  c.  115,  §  40.  "  See  Part  II.  §  37. 

"  See  Part  II.  §§  46-50.  "  See  Part  II.  §  39. 

19  Mass.  R.  L.  c.  115,  §  74. 

1-19 


I  69  BUSINESS   POWERS 

Capital 

(v)  Not  to  withdraw  any  part  of  capital  by  dividends,  etc.^" 
(U.  S.) 

Provisions  Relating  to  Fonn^ 

Directory  or  Imperative 

§  70.  (w)  When  a  statute  says  the  contracts  of  a  bank  shall 
be  signed  in  a  particular  way,  or  by  particular  officers,  opinions 

20  See  Part  II.  §  38. 

1  §  70.  Note  on  the  Use  of  the  Corporate  Seal  in  making 
Corporate  Contracts.  —  The  old  rule  of  law  was,  that  a  corporation 
could  do  no  act  save  by  a  deed  executed  under  its  corporate  seal.  But 
this  ancient  principle  has  of  late  years  been  done  away  with  by  the  com- 
pulsion of  the  practical  necessities  of  business ;  and  in  our  land  and  our 
time  corporations  without  number  transact  their  affairs  with  a  very  in- 
frequent use  of  this  once  indispensable  formality.  In  the  case  of  The 
Bank  of  Columbia  v.  Patterson's  Administrator,  7  Cranch  299,  3  L.  ed.  351, 
the  Supreme  Court  of  the  United  States  first  absolutely  declared  that  the 
old  rule  could  no  longer  be  regarded  as  law,  and  the  same  has  been  since 
consistently  and  frequently  held,  in  cases  not  only  of  banks,  but  of  various 
other  species  of  corporations.  Fleekner  v.  Bank  of  United  States,  8  Wheat. 
338,  5  L.  ed.  631 ;  Mechanics'  Bank  of  Alexandria  v.  Bank  of  Columbia, 
5  id.,  326,  5  L.  ed.  100 ;  Stamford  Bank  v.  Benedict,  15  Conn.  437 ;  Ridg- 
way  V.  Farmers'  Bank,  12  Serg.  &  R.  (Pa.)  256;  Fishmongers'  Company 
V.  Robertson,  5  Man.'  &  Gr.  131 ;  6  Scott,  N.  R.  56.  But  the  practical 
effect  of  the  old  rule  is  reduced  to  a  low  point  by  the  doctrine  that  the  class 
of  corporations  which  are  creatures  of  a  statute,  whether  general  or  special, 
are  not  within  the  force  of  the  common  law  rule. 

Then,  too,  the  ancient  rule  simply  required  that,  when  the  corporation 
itself  performed  an  act,  that  act  should  be  done  by  deed  and  with  the  seal. 
This  rule,  strictly  construed,  still  leaves  the  corporation  free  to  create 
agents  to  whom  it  may  delegate  power  to  act  for  it,  and  the  acts  of  such 
agents,  though  binding  the  corporation,  are  yet  not  primarily  the  acts 
of  the  corporation,  and  so  need  not  be  performed  by  deed  nor  evidenced 
by  seal.  Such  are  the  two  favorite  methods  which  jurists  have  adopted 
for  annulling  without  breaking  an  ancient  and  time-honored  principle. 
Either  artifice  accomplishes  sufficiently  satisfactorily  the  desired  end. 
Though  to  make  the  former  apply  it  is  essential  that  there  should  be  a 
statutory  enactment,  which  is  not  wholly  silent  concerning  the  govern- 
ment or  appointment  of  officers  of  the  corporation ;  and  the  latter  is 
available  only  when  the  deed  and  corporate  seal  appear  somewhere  in  the 
chain  of  proceedings.  For  the  corporation  must  act  somewhere  and  at 
some  time  in  creating  the  original  agency  and  making  the  primal  dele- 
gation, and  this  act  must  be  accompanied  by  the  common  law  formali- 
ties, since  it  cannot  receive  the  protection  of  the  agency  theory.  But  the 
simple  truth  is,  that  the  elastic  expansion  of  modern  business  has  irrevo- 
cably snapped  the  clumsy  and  useless  ligament  which  older  generations 
found  less  intolerable.     Judges,  in  evading  the  rigidity  of  an  antiquated 

150 


A    BRIEF   RESTATEMENT    OF  THE    NEGATIVE    SIDE    OF    §§  47-G7      §  71 

differ  whether  it  is  to  be  construed  as  merely  declaring  that  a 
contract  so  executed  will  be  sufficiently  executed  beyond  cavil, 
but  not  excluding  other  methods,-  or  it  is  to  be  considered  as  in- 
dicating the  only  valid  way  in  which  the  corporation  can  execute 
its  contracts.^ 

Do  not  Affect  Matters  of  Daily  Routine  not  Invohing  Direct  Action, 
of  the  Corporation 

But  such  a  provision  is  held  not  to  affect  the  ordinary  contracts 
made  by  a  cashier  as  an  inherent  part  of  his  office,  for  these  are 
not  made  by  the  corporation  directly,  and  great  inconvenience 
would  follow  construing  such  a  provision  to  cover  these  matters 
of  daily  and  hourly  routine.^  (See  Ultra  vires,  and  Informalitv, 
§  722.) 

Common  Law  Restrictions 

A  Brief  Restatemext  of  the  Negative  Side  of  §§  47-67 

§  71.  (a)  A  bank  cannot  sell  or  mortgage  its  franchises.  (If 
it  does,  it  will  be  a  case  of  "  absolute  ultra  vires'',  for  no  fact  can 
obscure  such  a  transaction.) 

(b)  A  bank  cannot  give  away  its  property,  except  by  consent 
of  all  the  stockholders,  though  the  directors  can  release  a  claim 
as  part  of  an  arrangement  the  whole  of  which  is  for  the  advantage 
•of  the  bank  under  the  circumstances. 

(c)  Nor  traffic  in  merchandise,  stocks,  or  securities. 

(d)  Nor  act  as  agent  in  dealing  in  them,  except  as  stated  in  §  59, 

(e)  Nor  be  an  accommodation  indorser  (except,  perhaps,  by 
consent  of  all  the  stockholders). 

(/)  Nor  be  a  surety,  except  so  far  as  is  necessarily  incidental 
to  its  business. 

(g)    Nor  lend  its  credit  in  any  way. 

(h)  Nor  "  purchase  "  negotiable  paper,  in  the  sense  of  taking 
it  free  from  the  taint  of  usury. 

dogma  of  the  law,  have  simply  yielded  to  that  pressure  of  invincible 
necessity  which  the  developments  in  the  conduct  and  systems  of  the  busi- 
ness world  are  every  day  bringing:  to  bear  upon  old-world  legal  technicali- 
ties. It  would  only  drag  the  law  into  contempt  to  declare  that  it  requires 
every  check  or  draft,  every  loan  or  discount,  every  indorsement  or  trans- 
fer, made  by  a  bank,  to  be  e^^deneed  by  a  corporate  deed  and  seid. 

2  Barnes*)'.  Ontario  Rank.  10  N.  Y."  152. 

3  See  Safford  v.  Wyekoff,  4  Hill  (N.  Y.)  442. 

151 


§  71  BUSINESS   POWERS 

(i)  Nor  issue  notes  to  circulate  as  money  without  special 
authority. 

(j)    Nor  borrow  on  time,  except  for  banking  necessities. 

(k)  Nor  engage  in  any  foreign  business,  except  so  far  as  neces- 
sary to  keep  surplus  capital  employed,  or  to  save  a  debt. 

(Z)  Nor  declare  dividends  out  of  its  capital.  Nor  assess  shares, 
unless  authorized  by  law,  or  by  express  agreement  of  the  share- 
holders.^ There  is  no  inherent  power  to  call  on  the  stockholders 
for  more  funds  to  aid  the  bank's  business,  after  they  have  paid 
the  amount  of  their  stock.  But  if  authorized,  the  bank  may 
issue  new  shares,  giving  the  existing  stockholders  the  preference. 

1  §  71.  Tippets  V.  Walker,  4  Mass.  595  ;  Knowles  v.  Beaty,  1  McLean 
41 ;  Palmer  v.  Ridge  Mining  Co.,  34  Pa.  St.  288. 


152 


CHAPTER   VII 

EXPANSION  OF  THE  POWERS  OP  A  BANK  IN  REFERENCE 
TO  PURCHASE  OF  NEGOTIABLE  PAPER,"  HANDLING 
STOCKS,  DEALING  IN  REAL  ESTATE,*  AND  SAVING  DEBTS 

§  72.     Power  of  Purchase.     §§  49,  722. 

Cases  affirming  power  to  purchase,  i.e.  to  acquire  absolute 
title ;   title  otherwise  than  by  loan, 
(a)     Massachusetts. 
lb)     South  Carolina,  Iowa,  Texas, 
(c)     Ohio. 

Id)     Kansas,  Kentucky, 
(e)     New  York. 
(J)      lUinois. 
§  73.     Cases  denying  such  Power.     §§  49,  722. 
(a)     Minnesota. 

lb)     Maryland.     Lazear  Brothers'  case,  and  dissent, 
(c)      Cases  in  form  denying  the  power  of  purchase,  but  using  the 
word  only  in  the  sense  of  power  to  buy  at  any  agreed  price, 
without  reference  to  usury  laws,  which  is  all  they  really 
deny. 
§  74.     Real  Estate.     §  12,  n.  4,  §§  54,  169,  747 ;    II.  §§  28,  228. 
May  hold  realty  enough  for  its  business. 
May  buy  in  outstanding  title  of  land  mortgaged  to  it. 
Power  to  sell  implied  from  power  to  buy. 
Power  liberally  construed. 

(a)  May  buy,  build  on,  and  sell  lots  adjoining  the  bank  as  a 

precaution  against  fire. 

(b)  Ultra  vires  purchase,  —  only  sovereign  can  object.     §  §  75 

(c),  750. 

(c)  Pre\'ious  debts  in  New  York  mean  concurrent  debts. 
Id)     State  bank  loans  on  real  estate. 

§  75.     National  bank  powers  in  respect  to  real  estate. 

(a)  Trust  deed  for  concurrent  loan  or  future  advances  prob- 
ably good  (the  bank  being  iho  cestui),  though  a  mort- 

(6)  gage  would  b(>  bad,  because  it  gives  title,  and  therefore 

violates  R.  S.  §  5137.  See  Union  National  Bank  v. 
Matthews,  U.  S.  S.  C. 

»  See  Fed.  Res.  Act.    Sec.  14,  Part  II.  §  154. 
6  See  Fed.  Res.  Act.    Sec.  24,  Part  II.  §  192. 

153 


§  72  EXPANSIONS    OF   THE    POWERS    OF   A    BANK 

(d)  Loan  on  personal  security  is  good,  although  a  mortgage 

is  also  taken. 

(e)  The  note  may  be  concurrent  if  the  debt  was  previous. 

(/)     Trust  deed  to  a  third  party  for  benefit  of  bank  held  good. 
§  76.     Bank  may  be  trustee  of  real  estate  at  common  law.     See  (6) 
but  contra  (e). 

(a)  New  York  law. 
§77.     Stocks.     §§  59,  164  ;   II.  §  35. 

National  bank  cannot  buy  its  own  stock ;   no  titles  passes.  §  59. 

A  bank  may  buy  to  save  debt. 

May  hold  other  stocks  as  collateral,  but  cannot  traffic  or  specu- 
late in  them. 

(a)  National  bank  cannot  sell  railroad  bonds  on  commission. 

(6)   But  may  take  to  save  debt. 
§  78.     Saving  Debts.      §§  60,  77  a,  b. 

May  carry  on  an  iron  miU  in  order  to  make  itself  good. 

May  buy  in  land  or  outstanding  title,  or  may  sell  its  claim  and 
transfer  the  note. 

§  72.  Affirmative  Cases  on  the  Power  of  Banks  to  purchase 
Negotiable  Paper,  and  whether  Discounting  covers  more  than 
lending  on  responsibiUty  of  the  transferrer.  See  Alvey's  dissent, 
§73  6. 

(Mass.)  (a)  DeaKng  in  checks  is  part  of  the  usual  business  of 
banking,  and  would  be  within  the  general  powers  of  a  bank  without 
special  mention.  But  II.  §  8,  in  the  clause  relating  to  discounting 
and  negotiating  promissory  notes  and  other  evidences  of  debt, 
gives  express  power  to  buy  checks  of  the  individuals,  whether 
payable  to  bearer  or  order. ^ 

(S.  C.)  (Iowa)  (Tex.)  (b)  A  draft  drawn  by  a  seller  against  a  buyer 
in  favor  of  a  national  bank,  by  which  it  is  discounted  or  purchased 
with  the  bill  of  lading  attached,  passes  title  to  the  goods  and  draft 
to  the  bank.*"  The  draft  is  a  bill  of  exchange,  and  its  purchase  is 
not  beyond  the  powers  conferred  by  Congress  upon  national  banks.^ 

(Ohio.)  (c)    In  a  case  concerning  the  purchase  of  an  inland  draft 

1  §  72.     First  National  Bank  v.  Harris,  108  Mass.  514. 

i«  Ayres  v.  Dorsey  Produce  Co.,  101  Iowa  141,  70  N.  W.  Ill  (1897). 

The  indorsement  and  delivery  of  a  bill  of  lading  to  a  bank  as  collateral 
security  for  paper  discounted  invests  the  bank  with  title  to  the  goods  and 
it  is  not  required,  in  order  to  protect  its  lien,  to  have  the  papers  recorded 
under  the  Virginia  Code,  Sec.  2445.  Seward  v.  Miller,  106  Va.  309,  55 
S.  E.  681  (1904). 

2  Union  National  Bank  v.  Rowan,  23  S.  C.  339.  But  the  United  States 
cases  cited,  viz.  Union  National  Bank  v.  Matthews,  98  U.  S.  621,  25  L.  ed. 
188,  and  National  Bank  v.  Whitney,  103  U.  S.  99,  26  L.  ed.  443,  seem  only 
to  support  the  proposition,  that,  whether  a  bank  has  power  to  buy  negoti- 
able paper  or  not,  only  the  United  States  can  object.  Freeman  v.  Bank  of 
Commerce,  3  Tex.  App.  .338  (1887) ;  Ayres  v.  Dorsey  Produce  Co.,  101  Iowa 
141,  70  N.  W.  Ill  (1897).     It  was  held  in  the  latter  case  that  the  provision 

154 


THE    POWER   OF   BANKS   TO    PURCHASE   NEGOTIABLE    PAPER      §  72 

or  bill  of  exchange,  the  court  used  the  following  comprehensive 
language  :  "  It  seems  to  be  the  idea  of  counsel  making  the  objection, 
that  negotiable  paper,  perfect  and  available  in  the  hands  of  the 
holder,  is  not  the  subject  of  purchase  by  a  national  bank  at  any 
rate  of  discount.  This  view  we  think  entirely  erroneous.  ]]'e 
see  nothing  in  the  act  of  Congress,  nor  in  reason,  why  a  borrower  may 
not  obtain  the  discount  by  a  bank  of  the  existing  notes  and  bills  of 
others  of  which  he  is  the  holder,  as  well  as  of  his  oicn  paper  made 
directly  to  the  bank.  It  is  true  that,  as  between  natural  persons, 
the  purchase  of  such  paper,  when  made  in  good  faith,  and  not  as  a  dis- 
guise for  a  loan,  is  not  subject  to  the  usury  laws;  but  it  is  otherwise 
as  to  a  bank.  In  the  business  of  banking,  the  purchasing  and 
discounting  of  paper  is  only  '  a  mode  of  loaning  money.'  "  ^ 

(Kansas.)  (Ky.)  (d)  Purchase  may  be  by  discount.^"  In  the 
case  of  individuals  the  purchase  of  negotiable  paper,  when  in  good 
faith  and  not  a  disguise  for  a  loan,  is  not  the  subject  of  usury  laws. 
It  is  otherwise  as  to  a  bank ;  it  may  buy,  or  simply  loan  money 
to  the  owner,  holding  him  responsible ;  in  either  case,  it  must  not 
gain  more  than  the  legal  interest  in  advance.^ 

(N.  Y.)  (e)  Statutory  authority  to  discount  includes  power  to 
buy  notes.^ 

To  buy  or  purchase  a  debt  is  always  in  commerce  termed  to 
discount  it.^ 

"  To  discount  includes  to  buy,  for  discounting  is  at  most  but 
another  name  for  buying  at  a  discount."  ® 

that  a  national  bank  cannot  hold  title  to  any  property,  except  in  satisfac- 
tion of  a  previous  indebtedness,  did  not  apply. 

A  bank  may  hold  a  note  for  its  own  accommodation  under  the  ordmary 
relationships  governing  accommodation  paper.  Westwater  v.  Lyons, 
193  Fed.  817  (1912). 

3  Smith  V.  Exchange  Bank,  20  Ohio  St.  141. 

3»  If  notes  are  purchased  and  discounted  by  a  bank  bona  fide  before 
their  maturity  it  is  not  affected  by  the  cancellation  of  the  contract  for 
which  the  notes  were  given.  Southern  Insurance  Co.  i'.  JMilligan,  154 
Ky.  216,  157  S.  W.  37  (1913). 

*  Pape  V.  Capitol  Bank  of  Topeka,  20  Kans.  440.  The  judge  quoted 
Bouvier's  definition  of  Discount :  "To  discount  signifies  the  act  of  Iniymg 
a  bill  of  exchange  or  promissory  note  for  a  less  sum  than  that  which  upon 
its  face  is  payable."  The  Avord  means  simply  "cutting  off."  The  pur- 
chase need  not  be  at  a  certain  per  cent.  A  "lumping  discount"  is 
sufficient  AAithin  the  National  Banking  Law.  Nicholson  v.  National  Bank, 
92  Ky.  251,  17  S.  W.  627  (1891). 

5  Atlantic  State  Bank  v.  Saverv,  18  Hun  (N.  Y.)  36.  See  Northfield 
National  Bank  r.  Arndt,  132  Wis.  383,  112  N.  W.  451. 

« Tracy  v.  Talmage,  18  Barb.  (N.  Y.)  462. 

155 


§  72  EXPANSIONS    OF   THE    POWERS    OF   A   BANK 

(111.)  (j)  A  note  taken  in  the  usual  course  of  business  may 
be  deemed  to  have  been  "  discounted  "  (within  R.  S.  5136)  though 
the  term  "  purchase  "  might  apply  to  the  transaction.^  Purchase 
may  be  made  by  discount  as  well  as  "  loan",  i.e.  the  absolute 
title  to  the  note  may  pass  to  the  bank ;  if  the  customer  assumes 
any  responsibility,  it  is  a  loan ;  if  he  does  not,  it  is  an  advance 
made  to  him  in  consideration  of  the  transfer  without  recourse, 
or  by  delivery  in  case  of  paper  payable  to  bearer.  If  the  bank 
takes  more  than  the  law  allows,  it  is  usury  in  one  case  as  in  the 
other,  but  the  word  "  purchase  "  properly  applies.^ 

§  73.  Negative.  —  1st.  Cases  denying  that  a  bank  can  acquire 
valid  title  otherwise  than  by  loan,  under  the  power  to  discount. 

State  Bank  cannot  Buy  because  it  loould  Nullify  the  Usury  Laws 

(a)  In  Minnesota  ^  it  is  said,  it  cannot  be  the  case  that  "  the 
power  to  purchase  and  traffic  in  promissory  notes  as  a  species  of 
personal  property  belongs  to  any  bank  as  a  necessary  incident  to 
its  existence,  or  to  the  exercise  of  any  of  its  powers  as  a  bank  of 
circulation  and  deposit  alone  "  ;  and  "  having  no  corporate  capac- 
ity to  make  the  contract  of  purchase,  the  plaintiff  never  acquired 
any  title  to  the  note  in  suit,  and  the  attempted  act  of  purchase 
was  strictly  ultra  vires,  and  conferred  no  rights  whatever," 

"  It  is  conceded  that  plaintiff's  only  title  to  the  note  in  question 
rests  upon  its  absolute  purchase,  as  a  chose  in  action,  from  one 
Patterson,  the  then  owner,  for  a  specific  sum  agreed  upon  and  paid 
at  the  time  of  the  purchase.  Patterson  did  not  indorse  the  note, 
nor  expressly  assume  anv  obligation  in  connection  with  the  trans- 
fer." 

"  Under  the  act  in  question,  the  business  of  banking  is  author- 
ized to  be  carried  on  '  by  discounting  bills,  notes,  and  other  evi- 
dences of  debt,  and  by  loaning  money  on  real  and  personal  security  ' 
(sect.  13),  and  the  rate  of  interest  allowed  to  be  charged  for  such 
discounts  and  loans  is  limited  to  twelve  per  cent  taken  in  advance 
(sect.  33).  The  obvious  intent  of  this  legislation  was  to  secure  to 
the  public  business  loans  and  accommodations  at  what  was  then 
regarded  reasonable,  and  not  exorbitant,  rates  of  interest ;  and  also 
to  protect  the  shareholders  of  banks,  and  the  banks  themselves, 
against  the  risk  of  loss  from  inadequate  securities,  such  as  would 
likely  be  taken  under  the  tempting  influences  of  high  rates  of 

'  First  National  Bank  v.  Sherburne,  14  111.  App.  566. 

1  §  73.     Farmers  &  Mechanics'  Bank  v.  Baldwin,  23  Minn.  201,  204. 

156 


NEGATIVE  §  73 

interest,  regulated  only  by  the  necessities  of  borrowers,  and  the 
cupidity  of  bank  directors.  If,  however,  as  is  claimed  on  the  part 
of  plaintifi',  associations  organized  under  this  enactment  possess 
the  unlimited  power  of  dealing  in  promissory  notes  and  other 
evidences  of  debt,  as  })r()pert\-  and  choses  in  action,  the  same  as 
individuals,  then  obviously  this  restriction  upon  the  rate  of  interest 
is  a  practical  nullity ;  as  the  bank  has  the  power  to  evade  it  at 
any  time  by  simply  buying  the  paper  instead  of  loaning  money 
upon  it." 

National  Bank  cannot  Buy  Negotiable  Paper 

It  has  also  been  said,^  generally,  that  purchasing  or  trafficking 
in  promissory  notes  is  not  a  legitimate  part  of  the  banking  busi- 
ness, properly  so  called,  and  that  a  bank  holding  a  note  by  pur- 
chase has  no  title  thereto. 

"  The  word  '  negotiating  '  as  used  in  this  section,  likewise  in 
sect.  29  of  the  same  statute  (U.  S.  Rev.  Stat.,  sect.  5136),  is  used 
in  the  ordinary  and  appropriate  transitive  sense,  to  indicate,  not 
an  act  of  purchase,  but  one  of  transfer,  whereby  the  negotiated 
paper  is  passed  from  the  holder  or  owner,  and  put  into  circulation. 

"  In  the  absence  of  any  authoritative  exposition  of  the  P'ederal 
statute  in  this  regard,  the  principle  settled  in  the  Farmers  and 
Mechanics'  Bank  v.  Baldwin  must  be  regarded  as  decisive  of  the 
present  case." 

"  A  borrower  may,  as  was  held  in  Smith  v.  Exchange  Bank  of 
Pittsburg,2<^  cited  by  appellant,  obtain  the  discount  by  a  bank  of 
the  existing  notes  and  bills  of  others,  of  which  he  is  the  holder,  as 
w^ell  as  of  his  own  paper  made  directly  to  the  bank,  and  the  bank 
will  thereby  acquire  a  \alid  title  to  such  paper,  because  it  makes 
the  purchase  by  discount,  or  through  the  exercise  of  its  discounting 
powers.  But  where  the  acts  of  the  parties  and  the  circumstances 
surrounding  the  transaction  clearly  rebut  any  presumption  arising 
from  the  indorsement,  —  and  indisi)utably  the  real  nature  of  the 
transaction  intended  by  the  parties  to  be,  in  the  language  of  the 
court  below,  '  an  out  and  out  purchase  of  the  note,  and  not  dis- 
counting it,  or  lending  money  on  the  credit  of  it,  —  the  mere  fact 
of  indorsement  is  not  sufficient  to  warrant  the  court  in  treating 
the  transaction  as  something  different  from  what  was  intended." 

2  First  National  Bank  of  Rochester  v.  Pierson,  24  Minn.  141,  142. 
2"  3  Central  Law  Jour.  G23 ;   s.  c,  2G  Ohio  St.  141. 

157 


§  73  EXPANSIONS    OF    THE    POWERS    OF    A    BANK 

These  Minnesota  cases  do  not  seem  to  contemplate  the  alter- 
native of  holding  that  a  bank  may  acquire  title  by  purchase  as  dis- 
tinguished from  loan,  and  yet  that  its  power  of  purchasing,  as  well 
as  its  power  of  lending,  must  be  exercised  within  the  limits  its 
organic  law  prescribes. 

The  last  case  is  overruled  in  33  Minnesota  as  to  the  point  that 
a  national  bank  may  recover  on  a  note  taken  ultra  vires  (which 
see). 

(6)  Though  a  national  bank  may  invest  its  surplus  capital  in 
notes  (but  not  its  mere  daily  surplus),  it  cannot  buy  or  acquire 
title  otherwise  than  by  loan ;  and  if  it  does,  it  cannot  recover  on 
such  notes.3  Alvey,  J.,  Bartol,  C.  J.,  and  Irving,  J.,  dissenting. 
As  this  was  a  very  strongly  argued  case,  we  give  it  at  some  length. 

Majority  opinion :  "  The  evidence  shows  that  Winchester  and 
Son,  note  and  bill  brokers,  were  employed  by  Lazear  Brothers  to 
sell  the  note  of  July  22,  1872,  to  any  purchasers  willing  to  buy, 
and  that  it  was  sold  to  the  appellee,  over  the  counter  of  its  bank- 
ing-house, at  nine  per  cent  discount,  for  Lazear  Brothers,  the 
drawers,  who  received  the  proceeds  of  sale.  None  of  the  bank 
officers  were  informed  that  the  Winchesters  were  acting  for  Lazear 
Brothers,  nor  were  the  latter  told  to  whom  the  note  had  been  sold. 
The  note  was  sold  to  the  bank  on  the  8th  day  of  July,  1872.  The 
president  of  the  bank  testified  that  the  note  in  question  was  pur- 
chased by  order  of  the  board  of  directors,  and  that  he  had  an  im- 
pression, he  believed,  that  Lazear  Brothers  were  to  get  the  proceeds 
of  it.  He  further  proved  that,  after  the  customers  of  the  bank  were 
served,  it  sometimes  invested  its  surplus  proceeds  in  notes.  We 
are  of  opinion  that  this  transaction  was  an  out  and  out  purchase  by 
the  bank,  and  that  such  purchase  was  without  authority,  and  that 
the  bank  acquired  no  title  to  the  note,  and  cannot  recover  thereon 
in  this  suit.  While  we  do  not  mean  that  a  national  hank  may  not 
invest  its  surplus  capital  in  notes,  we  are  of  opinion  that  it  has  no 
authority  to  use  such  surplus  funds,  as  may  remain  on  hand  from 
day  to  day,  for  the  purpose  of  buying  notes.  National  Bank  of 
Rochester  v.  Pierson,  Thompson's  Bank  Cases,  637 ;  Farmers  and 
Mechanics'  Bank  v.  Baldwin,  23  Minn.  198.  If  any  other  con- 
struction were  given  to  such  a  transaction  as  this,  the  intention 
of  Congress  to  prohibit  national  banks  from  buying  and  selling 

3  Lazear  Brothers  v.  National  Union  Bank  (Md.),  12  Leg.  News  64. 

But  when  the  contract  is  executed,  even  if  the  transaction  was  a  sale 
and  not  a  discount,  there  may  be  a  recovery  on  the  note.  Black  v.  First 
National  Bank,  96  Md.  399,  54  Atl.  88  (1903). 

158 


NEGATIVE  §  73 

notes  would  be  entirely  defeated,  and  those  institutions  would  be 
at  perfect  liberty  to  decline  making  discounts  for  their  customers, 
and  afterwards  to  buy  up  the  very  paper  which  had  been  ofl'ered 
for  discount  and  refused,  at  such  price  as  the  bank  might  choose 
to  give.  The  note  of  the  22d  of  June,  1872,  for  five  thousand 
dollars,  was  acquired  by  the  appellee  by  purchase,  without  autlujr- 
ity  to  make  such  purchase,  and  it  is  not,  therefore,  entitled  to  the 
note,  and  cannot  recov^er  upon  it." 

Dissent  by  Alvey,  J. :  "  If  Lazear  Brothers  had  presented  the 
paper  in  person,  and  obtained  the  money  upon  the  terms  upon 
which  the  brokers  obtained  it,  there  would  then  have  been  no 
question  as  to  the  legality  of  the  title  acquired  by  the  bank  ;  that, 
it  is  conceded,  woukl  have  been  a  discount.  But  it  is  contended, 
and  it  is  so  held  in  the  opinion  of  the  majority  of  this  court,  that, 
as  the  note  was  obtained  from  Winchester  and  Son,  bill  brokers, 
without  disclosure  at  the  time  from  them  that  the  money  was  for 
the  benefit  of  the  makers  of  the  note,  therefore  it  was  a  purchase 
of  the  note  as  contradistinguished  from  a  discount,  and  that  the 
transaction  was  ultra  vires  and  consequently  no  title  to  the  note  was 
transferred  to  the  bank.     To  this  proposition  I  cannot  assent. 

"  Now,  without  invoking  the  aid  of  any  implied  power  possessed 
by  the  bank  to  enable  it  to  carry  on  the  banking  business,  it  is 
expressly  authorized,  as  we  have  seen,  to  discount  and  negotiate 
promissory  notes.  What,  then,  is  the  meaning  of  the  word  '  ne- 
gotiate', according  to  its  ordinary  acceptation  among  business 
men  ?  According  to  the  most  approved  lexicographers,  its  meaning 
is  '  to  transfer,  to  sell,  to  pass,  to  'procure  by  mutual  intercourse 
and  agreement  icith  another,  to  arrange  for,  to  settle  by  dealing 
and  management.'  W^ebster's  and  Worcester's  Diet.  This  term 
would  seem  to  be  comprehensive  enough  for  all  the  requirements 
of  the  case;  but,  by  allowing  the  full  meaning  to  the  more  exact 
and  important  term,  '  discount',  all  doubt  whatever  would  seem 
to  be  removed.  To  discount  is  to  deduct  a  sum  of  money  from 
the  debt  in  consideration  of  its  being  paid  before  the  usual  or  stipu- 
lated time  for  payment.  In  the  case  of  Fleckner  v.  Bank  of  United 
States,  8  Wheat.  350,  Judge  Story,  in  delivering  the  opinion  of 
the  court,  having  occasion  to  define  a  discount  by  the  bank  said  : 
'  Nothing  can  be  clearer  than  that,  by  the  language  of  the  com- 
mercial world,  and  the  settled  practice  of  banks,  a  discount  by  a 
bank  means,  ex  vi  termini,  a  deduction  or  drawback  made  upon 
its  advances  or  loans  of  money,  upon  negotiable  paper,  or  other 

159 


§  73  EXPANSIONS  OF  THE  POWERS  OF  A  BANK 

evidences  of  debt,  payable  at  a  future  day,  which  are  transferred 
to  the  bank.' 

"  Purchase  may  be  by  way  of  discount,  equally  as  a  loan 
may  be  made  by  that  means.  When  the  party  receiving  the  pro- 
ceeds of  the  paper  discounted  is  himself  either  maker  or  indorser, 
and  the  discount  is  made  on  his  responsibility,  he  receives  the 
money  as  a  loan,  for  he  is  bound  to  return  it ;  but  if  he  is  in  no  way 
bound  on  the  paper,  he  receives  the  money  as  an  advance,  and  as  a 
consideration  for  the  transfer  of  the  paper.  Both  transactions  are, 
according  to  the  established  practice  and  usage  of  banks,  discounts, 
though  the  latter  is  in  effect  a  purchase  by  the  bank.  The  act  of 
discounting  simply  has  reference  to  the  deduction  from  the  face 
amount  of  the  paper  the  time  it  has  to  run  to  maturity,  and  the 
rate  of  that  deduction ;  but  whether  the  transaction  amounts  to 
a  loan  or  a  purchase  on  the  part  of  the  bank,  depends  upon  other 
facts  and  conditions  of  things. 

"  Suppose  the  payee  of  a  promissory  note  payable  to  order 
takes  it  to  a  bank,  and  procures  the  money  on  it,  less  the  rate 
of  discount,  upon  indorsement  without  recourse ;  would  not 
that  be  strictly  a  discount  within  the  meaning  of  the  law,  not- 
withstanding it  would  not  be  a  loan  upon  the  responsibility  of 
the  party  obtaining  the  money?  Such  a  transaction  would  not 
be  a  loan  at  all,  according  to  the  correct  meaning  of  the  term ; 
and  if  it  be  a  discount,  according  to  the  modes  and  usages  of 
banking,  why  should  not  any  third  party  holding  paper  payable 
to  bearer,  or  indorsed  in  blank,  be  able  to  negotiate  that  paper 
with  the  bank,  by  way  of  discount,  and  transfer  a  good  title 
to  the  bank,  notwithstanding  his  name  might  not  appear  upon 
the  paper,  or  he  incur  any  liability  in  respect  to  it.  I  cannot,  I 
must  confess,  perceive  the  reason  for  the  distinction  that  has  been 
made  in  this  case.  It  should  be  recollected  that  it  is  not  the  rate 
of  discount  with  reference  to  which  the  parties  deal,  that  deter- 
mines the  question  of  the  validity  of  the  transfer  of  the  paper,  or 
the  title  of  the  bank,  though  the  latter  may  have  exacted  and 
received  more  than  the  lawful  rate  of  discount.  All  the  business 
of  the  national  banks  is  done  under  the  restrictions  prescribed 
by  the  act  of  Congress ;  and  the  rate  of  discount  is  expressly  pre- 
scribed among  the  various  regulations  contained  in  the  act  for  the 
government  of  the  banking  business ;  and  for  taking,  receiving, 
or  charging  any  greater  rate  of  interest  or  discount  than  is  by  the 
act  allowed,  the  bank  subjects  itself  to  the  penalties  prescribed 
160 


POWERS    IN    RELATION    TO    REAL   ESTATE  §  74 

by  sect.  5198  of  the  Revised  Statutes ;  but  the  title  to  the  paper 
is  not  thereby  affected." 

2d.  Cases  which  deny  the  power  of  purchase  of  negotiable  paper, 
but  use  the  word  merely  to  exclude  transactions  not  controlled  by 
usury  laws,  and  do  not  mean  that  a  bank  cannot  acquire  title  to 
negotiable  paper  absolutely  by  indorsement  without  recourse. 

(c)  The  banking  law  of  New  York  authorized  banks  to  "  carry 
on  the  business  of  banking  by  discounting  bills,  notes,  and  other 
evidences  of  debt,  .  .  .  by  buying  and  selling  .  .  .  bills  of  exchange", 
etc.  It  has  been  held,  that  this  did  not  authorize  a  bank  to  pur- 
chase a  bill  or  note.  The  distinction  became  essential  in  connection 
with  the  point  of  usury.  If  the  bank  could  only  discount  bills 
and  notes,  it  could  not  evade  the  statutes  controlling  usury. 
But  if  it  could  buy  bills  and  notes,  it  could  buy  them  at  any  price 
w^hich  might  be  agreed  upon  with  the  seller,  and  so  practically 
evade  the  statute.  The  question  therefore  was,  w^hich  character, 
that  of  discount  or  that  of  purchase,  should  be  given  to  a  com- 
pleted transaction.  The  court  gave  to  it  the  character  of  a  dis- 
count, on  the  ground  that  the  bank  could  discount,  but  could  not 
buy,  mercantile  paper;  and  the  taint  of  usury  icas  therefore  held 
to  inhere.'^ 

Power  to  discount  notes  is  not  power  to  purchase  them.  The 
right  of  purchasing  is  an  entirely  distinct  and  independent  one, 
which  may  or  may  not  be  enjoyed  by  any  bank,  according  to  the 
circumstances  of  its  particular  case  and  the  language  of  its  incor- 
porating act.  If  possessed,  it  is  simply  a  right  to  buy  the  notes 
in  the  market  for  their  fair  market  value,  whatever  that  may  be. 
It  must  be  a  bona  fide  transaction  of  bargain  and  sale.  If  it  be 
colorable  only,  and  resorted  to  for  the  purpose  of  covering  up  a 
usurious  dealing,  it  will  be  treated  as  a  usurious  contract.^ 

§  74.  Powers  in  Relation  to  Real  Estate.  —  Ordinarily,  it  is 
no  part  of  the  banking  business  to  hold  or  deal  in  real  estate.® 

''  All  bank  transactions  are  subject  to  usury  laws,  and  are  called  dis- 
counts to  indicate  that  fact,  though  the  same  transaction  between  indi- 
viduals would  be  called  a  purchase,  and  be  free  from  the  taint  of  usury. 
Niagara  County  Bank  v.  Baker,  15  Ohio  St.  68,  upon  authority  of  cases 
cited  in  the  next  note. 

5  See  Flcckner  v.  Bank  of  the  United  States,  8  Wheat.  338,  5  L.  ed.  631 ; 
Talmage  v.  Pell,  3  Seld.  (N.  Y.)  328 ;  Dunkle  v.  Renick,  6  Ohio  St.  524 ; 
M'Lean  v.  Lafayette  Bank,  3  McLean  587 ;  Philadelphia  Loan  Co.  v. 
Towner,  13  Conn.  259. 

0  §  74.  Under  Fed.  Res.  Act,  Sec.  24,  Part  IL  §  192,  a  bank  may  make 
loans  secured  by  improved  and  unincumbered  farm  lands.     In  Oklahoma 

VOL.  I  — 11  IGl 


§  74         EXPANSIONS  OF  THE  POWERS  OF  A  BANK 

No  general  right  to  do  so  can  be  considered  to  be  inherent  in  a 
bank.  Certain  obvious  cases,  however,  in  which  it  is  eminently 
proper,  almost  even  necessary,  that  a  bank  should  be  able  to  ac- 
quire, to  hold,  and  to  sell  land  and  interest  in  land,  will  suggest 
themselves  at  once  to  every  mind.  Thus,  it  may  often,  especially  in 
small  towns,  be  impossible  to  obtain  a  building  with  the  suitable 
appliances  for  security,  unless  the  corporation  can  buy  land  and 
erect  a  structure  for  itself.""  The  mortgage  or  conveyance  of  real 
estate  to  it  may  often  be  the  only  means  by  which  debts  owing 
to  it  can  be  secured  or  discharged. °*  If  a  bank  should  come  into 
possession  of  land  in  perfect  good  faith  for  either  of  these  purposes, 
and  should  hold  it  or  sell  it  only  in  due  and  bona  fide  prosecution 
of  these  objects,  it  seems  unreasonable  to  imagine  that  the  most 
rigorous  court  of  justice  would  declare  the  transaction  illegal. 
But  the  necessity  of  discussing  the  question  of  the  abstract  legality 
of  such  proceedings  has  nearly  always  been  saved  by  the  insertion 
in  charters  and  organic  laws  of  clauses  specifically  enabling  banks 
to  acquire,  hold,  and  sell  real  estate  for  these  purposes. ^  The 
legislative  expression  of  this  power  of  course  excludes  its  exercise 
otherwise  than  in  precise  accordance  with  the  statutory  provisions. 
The  holding,  acquiring,  or  selling  to  any  greater  extent,  in  any 

a  banking  corporation  may  not  engage  in  real  estate  speculation  not 
authorized  by  its  charter ;  but  where  a  bank  has.  received  the  title  to  real 
estate  and  has  passed  it  on  to  another  in  a  chain  of  title  derived  from  a  tax 
sale  of  real  estate,  such  fact  is  not  sufficient  to  avoid  the  tax  deed  in  a  suit 
in  which  the  bank  is  not  a  party.  Jones  v.  Carnes,  17  Okla.  470,  87  Pac.  652 
(1906).  Banks  incorporated  under  the  law  of  Indiana  can  acquire  and 
hold  real  estate  for  certain  defined  purposes  (see  §  3340,  Burns  1908, 
§  2695  R.  S.  1881),  but  they  cannot  hold  real  estate  taken  for  debt  for 
more  than  five  years.  Smith  v.  Stephens,  173  Ind.  564,  91  N.  E.  167,  30 
L.  R.  A.  (n.  s.)  704,  n.  (1910).  In  North  Dakota  a  transaction  by  which  a 
bank  takes  a  deed  of  real  estate  for  loans  previously  contracted  and  for 
loans  made  is  within  the  statute.  Merchants'  State  Bank  v.  Tuft,  14  N.  D. 
238,  103  N.  W.  760,  116  Am.  St.  Rep.  682,  n.  (1909). 

0"  Where  a  bank  erected  a  building  twenty-two  stories  high,  used 
only  one  fourth  of  the  first  floor  for  its  banking  business  and  leased  the 
rest  of  the  building,  a  tenant  of  the  building  had  no  right  to  complain  and 
was  obhged  to  pay  his  rent.  Farmers'  Deposit  National  Bank  v.  Western 
Pa.  Fuel  Co.,  215  Pa.  St.  115,  64  Atl.  374,  114  Am.  St.  Rep.  949  (1906). 
See  also  Brown  v.  Schlieer,  118  Fed.  981  (1902) ;  Manhattan  Co.  v.  Eversz, 
171  111.  App.  449. 

"''  A  bank  though  not  expressly  organized  to  deal  in  real  estate  or  au- 
thorized by  statute  to  do  so  may,  as  an  incident  to  its  business  and  for  the 
purpose  of  securing  itself  from  loss  in  the  transaction  of  its  authorized 
business,  become  the  la-nd'ul  owner  of  that  estate.  State  Security  Bank 
V.  Hoskins,  1.30  Iowa  339,  106  N.  W.  764,  8  L.  R.  A.  (n.  s.)  376,  n.  (1906). 

162 


POWERS   IN    RELATION    TO    REAL   ESTATE  §  74 

other  manner,  or  for  any  other  end,  than  is  therein  set  fortli, 
would  be  unquestionably  illegal.^  The  power  to  purchase  land, 
or  take  it  in  mortgage  or  by  absolute  conveyance,  without  the  ad- 
ditional expression  of  the  power  to  sell  it  or  to  assign  the  mortgage, 
will  by  necessary  implication  confer  those  powers  also,  and  e\en, 
it  has  been  held,  the  power  to  mortgage  it.^  And,  although  a 
national  bank  cannot  engage  in  the  business  of  buying  and  selling 
personal  property,  it  may  sell  real  estate  lawfully  acquired,^°  and, 
may  take  personal  property  for  it.^"  Further,  it  must  be  regarded 
as  appurtenant  to,  or  even  a  part  of,  the  power  to  take  land  in 
mortgage  or  pledge,  that  the  bank  should  also  be  permitted  to 
deal  in  reference  to  the  land  or  interest  therein,  thus  acquired, 
in  any  manner;  as,  for  example,  by  buying  in  any  outstanding 
title  or  interest,  or  in  any  other  way  whatever,  that  may  prove 
desirable  for  rendering  the  security  more  perfect  or  more  available.* 
The  courts  seem  generally  to  have  been  inclined  to  construe  the 
privileges  of  this  nature  conferred  upon  banks  in  a  very  liberal 
way.  The  foregoing  cases  and  instances  certainly  do  not  ap- 
pear to  trespass  beyond  strict  justice ;  but  others  can  be  added 
where  the  bounds  of  reasonable  construction  have  been  much 
more  freely  extended. 

May  Buy,  Build  on,  and  Sell  Land  Adjoining  the  Bank  as  a  Pre- 
caution against  Fire 

(a)  Thus,  a  bank  authorized  to  hold  as  much  real  property 
as  might  be  necessary  for  its  immediate  accommodation  was  held 
to  have  the  right  to  buy  up  the  land  in  the  neighborhood  of  its 
banking-house,  to  erect  fire-proof  buildings  thereon,  and  then  sell 
these  out  again ;  the  end  being,  of  course,  the  greater  security  of 
its  own  building,^     And  a  bank  may  enter  into  a  contract  to  secure 

1  Thomaston  Bank  ;-.  Stimpson,  21  Me.  195. 

2  Metropolitan  Bank  /•.  Godfrey,  23  111.  579. 

3  Jackson  v.  Brown,  5  Wend.  (N.  Y.)  590  ;  Curtis  v.  Swartwout,  1  N.  Y. 
Leg.  Obs.  406;  Roberts  v.  Washington  National  Bank,  11  Wash.  550, 
40  Pac.  225  (1895). 

3°  The  bank  may  warrant  the  title  to  the  property  which  it  conveys. 
Merchants'  Bank  v.  Baird,  160  Fed.  642  (1908). 

^o  First  National  Bank  ;-.  Reno,  73  Iowa  145,  34  N.  W.  796. 

*  Ingraham  v.  Speed,  30  Miss.  410 ;  Coekrill  v.  Abeles,  86  Fed.  505 
(1898). 

^  Banks  v.  Poitiaux,  3  Rand.  (Va.)  136. 

A  bank  may  lease  land  for  a  term  of  years  outstanding  the  life  of  the 
bank,  erect  a  building  thereon,  and  rent  part  of  the  liuilding  to  others. 

1G3 


§  74         EXPANSIONS  OF  THE  POWERS  OF  A  BANK 

free  entrance  of  light  and  air  into  its  banking  house. ^"  The  ease 
of  Baird  v.  Bank  of  Washington  ^  contains  a  long  and  interesting 
dissertation  upon  the  rights  which  were  conferred  upon  the  bank 
by  a  clause  in  the  act  of  incorporation,  allowing  it  to  hold  "  such 
lands  as  were  bona  fide  mortgaged  or  conveyed  to  it,  in  satisfaction 
of  debts  previously  contracted  in  the  course  of  its  dealings."  The 
reasoning  and  language  of  the  court  will  apply  to  a  great  number 
of  similar  clauses  in  other  incorporating  acts,  in  which  language 
essentially  identical  with  this  is  of  frequent  occurrence.  It  was 
declared  that  the  right  to  commute  debts  for  lands  was  gen- 
eral, and  was  not  limited  to  cases  where  any  doubt  existed  as  to 
the  perfect  safety  of  the  debt.  The  effect  of  the  words  employed 
was  simply  to  prohibit  colorable  commutation,  whereby  a  real 
purchase  might  be  effected  under  a  technical  disguise.  Provided 
the  debt  was  pre-existing,  and  was  a  bona  fide  one,  that  is  to  say, 
not  contracted  originally  with  the  purpose  of  being  discharged 
by  the  conveyance  of  real  estate,  the  conveyance  would  be  strictly 
valid ;  although,  without  it,  the  safety  of  the  debt  must  be  un- 
questionable. The  court  also  added,  as  a  semble,  that  if  the  con- 
veyance were  made  to  trustees  for  the  bank,  with  the  intent  to 
raise  money  by  selling  it,  and  not  with  a  view  to  holding  it  per- 
manently, neither  the  letter  nor  the  spirit  of  the  statute  would 
be  violated. 

Brown  v.  Schleier,  118  Fed.  981  (1902),  reported  also  in  112  Fed.  577 
(1901),  and  affirmed  in  194  U.  S.  18,  48  L.  ed.  857,  24  Sup.  Ct._558  (1904) ; 
and  the  lessor  is  not  liable  to  creditors  of  the  bank  because  it  expended, 
in  the  construction  of  the  building,  more  than  it  was  authorized  to  do  by 
the  terms  of  the  lease  and  more  than  it  was  authorized  to  do  by  statute, 
and,  not  being  able  to  pay  the  taxes  and  rent,  conveyed  the  building 
back  to  the  lessor  with  no  creditor  objecting.  Brown  v.  Schleier,  supra. 
The  lease  is  valid  even  though  it  is  assignable  only  by  the  consent  of  the 
lessor.  Weeks  v.  International  Trust  Co.,  125  Fed.  370,  (1903).  A  bank 
may  also  lease  a  building  where  it  is  leased  so  as  to  exchange  the  use  of  a 
part  of  it  for  a  building  suitable  to  its  purposes,  and  which  cannot  be 
procured  otherwise.  Lechenger  v.  Merchants'  National  Bank,  96  S.  W. 
638  (Tex.  Civ.  App.)  (1906) ;  and  an  action  by  a  stocldiolder  against  a 
national  bank  to  restrain  it  and  its  directors  from  pulling  down  the  bank 
building  and  erecting  a  six  story  building  in  its  place,  the  most  of  which  is 
to  be  let  for  offices,  will  not  be  transmuted  into  an  action  for  damages 
against  the  directors,  as  such  an  action  would  not  lie.  Wingert  v.  First 
National  Bank,  175  Fed.  739  (1910),  affirmed  in  223  U.  S.  670,  56  L.  ed. 
605,  32  Sup.  Ct.  391  (1912). 

^^  First  Presbyterian  Church  v.  National  Bank,  57  N.  J.  L.  27,  29 
Atl.  320. 

«  11  Serg.  &  R.  (Pa.)  411. 

164 


POWERS   IN    RELATION    TO    REAL   ESTATE  §  74 

Onhj  the  Sovereign  can  Object 

(b)  Further,  the  opinion  was  expressed,  on  the  strength  of  the 
decision  in  Leazure  v.  Hillcgas,''  that,  even  if  the  bank  should  take 
from  a  debtor  real  estate,  which  it  had  no  right  to  hold,  the  title 
of  the  bank  therein  would  be  defeasible  only  at  the  instance  (jf 
the  State  ;  ^"  that,  if  the  title  should  be  set  aside  in  a  process  thus 
instituted,  the  land  would  not  revert  to  the  party  granting  to  the 
bank,  but  would,  apparently,  fall  into  the  State  itself ;  yet  that 
the  debtor  would  have  been  fully  acquitted  and  discharged  from 
his  indebtedness,  and  the  loss  would  have  to  be  borne  wholly  by 
the  bank.  This  view,  though  properly  only  an  obiter  dictum, 
was  expressed  with  a  good  deal  of  confidence,  and  apparently  upon 
a  mature  consideration  of  the  whole  subject.  It  is  certainly 
difficult  to  see  why  it  is  not  sound. 

(c)  Where,  by  its  charter,  a  bank  was  authorized  to  take  mort- 
gages in  security  for  debts  previously  contracted,  it  was  adjutlged 
by  Chancellor  Kent,  that,  if  the  loan  and  mortgage  were  concurrent 
acts,  and  intended  so  to  be,  it  ivas  not  a  case  within  the  reason  and 
spirit  of  the  restraining  clause  of  the  statute,  which  only  meant  to 
prohibit  the  banking  company  from  investing  their  capital  in  real 
property  and  engaging  in  land  speculations.     "  A  mortgage  taken 

7  7  Serg.  &  R.  (Pa.)  313. 

7"  Hennessy  v.  St.  Paul,  54  Minn.  219,  55  N.  W.  1123  ;  Bank  v.  Flathers, 
45  La.  Ann.  75,  12  So.  243 ;  Savings  Bank  v.  Burns,  104  Cal.  473,  38  Pac. 
102;    Smith  v.  First  National  Bank,  45  Neb.  444,  G3  N.  W.  796  (1S95) ; 
Hall  V.  Farmers'  Bank,  145  Mo.  418,  46  S.  W.  1000  (1898);    National 
Bank  v.  Mathews,  98  U.  S.  63,  25  L.  ed.   190 ;    Baker  v.  Sehofield.  221 
Fed.  322  (1915) ;   Minneapolis  Threshing  Machine  Co.  v.  Jones.  95  Minn. 
127,  103  N.  W.  1017  (1905) ;    Schuyler  National  Bank  v.  Gadsden.  191 
U.  S.  451,  48  L.  ed.  258,  24  Sup.  Ct.  129  (1903)  ;    Sehofield  v.  Baker.  212 
Fed.  504  (1914) ;   First  National  Bank  v.  Flath,  10  N.  D.  281,  86  N.  W. 
867  (1901) ;  Puget  Sound  National  Bank  v.  Fisher,  52  Wash.  256,  100  Pac. 
724  (1909)  ;    DeWitt  County  National  Bank  v.  Mickelberry,  244  111.  77, 
91  N.  E.  86,  135  x\m.  St.  Rep.  304  (1910)  (purchase  of  land  at  foreclosure 
sale);   Brown  v.  Schleier,  118  P\'d.  981  (1902) ;  id.,  112  Fed.  577  (1901), 
affirmed  in  194  U.  S.  18,  48  L.  ed.  857,  24  Sup.  Ct.  5.58  (1904)  (unauthor- 
ized expenditure  of  money  by  the  bank  in  the  erection  of  a  building  on 
land  which  it  had  leased)  ;  Farmers'  Deposit  National  Bank  v.  West  Pa.  Fuel 
Co.,  215  Pa.  St.  115,  64  Atl.  374,  114  Am.  St.  Rep.  949  (1906)    (building 
erected  by  the  bank) ;   Jones  v.  Carnes,  17  Okla.  470,  87  Pac.  652  (1906) 
(purchase  by  a  bank  from  a  county  which  had  bid  in  the  property  at  a 
tax  sale) ;   State  Security  Bank  i>.  Hosldns,  130  Iowa  339,  106  N.  W.  764, 
8  L.  R.  A.  (n.  s.)  376,  n.  (bank  acquiring  title  to  property  from  one  who 
holds  it  in  trust  for  defendants) ;   Kerfoot  r.   Farmers'  etc.   Bank,  218 
U.  S.  281,  54  L.  ed.  1042.  31  Sup.  Ct.  14  (1910)  (taking  title  to  property 
to  be  held  for  the  life  of  the  grantor  with  remainder  to  his  children). 

165 


§  74  EXPANSIONS    OF   THE    POWERS    OF   A    BANK 

to  secure  a  loan,  advanced  bona  fide  as  a  loan,  in  the  course,  and 
according  to  the  usage,  of  banking  operations,  was  not,  surely," 
says  he,  **  within  the  prohibition."  ^ 

KenCs  Reasoning  Doubted 

A  similar  decision  has  been  made  in  Virginia,^  the  court  quoting 
Kent  in  the  Silver  Lake  case:  "Previously  contracted?  how 
long  previously  ?  must  it  be  a  month,  a  week,  a  day,  or  a  minute  ?  " 
Of  course,  this  is  mere  jugglery  with  words.  If  the  legislators 
said  "  previously  "  they  did  not  mean  concurrent,  and  no  such 
hair-splitting  can  prove  that  there  is  no  difference  between  those 
terms.  The  other  argument  of  Kent  quoted  above,  based  on  the 
spirit  of  the  law,  is  better ;  and  still  it  may  well  be  asked  how  we 
are  to  know  what  the  object  of  a  law  is,  except  by  what  the  legis- 
lature says,  and  especially  how  we  are  to  know  what  means  the 
lawgivers  meant  to  have  used  to  accomplish  their  purposes  except  by 
looking  to  these  words;  and  when  they  have  said  "  previously", 
is  it  complimentary  to  their  intelligence,  to  say  nothing  of  any 
further  implication,  to  hold  that  they  meant  concurrent  ? 

{d)  A  commercial  bank  incorporated  under  the  California  code 
may  loan  on  a  real  estate  mortgage.^" 

§  75.  A  National  Bank  mav  deal  in  realty  as  follows  (see  II. 
§§28,   192):- 

(1)  It  may  buy  and  hold  what  it  needs  for  its  own  use  as  a  bank. 

(2)  It  may  take  mortgage  or  trust  deeds  as  security  for  a  debt 
previously  contracted,  and  may  buy  in  the  land  at  a  judgment 
sale  under  such  deed  or  mortgage. 

(3)  It  may  buy  land  sold  under  any  judgment  held  by  it. 

(4)  It  may  take  a  conveyance  of  land  in  satisfaction  of  pre- 
vious debt. 

(5)  It  may  buy  land  or  outstanding  title,  when  such  action  is 
necessary  to  save  a  debt  due  it  (and  the  bank  is  the  one  to  exercise 
its  discretion  as  to  such  necessity),  even  though  the  land  exceeds 
the  debt,  if  the  security  of  the  debt  is  the  real  object.^ 

(6)  It  may  make  loans  secured  by  improved  and  unencumbered 
farm  lands. i° 

8  Silver  Lake  Bank  v.  North,  4  Johns.  Ch.  (N.  Y.)  370. 

9  31  Gratt.  (Va.),  228. 

1"  Bank  v.  Hemme  Company,  105  Cal.  376,  38  Pac.  963. 

^  §  75.     Upton  V.  National  Bank  of  Soiith  Reading,  120  Mass.  153. 

1°  Fed.  Res.  Act.  See.  24.     Part  II.  §  192. 

166 


A    NATIONAL    BANK  §  75 

It  cannot  hold  possession  of  real  estate  more  than  five  years, 
except  under  the  first  clause. 

Real  Security  on  Concurrent  Loans 

(a)  Whether  a  national  bank  can  take  real  estate  security,  by 
mortgage  or  truM  deed,  for  a  concurrent  loan,  is  doubtful. i" 

New  York,2  Illinois,^  Missouri,^  say  that  the  national  law  clearly 
forbids  a  bank  to  take  real  security  for  concurrent  or  future 
advances. 

(6)  The  United  States  Supreme  Court  in  Union  National  Bank 
r.  Matthews,^  after  sayin<:i:  that  the  implication  is  clear  that  a 
loan  on  real  estate  is  forbidden,  proceed  to  declare  the  spirit 
and  intent  of  the  prohibition  to  be  the  prevention  of  hazardous 
investments  by  the  bank,  the  keeping  of  its  money  in  the  regular 
channels  of  business,  and  the  prevention  of  accumulation  of  masses 
of  real  estate  in  their  hands,  and  that  the  intent,  not  the  letter, 
is  to  govern. 

Trust  Deed 

The  court  further  say,  that,  as  there  was  only  a  deed  of  trust  ^^ 
vesting  the  legal  title  in  a  third  person,  the  bank  had  taken  no 
title  to  land  and  so  in  any  event  had  not  violated  §  5137. 

These  sections  do  not  prohibit,  in  terms,  the  mortgage  of  real 
estate  to  a  third  party,  to  be  held  by  the  mortgagee  in  trust  to 
secure  a  loan  made  by  a  national  bank.  Hence,  where  a  loan  was 
made  upon  the  individual  note  of  one  partner  in  a  firm  indorsed 
by  his  copartner,  and  the  maker  mortgaged  real  estate  to  secure 
the  indorser,  with  the  agreement  that  in  case  of  default  the  security 
should  inure  to  the  benefit  of  the  bank,  it  was  held  that  the  trans- 
action was  valid,  and  that  the  bank  could,  by  proceedings  in  equity, 
reach  and  avail  itself  of  the  security.^ 

'«  A  national  bank  has  authority  to  take  an  assignment  of  a  note  and 
mortgage  upon  real  estate  for  money  loaned  the  mortgagee.  First  National 
Bank  v.  Andrews,  7  Wash.  261,  34  Pac.  913  (1893).  But  see  First  Na- 
tional Bank  v.  Flath,  10  N.  D.  281,  86  N.  W.  867  (1901). 

2  Crocker  v.  Whitney,  71  N.  Y.  161. 

3  Fridley  ;-.  Bowen,  87  111.  151. 

*  Matthews  v.  Skinner,  62  Mo.  329. 

^  98  U.  S.  621,  25  L.  ed.  188.     See  §  754,  ultra  vires. 

^^  When  the  conveyance  is  taken  in  trust  to  be  conveyed  upon  the  direc- 
tion of  the  grantor  the  title  is  not  void,  but  only  voidable.  Kerfoot  v. 
Farmers'  etc.  Bank,  218  U.  S.  281,  .54  L.  ed.  1042,'  31  Sup.  Ct.  14  (1910) ; 
Miller  v.  King,  223  U.  S.  505,  56  L.  ed.  528,  32  Sup.  Ct.  243  (1912). 

*  First  National  Bank  f.  Haire,  36  Iowa  443. 

167 


§  75  EXPANSIONS    OF    THE    POWERS    OF    A    BANK 

-  The  result  seems  to  be,  that  a  conveyance  which  carries  the  legal 
title  to  the  bank,  if  for  a  concurrent  loan  or  future  advances,  is  un- 
lawful ;  but  a  trust  deed  or  mortgage  giving  legal  title  to  a  third 
person  for  the  benefit  of  the  bank  and  as  security  for  such  loan,  is 
lauful^" 

Effect  of   Ultra  Vires.     Only  Sovereign  can  Object 

(c)  One  thing  the  Matthews  case  did  make  perfectly  clear, 
viz.  that  whether  right  or  wrong,  if  a  national  bank  takes  real 
estate  by  mortgage,  trust  deed,  or  conveyance  absolute,  no  one 
but  the  United  States  in  the  person  of  the  comptroller  can  object ; 
the  transaction  is  perfectly  good  and  enforceable  between  the 

parties.®^ 

A  number  of  State  cases  had  ruled  otherwise  on  this  point,  but 
these  decisions  are  now  fossils,  buried  deep  under  this  recent 
deposit,  but  as  they  may  be  interesting  in  connection  with  State 
statutes,  I  will  keep  some  of  those  I  have  dug  up,  and  arrange 
them  for  exhibition  in  a  sort  of  museum  note  in  Part  II. 

(d)  M.  obtained  a  loan  from  a  national  bank  on  short  time 
paper,  and  deposited  as  security  a  note  of  W.  secured  by  mortgage ; 
the  bank  had  the  note  of  M.  and  other  personal  security. 

The  court  said  a  national  bank  could  lend  only  on  personal 
security,  but  if  the  debtor  makes  default,  or  at  any  time  after  the 
loan  is  actually  made,  the  bank  may  take  real  security  unless  so 
soon  after  as  to  indicate  that  the  transaction  was  only  colorable, 
and  "  really  a  part  of  the  original  understanding." 

But  in  this  case  the  personal  security  was  ample  at  the  time, 
and  the  loan  was  therefore  on  personal  security,  and  not  within 
the   prohibition,    though    a   mortgage   was    also   taken;    and    if 

6«  In  National  Bank  v.  Thomas,  30  R.  I.  294,  74  Atl.  1092  (1910),  the 
court  says  that  although  a  national  bank  may  not  loan  money  upon  real 
estate  security  given  directly  to  the  bank,  real  estate  owned  by  the  bor- 
rower may  be  used  in  various  indirect  ways  for  the  purpose  of  giymg 
security  to  the  bank.  ,,rwrMx 

6"  See  First  National  Bank  v.  Flath,  10  N.  D.  281,  86  N.  W.  867  (1901) ; 
First  National  Bank  v.  Messner,  25  N.  D.  263,  141  N.  W.  999  (1913) ; 
National  Bank  v.  Thomas,  30  R.  I.  294,  74  Atl.  1092  (1910) ;  Puget  Sound 
National  Bank  v.  Fisher,  52  Wash.  246,  100  Pac.  724  (1909).  If  a  savings 
bank  takes  an  assignment  of  a  mortgage  solely  in  the  mterests  of  the  bank 
it  cannot  be  assailed  because  it  was  by  statute  prohibited  from  taking  such 
assignment  or  prohibited  under  its  chartered  powers  from  binding  itself  by 
the  accompanying  agreement.  Gerrity  v.  Wareham  Savings  Bank,  202 
Mass.  214,  88  N.  E.  1084  (1909). 
168 


BANK  AS  TRUSTEE  OF  REALTY  §  76 

the  personal  security  becomes  insufficient,  and  tlie  Ix^rrower 
is  insolvent,  the  bank  can  maintain  a  hill  to  foreclose  the 
mortgaged 

True,  the  loan  was  on  personal  security,  and  therefore  good. 
But  as  §  5137  forbids  taking  a  mortgage  for  any  other  purpose 
than  to  secure  a  previous  debt,  as  between  the  United  States 
and  the  bank  taking  the  mortgage,  it  could  hardly  be  sustained  as 
proper. 

The  Note  may  be  Concurrent  if  the  Debt  is  Previous 

(e)  And  where  an  indebtedness  already  existed,  and  an  ar- 
rangement was  made  whereby,  in  payment  of  this  and  to  secure 
the  bank  against  loss,  a  new  note  secured  by  a  mortgage  was 
executed,  it  was  held  that  such  new  note  and  mortgage  were  valid, 
as  being  taken  in  pursuance  of  the  power  of  the  bank  to  adopt 
reasonable  and  necessary  measures  for  the  collection  and 
security  of  debts ;  a  power  necessarily  incident  to  the  power 
of  banking.^ 

§  7(3.  Bank  as  Trustee  of  Realty.  —  In  this  country  the  general 
or  common  law  rule  is,  that  corporations  may  be  seised  of  lands, 
and  hold  other  property  in  trust,  for  purposes  not  foreign  to  their 
institution.^ 

In  many  States  there  are  statutory  provisions  upon  this  matter. 

(a)  In  New  York  there  is  an  act  concerning  money  corpora- 
tions, which  decides  that  no  conveyance,  assignment,  or  transfer 
of  any  effects  for  the  benefit,  use,  or  security  of  any  such  corpora- 
tion shall  be  valid,  unless  made  directly  to  the  corporation.  This 
refers  to  moneyed  corporations  chartered  by  the  legislature  of  that 
State,  and  has  no  application  to  foreign  corporations.  And  if 
land  be  conveyed  in  trust  for  the  benefit  of  a  foreign  corporation, 
the  corporation,  under  the  provisions  of  another  act,  will  only 
incur  the  penalty  of  not  being  able  to  maintain  an  action  on 
the  deed;  but  the  conveyance,  for  all  other  purposes,  will  be 
good.2 

7  Merchants'  National  Bank  of  Chicago  v.  Mears,  8  Bissell  158  (1878). 

8  Shinkle  v.  First  National  Bank  of  Ripley,  22  Ohio  St.  510. 

1  §  76.  2  Kent,  Com.  22(1.  See  First  Parish  in  Sutton  v.  Cole,  3  Pick. 
(Mass.)  237-239,  249;  M'Girr  v.  Aaron,  1  Penn.  (Pa.)  49;  Greene  v. 
Dennis,  G  Conn.  304 ;  Theological  Seminary  of  Auburn  i-.  Cole,  18  Barb. 
(N.  Y.)  3G0. 

2  Wright  V.  Douglass,  10  Barb.  (N.  Y.)  97. 

169 


§  76         EXPANSIONS  OF  THE  POWERS  OF  A  BANK 

Story 

(b)  Justice  Story,  in  Vidal  v.  The  Mayor,'  said  there  was  no 
objection  to  a  corporation  taking  realty  in  trust  for  a  purpose 
not  strictly  within  the  scope  of  its  direct  objects,  as  for  the  benefit 
of  a  stranger  or  another  corporation. 

Kent 

(c)  Kent  says  corporations  have  no  powers  not  given  them, 
and  therefore  cannot  be  trustees  in  a  matter  where  they  have  no 
interest. 

But  if  property  is  granted  or  devised  to  them  partly  for  their 
use  and  partly  for  the  use  of  others,  they  can  execute  the  latter 
trust  as  a  necessary  incident  to  the  former.^ 

It  is  pretty  well  agreed  that  only  the  State  can  object  to  the 
corporation's  right  to  take  land  in  trust.^ 

§  77.  Cases  upon  the  Power  of  Banks  in  Relation  to  Stocks. 
—  See  §  59. 

A  national  bank  cannot  buy  its  own  stock,  and  no  title  passes 
to  it,i  although,  in  Wallace  v.  Hood,i"  it  was  held  that  stock  so 
purchased  was  not  void. 

Where  a  bank  buys  its  own  stock  to  protect  itself  from  loss  i* 
it  may  sell  the  same  on  credit,  and  take  the  buyer's  note  as  collat- 
eral security.  The  buyer,  if  already  a  stockholder,  cannot  avoid 
the  sale  on  the  ground  of  false  representations  made  to  him  by 
the  officers  of  the  bank  as  to  its  stock  and  condition.^ 

A  bank  cannot  speculate  '"^  or  traffic  either  in  financial  securities 

3  Vidal  V.  Mayor,  2  How.  128,  11  L.  ed.  205. 

^  In  re  Howe,  1  Paige  (N.  Y.)  214. 

5  Wade  V.  American  Col.  Soc,  7  Smedes  &  M.  (Miss.)  697. 

1  §  77.  Meyers  v.  Valley  National  Bank,  18  National  Bankruptcy 
Register  34  ;  Green  v.  Ashe,  130  Tenn.  615,  172  S.  W.  293  (1914) ;  United 
Securities  Co.  v.  Ostenberg,  60  Colo.  249,  152  Pae.  1163  (1915) ;  Mary- 
land Trust  Co.  V.  National  Mechanics'  Bank,  102  Md.  608,  63  Atl.  70 
(1906). 

In  Georgia  a  bank  is  prohibited  from  using  any  part  of  its  capital 
stock  to  purchase  its  own  shares.  Civ.  code,  1895,  §  1965.  See  Fitz- 
patrick  v.  McGregor,  133  Ga.  332,  65  S.  E.  859,  25  L.  R.  A.  (n.  s.)  50,  n. 
(1909). 

i«  89  Fed.  11  (1898). 

^^  A  national  bank  may  accept  a  pledge  of  its  own  stock  to  secure  a 
loan.     First  National  Bank  v.  Lanz,  202  Fed.  117  (1913). 

2  Union  National  Bank  v.  Hunt,  7  Mo.  App.  42. 

^  A  national  bank  cannot  take  stock  in  a  new  speculative  corporation 
with  the  double  liability  attached  in  satisfaction  of  a  debt.     First  National 

170 


CASES   UPON    THE    POWER    OF    BANKS   IN    RELATION   TO    STOCKS      §  77 

or  in  merchandise.^''  It  has  been  held  not  to  be  incidental  to  the 
banking  business,  nor  an  implied  power  pertaining  to  a  bank,  to 
buy  or  sell  stock  or  bonds.'*  But  it  may  take  and  hold  them  as 
collateral  security,^"  and,  in  case  of  their  loss,  will  be  liable  only  as 
an  ordinary  bailee  ;  that  is,  if  there  has  been  an  absence  (jf  proper 
and  sufficient  care  on  its  part."*  The  measure  of  damages  will  be 
the  value  of  the  bonds  at  the  time  of  the  loss,^  A  bank  need  not  • 
be  prohibited  by  its  organic  law  from  engaging  in  such  traffic. 
For  it  owes  its  powers  as  it  owes  its  existence  to  the  terms  of  that 
charter  or  law.  It  is  not  restricted  like  an  individual  from  the  ex- 
ercise of  a  wide  range  of  other  powers,  which,  in  the  absence  of 
restriction,  it  would  enjoy ;  but  its  power  to  do  any  act  at  all  is 
due  wholly  to  the  legislation  of  which  it  is  a  creature,  and  must 
be  either  the  direct  or  necessarily  incidental  gift  of  that  legislation. 
When,  therefore,  it  is  specifically  permitted  to  conduct  a  banking 
business,  it  has  no  power  to  do  any  other  species  of  business; 
not  because  it  has  been  stripped  in  any  manner  of  that  power, 
but  because  that  power  has  never  attached  to  it.  A  bank  may 
however  do,  on  isolated  and  especial  occasions,  or  for  certain 
purposes,  what  it  cannot  do  generally,  and  for  all  purposes.  It 
cannot  buy  and  sell  merchandise,  but  it  can  take  merchandise 

Bank  v.  Converse,  200  U.  S.  425,  50  L.  ed.  537,  26  Sup.  Ct.  306  (1906) ;  a 
fortiori,  it  cannot  take  shares  in  a  partnership  to  the  same  end.  Mer- 
chants' National  Bank  v.  Wehrmann,  202  U.  S.  295,  50  L.  ed.  1036,  26 
Sup.  Ct.  613  (1906).  The  purchase  of  national  bank  shares  by  a  national 
bank  for  speculation  is  ultra  vires.  Metropolitan  Trust  Co.  v.  McKinnon, 
172  Fed.  846  (1909). 

2''  National  banks  have  no  power  whatever  to  deal  in  merchandise  of 
any  kind,  or  in  stocks  or  bonds.  Lconhardt  v.  Small,  117  Tenn.  153,  96 
S.  W.  1051,  119  Am.  St.  Rep.  994,  6  L.  R.  A.  (n.  s.)  887  (1900).  See 
Farmers'  Bank  v.  St.  Louis  etc.  Ry.  Co.,  119  Mo.  App.  1,  95  S.  W.  286 
(1906). 

3  First  National  Bank  of  Charlotte  v.  National  E.xchange  Bank  of 
Baltimore,  39  Md.  600;  Weekler  t-.  First  National  Bank,  42  Md.  .581; 
Logan  Bank  v.  Townsend,  139  U.  S.  67,  35  L.  ed.  107,  11  Sup.  Ct.  496 
(1891) ;  McBovle  v.  Union  National  Bank,  162  Cal.  277,  122  Pac.  458 
(1912) ;  Hotchidn  v.  Third  National  Bank,  219  Mass.  234,  106  N.  E.  974 
(1914). 

3-  Fulton  V.  National  Bank,  26  Tex.  Civ.  App.  115,  62  S.  W.  84  (1901). 
And  by  the  enforcement  of  its  right  as  pledgee  it  may  become  the  owner 
of  such  stock  ;  or,  at  least,  it  is  entitled  to  hold  them  against  the  adminis- 
trator of  the  pledgor,  so  long  as  its  claim  is  unsatisfied,  and  in  the  mean- 
time may  receive  and  enforce  dividends  or  other  benefits  attached  thereto. 
Corn  Exchange  National  Bank  v.  Kaiser,  160  Wis.  199,  151  X.  W.  259 
(1915). 

*  Third  National  Bank  of  Baltimore  v.  Boyd,  44  Md.  47.  ^  Ibid. 

171 


§  77         EXPANSIONS  OF  THE  POWERS  OF  A  BANK 

from  a  debtor,  if  this  is  the  only  way  to  save  the  amount  of  the 
debt ;  and  of  course,  having  taken  property  of  any  nature  for  this 
proper  purpose,  it  may  sell  it  in  any  manner  that  will  bring  the 
best  price.  It  may  purchase  public  stocks  in  order  to  deposit 
them,  under  a  law  requiring  such  stocks  to  be  deposited  as  a 
security  for  circulation ;  or  in  order  to  invest  its  surplus  funds 
in  them  ;  it  may  loan  upon  them  as  security,  and  sell  them  if  need 
be  to  save  the  debt.  But  it  cannot  "  traffic  "  in  them  ;  it  cannot 
buy  them  with  the  view  to  sell  them  shortly  at  an  anticipated 
advanced  price.  Such  would  not  fall  within  any  department  of 
the  general  province  of  banking,  which  alone  the  association  can 
carry  on,  and  which  it  must  carry  on  only  in  the  manner,  with  the 
powers,  and  for  the  objects  directly  set  forth  or  necessarily  implied 
in  the  law  of  the  corporate  existence.^ 

In  a  case  in  Vermont,  indeed,  it  was  once  said  that  a  clause  in 
a  bank  charter  prohibiting  the  bank  from  dealing  in  any  goods, 
wares,  merchandise,  or  commodities,  was  in  derogation  of  the 
common  and  ordinary  powers  of  the  corporation.  The  full 
breadth  of  this  language  would  certainly  set  the  doctrine  of 
the  case  at  variance  with  the  views  expressed  above.  But  the 
reasoning  in  support  of  those  views  is  too  clear,  and  the  authorities 
are  too  strong,  to  be  brought  within  the  range  of  doubt  by  this 
solitary  adjudication ;  more  especially  since  the  sweeping  state- 
ment of  the  legal  theory  in  that  opinion  was  enunciated  for  the 
insignificant  purpose  of  protecting  the  bank  in  a  purchase  of 
shares  in  its  own  capital  stock,  a  proceeding  which  could  have  been 
defended  at  much  less  expense  of  questionable  generalization.'^ 
See  §  59. 

(a)  A  national  bank  cannot  engage  in  selling  railroad  or  mort- 
gage '^"  bonds  on  commission.     In  Maryland  ^  the  court  say :  — 

"  To  the  usual  attributes  of  Banking,  consisting  of  the  right  to  issue 
notes  for  circulation,  to  discount  commercial  imyer,  aiid  to  receive 
deposits,  this  laio  adds  the  special  power  to  buy  and  sell  exchange, 
coin,  and  bullion ;  but  we  look  in  vain  for  any  grant  of  power  to 

6  Comstoek  v.  Willoughby,  Hill  &  Den.  (N.  Y.)  271 ;  Talmage  v.  Pell, 
3  Seld.  (N.  Y.)  328 ;  Leavitt  v.  Yates,  4  Edw.  Ch.  (N.  Y.)  134 ;  Sackett's 
Harbor  Bank  v.  President  of  Lewis  County  Bank,  11  Barb.  (N.  Y.)  213; 
Portland  Bank  ;;.  Storer,  7  Mass.  433 ;  Weckler  v.  First  National  Bank  of 
Hagerstown,  42  Md.  581.  See  also  Curtis  v.  Leavitt,  15  N.  Y.  9,  which, 
properly  interpreted,  supports  the  above  doctrine. 

^  Farmers  &  Mechanics'  Bank  v.  Champlain  Trans.  Co.,  18  Vt.  131. 

7o  Farmers'  National  Bank  v.  Smith,  77  Fed.  129  (1896). 

172 


CASES   UPON   THE    POWER   OF   BANKS    IX    RELATION'   TO    STOCKS      §  77 

engage  in  the  business  charged  in  this  declaration.  It  is  not  em- 
braced in  the  power  to  '  discount  and  negotiate  '  promissory  notes, 
drafts,  bills  of  exchange,  and  other  evidences  of  debt.  The  ordinary 
meaning  of  the  term  '  to  discount '  is  to  take  interest  in  advance, 
and  in  banking  it  is  a  mode  of  loaning  money.  It  is  the  advance 
of  money  not  due  until  some  future  period,  less  the  interest  which 
would  be  due  thereon  when  payable.  The  power  '  to  negotiate  ' 
a  bill  or  note  is  the  power  to  indorse  and  deliver  it  to  another,  so 
that  the  right  of  action  thereon  shall  pass  to  the  indorsee  or  holder. 
No  construction  can  be  given  to  these  terms,  as  used  in  this  statute, 
so  broad  as  to  comprehend  the  authority  to  sell  bonds  for  third 
parties  on  commission,  or  to  engage  in  business  of  that  character. 
The  appropriate  place  for  the  grant  of  such  a  power  would  be  in 
the  clause  conferring  authority  to  '  buy  and  sell ' ;  but  we  find 
that  limited  to  specific  things,  among  which  bonds  are  not  men- 
tioned, and  upon  the  maxim,  Expressio  unius  est  exchisio  alterius, 
and  in  view  of  the  rule  of  interpretation  of  corporate  powers 
before  stated,  the  carrying  on  of  such  a  business  is  prohibited  to 
these  associations."  ^ 

Dealing  in  stocks  is  not  distinctly  prohibited  by  the  act,  but 
such  prohibition  is  implied  from  a  failure  to  grant  the  power. 
Yet,  in  adjusting  a  contested  claim,  the  bank  may  pay  more  than 
its  value,  so  as  to  obtain  stocks  in  an  honest  effort  to  avoid  loss ; 
and  then  it  may  sell  such  stock  in  the  market.  Such  transactions 
do  not  amount  to  a  dealing  in  stocks.^"  Subject  to  the  restric- 
tions of  the  act,  the  bank  can  do  what  a  natural  person  may  law- 
fully do.^ 

A  national  bank  is  not  by  its  charter,  nor  by  its  statutory  nor 
its  incidental  powers,  authorized  to  act  as  broker  or  agent  in  the 
purchase  of  bonds  or  stocks. ^° 

{b)    In  the  honest  exercise  of  the  power  to  compromise  a  doubt- 

8  Weckler  v.  First  National  Bank,  42  Md.  581. 

8»  McBovle  V.  Union  National  Bank,  1()2  Cal.  277,  122  Pac.  458  (1912). 

9  First  National  Bank  of  Charlotte  v.  National  Exchange  Bank,  2  Otto 
122,  2.3  L.  od.  ()79. 

10  First  National  Bank  of  Allontown  v.  Hoch,  7  Weekly  Notes  of  Cas. 
(Penn.)  29S  ;  Ilotchldn  v.  Third  National  Bank,  219  Mass.  234,  lOG  N.  E. 
974  (1914).  ,     ^  ,         , 

But  if  it  authorizes  its  cashier  to  buy  and  sell  stocks  for  cash  and  on 
margin  and  he  does  so  and  mak(>s  large  profits  on  the  cash  transactions 
the  bank  cannot,  after  the  cashier  has  absconded,  claim  that  it  is  not 
liable  for  tlie  losses  on  the  margin  transaction.  National  Bank  v.  Frulen- 
berg,  203  Pa.  St.  24.3,  55  Atl.  900  (1903). 

173 


§  77  EXPANSIONS    OF    THE    POWERS    OF    A    BANK 

fill  debt  owing  to  the  bank,  it  can  hardly  he  doubted  that  railway 
stocks  may  he  accepted  in  jjayment  and  satisfaction,  with  a  view  to 
their  subsequent  sale  and  conversion  into  money,  so  as  to  make 
good  or  reduce  the  anticipated  loss.^^ 

The  power  to  buy  or  sell  stocks  of  other  corporations  by  a 
national  bank,  for  its  own  use,  is  nowhere  delegated  to  it,  nor  is 
it  an  incident  of  banking  business,^^"  except  as  stocks  are  taken 
a3  security  for  a  debt.  A  national  bank  holding  stocks  as  security 
may,  for  its  own  protection,  on  a  foreclosure  for  default  in  payment 
of  the  debt,  become  the  purchaser  to  prevent  loss.^^ 

The  directors  of  a  savings  bank  may,  in  order  to  secure  a  debt 
due  from  an  insolvent  debtor,  take  from  him  shares  of  stock  in 
another  corporation  in  settlement  of  his  liability.^^  A  solvent 
bank  may  purchase  its  own  stock  in  payment  of  a  previously 
existing  debt  due  from  a  stockholder.^^ 

§  78.    Saving  Debt.  —  See  §§  60,  77  h. 

A  Georgia  bank,^  to  secure  a  claim,  levied  on  the  Stonewall  Iron 
Works,  and  B.,  the  manager  of  said  works,  told  the  bank  that,  if 
he  could  work  off  the  raw  material  on  hand,  convert  it  into  pig  iron, 
and  sell  it,  the  debt  due  the  bank  could  be  paid,  but  he  must  have 
supplies  to  do  this.  The  bank  thereupon  furnished  the  means 
to  carry  on  this  business,  and  the  court  held  its  action  intra  vires. 

"  First  National  Bank  of  Charlotte  v.  National  Exchange  Bank,  51 
How.  Pr.  (N.  Y.)  320. 

I"'  See  Barron  v.  McKinnon,  196  Fed.  933  (1912) ;  Metropolitan  Trust 
Co.  V.  McKinnon,  172  Fed.  846  (1909) ;  Shaw  v.  National  German-Amer- 
ican Bank,  132  Fed.  658  (1904) ;  First  National  Bank  v.  Converse,  200 
U.  S.  425,  50  L.  ed.  537,  26  Sup.  Ct.  306  (1906) ;  Merchants'  National  Bank 
V.  Wehrmann,  202  U.  S.  295,  50  L.  ed.  1036,  26  Sup.  Ct.  613  (1906) ; 
Hotehldn  v.  Third  National  Bank,  219  Mass.  234,  106  N.  E.  974  (1914) ; 
Bovertown  National  Bank  v.  Fridenberg,  206  Pa.  St.  243,  55  Atl.  960 
(1903) :  Fourth  National  Bank  v.  Stahlman,  132  Tenn.  367,  178  S.  W.  942 
(1915). 

A  national  bank  may  acquire  and  hold  stock  in  a  building  corporation 
as  part  of  a  transaction  for  renting  desirable  banking  quarters,  if  it  uses 
good  faith  in  the  transaction.  Fourth  National  Bank  v.  Stahlman, 
132  Tenn.  387,  178  S.  W.  942  (1915)'. 

12  Burley  v.  Bowen,  quoted  in  Ball  on  National  Banks,  pp.  54,  110. 
See  also  Wood  v.  Green,  131  Tenn.  583,  175  S.  W.  1139  (1915),  citing 
many  cases. 

It  then  becomes  subject  to  the  same  liability  as  any  other  shareholder. 
Hotehldn  v.  Third  National  Bank,  219  Mass.  234,  106  N.  E.  974  (1914) ; 
Hill  V.  Shilling,  69  Neb.  152,  95  N.  W.  24  (1903). 

"  Hill  V.  Shilling,  65  Neb.  152,  95  N.  W.  24  (1903). 

1"  Draper  v.  Blackwell,  138  Ala.  182,  35  So.  110  (1903). 

1  §  78.     Reynolds,  assignee,  v.  Simpson  &  Ledbetter,  74  Ga.  474. 

174 


SAVING    DEBT  §  78 

"  When  a  banking  corporation  acquires  possession  of  property, 
either  by  a  hen  thereon,  or  by  the  purchase  of  the  same  for  the 
payment  of  a  debt  due  to  it,  and  expends  money  on  it,  or  furnishes 
supphes  either  for  its  preservation  or  to  carry  on  the  business  in 
which  such  property  is  employed,  with  a  view  to  rendering  it  pro- 
ductive, in  order  to  satisfy  the  debt  the  bank  holds  against  the 
former  owner  of  the  property,  it  is  not  chargeable  with  exceeding 
its  corporate  powers  by  engaging  in  a  business  beyond  the  scope 
and  purpose  of  its  creation. 

"  Whether  the  bank  used  its  power  of  collecting  its  debt  as  a 
pretext  for  embarking  in  a  business  foreign  to  that  for  which  it 
was  created,  and  which  it  was  authorized  to  conduct,  or  whether 
it  made  a  proper  use  of  it  in  furtherance  of  its  legitimate  business, 
was  fairly  submitted  to  the  jury,  and  their  verdict  is  upheld  by 
the  evidence."  ^ 

A  national  bank  lawfully  holding  a  mortgage  on  real  estate 
may,  to  protect  its  interests,  purchase  a  prior  mortgage  on  the 
same  real  estate.^ 

Under  the  United  States  Revised  Statutes,  §  5137,  a  national 
bank  may  purchase  at  sheriff's  sale  land  mortgaged  to  it  in  good 
faith,  as  security  for  a  debt  previously  contracted.*  Under  INIich- 
igan  statute  a  bank  may  foreclose  a  mortgage  by  advertisement.*" 

It  was  agreed  between  the  maker  and  the  accommodation  in- 
dorser  of  a  promissory  note,  that  it  should  be  "  used  "  only  at  a 
certain  bank.  The  bank,  having  knowledge  of  the  agreement, 
allowed  the  maker  from  time  to  time  to  draw  money,  holding 
the  note  as  collateral  security.  Held,  that  the  bank  might  sell 
its  "claim  against  the  maker,  and  transfer  the  note  to  the  pur- 
chaser as  collateral.^ 

Bank  may  Cut  and  Sell  Timber,  or  Agree  to  Get  Release 
of  Mortgage 

A  national  bank  that  has  loaned  money  on  timber  land  may,  to 
save  itself,  buy  in  the  land  at  foreclosure  sale,  and  cut  and  sell  the 
timber.^ 

2  Holmes  v.  Boyd,  90  Ind.  332. 
5  Heath  v.  Second  National  Bank,  70  Ind.  107. 

^  1  How.  Stat.  (Mich.)  §  3142 ;  3  How.  Stat.  (Mich.)  §  3208  b ;   Gage 
V.  Sanborn,  106  Mich.  2()9,  04  N.  W.  32. 
*  Proctor  V.  Whitcomb,  137  :\Iuss.  303. 
^  Roebling  v.  First  National  Bank,  30  Fed.  744. 

175 


§  78  EXPANSIONS   OF   THE    POWERS    OF   A   BANK 

An  agreement  by  a  bank  to  procure  the  release  of  a  mortgage 
held  by  a  third  person  on  lands  upon  which  the  bank  also  holds 
a  mortgage,  if  made  to  save  the  debt  due  the  bank,  is  not  ultra 
mres.^ 

A  mortgage,  given  to  a  bank  by  its  president  to  secure  a  loan 
made  by  him  contrary  to  the  statute,  is  not  invalid,  if  its  object 
is  to  restore  the  money  thus  illegally  loaned/ 

A  bank  though  not  authorized,  either  expressly  or  by  statute, 
to  deal  in  real  estate,  may  acquire  and  hold  land  for  the  purpose 
of  securing  itself  from  loss  in  the  transaction  of  its  authorized 
business/" 

When  a  deed  is  given  to  a  bank  for  loans  previously  contracted 
and  for  loans  made  the  transaction  is  within  the  statute.* 

Banks  which  hold  a  trust  deed  of  a  mining  company  may  pur- 
chase the  property  so  as  to  protect  their  interest  and  realize  on 
their  security.* 

A  national  bank  may  become  the  owner  of  shares  in  a  partner- 
ship. It  cannot,  however,  become  a  partner  or  incur  partnership 
liabilities. ^° 

Whether  or  not  a  national  bank  may  engage  in  the  creamery 
business  in  order  to  save  itself  is  not  fully  decided,  but  the  court 
intimates  that  it  could  do  so ;  ^^  also  it  is  undecided  whether  or  not 
a  national  bank  may  complete  a  building  contract  when  the 
contractor  dies  insolvent.^^ 

A  bank  is  liable  for  debts  incurred  while  attempting  to  carry 
out  the  contract  of  its  debtor,  for  the  purpose  of  collecting  a  debt 

due  it.i^ 

* 

«  MeCraith  v.  National  Mohawk  VaUey  Bank,  104  N.  Y.  414,  10  N.  E. 
862  (1887). 

7  Dunn  V.  O'Connor,  25  App.  Div.  (Hun,  N.  Y.)  73  (1898). 

7-  State  Security  Bank  v.  Hoskins,  130  Iowa  339,  106  N.  W.  764,  8 
L.  R.  A.  (n.  s.)  376  (1906). 

8  North  Dakota  Rev.  Code,  1899,  sec  3230 ;  Merchants'  State  Bank  v. 
Tufts,  14  N.  D.  238,  103  N.  W.  760,  116  Am.  St.  Rep.  682,  n.  (1905). 

9  Missouri  State  Bank  v.  South  St.  Louis  Foundry,  145  Mo.  App.  257, 
129  S.  W.  433  (1910). 

1"  Merchants'  National  Bank  v.  Wehrmann,  69  Ohio  St.  160,  68  N.  E. 
1004  (1903). 

11  Emigh  V.  Earling,  134  Wis.  565,  115  N.  W.  128,  27  L.  R.  A.  ^n.  s.) 
243,  n.  (1908). 

Insecurity  National  Bank  v.  St.  Croix  Power  Co.,  117  Wis.  211,  94 
N.  W.  74  (1903). 

13  Swanee  National  Bank  v.  Pureell  Grocery  Co.,  34  Okla.  34,  124  Pac. 
603,  41  L.  R.  A.  (N.  s.)  494  (1912). 

176 


CHAPTER  VIII 
OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES 

§  80.  The  principles  of  estoppel,  ratification,  intent  of  parties  to  con- 

tract, "  qui  facit  per  alium  ",  etc.,  and  the  rules  of  agency  in 
general,  are  what  we  have  to  keep  in  mind. 

§  81.  The  fourth  question  as  to  banking  business,  "How?" 

(a)  What  the  stockholders  must  do. 

(b)  What  the  stockholders  may  do. 

§  82.  When  agents  are  necessary  ;    the  questions  arising  from 

their  employment ;   and  the  facts  precedent  and  sub- 
sequent to  be  considered. 
When  the  Agent's  Act  is  that  of  the  Bank. 
§  83.  As  between  the  bank  and  the  agent. 

§  84.  As  between  the  bank  and  its  sovereign. 

§  85.  As  between  the  bank  and  a  surety  on  the  bond  of  an  officer  of 

the  bank. 
§  86.  As  between  the  bank  and  third  persons  generally. 

Contractual  Acts  in  General. 
§  87.  May  not  bind  either  bank  or  agent. 

§  88.  But  one  or  both  may  be  liable  on  the  facts, 

(o)  Account  for  benefit. 
(6)  Agent  liable  in  case. 
§  89.  When  third  person  may  hold  bank  (general  rules). 

(a)    Ultra  vires  acts,  two  classes  of  cases. 
§§  90,  91.    When  bank  can  hold  third  party  (general  rules). 

(a)  Ratification. 

(b)  Ultra  vires. 

§  92.  When  the  agent  holds  third  party  (general  rules). 

Contractual  Acts.  —  Intent  of  Parties. 
§  93.  Exclusive  credit  to  agent. 

§  94.  Exclusive  credit  to  bank. 

When  agent  contracts  in  his  own  name  as  agent,  but  fails  to 
sustain  his  authority. 
§  95.  Concurrent  credit. 

(a)  Presumption  when  agent  contracts  in  his  own  name. 

§  144  e. 

(b)  When  agent  does  not  disclose  his  principal. 

(c)  Note  payable  to  cashier  may  be  sued  on  by  the  bank. 

(d)  Land  bought  for  bank  by  president  in  his  own  name. 
§96.     Contractual  Acts.  —  Authority  of  Agent. 

§  97.  Actual  authority  by  organic  law,  vote,  usage,  verbal  order  of 

superior,  and  tacit  approval,  or  by  necessity.     See  §  165. 
vol.  1  —  12  177 


OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES 

98.  Inferred  or  apparent  aiitliority.     See  98    (i),    (e),    (0,    (n)  j 

§§  114,  142,  151,  153,  165c,  (/,  174  a. 

(o)  Course  of  action  by  an  officer  without  objection  from. 
bank.     See  §  171  g. 

(6)  Legal  and  proper  appointment  inferred. 
De  facto  officers. 

(c)  Inherent  powers  inferred  from  occupancy  of  office.     See 

§  171,  d,  e. 
Expansion  of  §  98. 

(d)  Test  question,  —  Would  a  prudent  man  suppose  the 

officer  had  authority,  judging  from  the  conduct  of  the 
bank,  as  known  to  him,  actually  or  constructively? 
{K)  Third  party  has  notice  if  he  knows  a  fact  which  would 
lead  a  man  of  ordinary  prudence  to  an  inquiry  which 
would  disclose  the  truth, 
(i)    Authority  cannot  be  inferred  beyond  what  could  legally 
be  given  by  the  power  whose  conduct  is  the  basis  of 
inference. 
if)    Ultra  vires  acts  may  bind. 
{g)  Bank  may  restrict  or  enlarge  inherent  powers,  but  not  to 

affect  parties  without  notice. 
ij)    Substitution  of  one  officer  for  another. 

Receipt  of  money  by  paying  teller, 
(/c)  Representations.     §  103. 
Notice  to  agent.     §  104. 
(Z)    Holding  out  by  usage. 

Opinion  of'u.  S.  S.  C. 
Bank  may  be  bound  to  innocent  party,  even  though  the 
officer  acts  fraudulently  or  ultra  vires, 
(l-n)  \  Acts  within  the  ordinary  scope  of  an  office  bind  the  bank 
in  favor  of  an  innocent  third  party,  though  the  charter 
limits  the  officer's  powers  unknown  to  such  party. 
§98/. 

§99.     Contractual  Acts.  —  Adverse   Interest  of  Agent.     §§109, 

125,  b,  e,  136,  167  e. 
§  100.  Revocation. 

§  101.  Ratification. 

(a)  Constructive  knowledge  of  facts  not  enough. 

(b)  Ratification  by  stockholders. 

(c)  Retention  of  proceeds  ratifies. 

(d)  Directors,'  approval  or  acquiescence.     §§25  a,  168  g. 

§  102.     Tortious  Acts  in  General. 

Agent's  responsibility  to  bank.      §§  128,  147,  172. 
(o)  Agent's  responsibility  to  third  party.     §§  128,  147,  172, 
717. 

(b)  Bank's  responsibility  to  an  agent. 
Bank's  responsibility  to  sovereign.      §  722. 

(c)  Bank's  responsibility  to  third  person. 

Grounds  of  liability  in  tort ;  authorization,  ratification, 
control,  or,  in  some  cases,  the  fact  of  being  in  the  best 
position  to  prevent. 

General  rule  of  bank's  liability. 

Ultra  vires  tort.      §  727  /. 

178 


OFFICERS    AND    AGENTS. — GENERAL    PRINCIPLES 

Wilfulness  not  the  test ;   bank  liable  for  tort  in  course  of 
business,  even  though  contrary  to  express  directions. 

(d)  Statement  of  the  law  by  U.  S.  S.  C. 

Bank's  responsibility  for  correspondent  or  notary.    §  264, 

(e)  Cases  on  the  bank's  liability  for  negligence.     §  9   n    16  ' 

§§  204.  430,  461,  482  e,  761.  *       ' 

(e)  and  (h)  Tort  beyond  officer's  scope  ;   cask  of  gold.    §§  201,  202. 
(/)    Banks  do  not  warrant  the  general  honesty  of  officers. 
ig)  Neghgence  of  directors  in  selecting  officer. 

Bank  not  responsible  for  remote  result,  felony  inter- 
vening, case  of  stolen  bills.     §  658. 
§  103.     Representations.     §  42  c,  2,  §§  124,  145,  167,  168,  203. 

General  rule.  May  amount  to  fraud,  warranty,  or  con- 
tract. §  167. 
Information  as  to  past  transactions  is  courtesy,  unless  it 
bears  on  present  or  future  dealings.  §  167  c.  See 
also  b. 
(a)  When  an  agent's  power  is  ascertained,  a  third  person 
may  take  his  representations  as  to  any  extrinsic  fact 
peculiarly  within  the  agent's  knowledge,  and  not  as- 
certainable by  a  comparison  of  the  act  done  with  the 
terms  of  the  agent's  power,  and  pertaining  to  the 
business  for  which  the  agent  has  actual  or  implied 
authority.  What  representations  shall  be  considered 
as  so  pertaining  to  the  duty  of  an  agent  is  much  con- 
trolled by  usage.  An  agent's  representations  can 
never  be  taken  to  prove  his  own  authority. 

(c)  Falsehood  told  by  one  officer  to  another. 

(d)  Teller's  assertion  that  an  indorsement  is  genuine. 

(e)  Representations  in  agent's  own  business,  as  known  to 

party  with  whom  he  is  dealing,  will  not  affect  the  bank. 
§  104.     Notice  to  the  Bank.     §  9,  n.  9 ;    §§  133,  146,  166. 

Grounds  of  decision,  communication,  and  identity. 
§  105.  Credibility. 

§  106.  Adverse  interest. 

§  107.  Special  duty  to  receive  such  notice. 

§  108.  Did  the  agent  act  for  the  Bank  in  the  matter? 

If  so,  did  the  information  come  during  such  action,  or  pre- 
viously ; 
(a)  and  if  the  latter,  then  how  long  before,  and  was  there 
an 
(e)  {g)  adverse  interest,  and  did  the  third  party  Icnow  of  the 
agent's  having  notice,  and  not  of  his  adverse  interest. 
§  110.  Ratification  adopts  an  act  with  all  the  agent's  notice,  pre\ious 

or  contemporaneous.      §§  101,  168  g. 
§  111.  When  notice  to  agent  does  not  affect  the  bank. 

§  112.  Notice  to  a  single  director. 

Question  as  to  the  justice  of  holding  bank. 

(a)  Louisiana  court  favors  requiring  notice  to  a  majoritj', 

or  to  the  board. 
(h)   Conclusion  upon  the  argument. 
§  113.  A  note  on  the  competency  of  bank  officers  as  witnesses  for  the 

bank. 
§  98  b.     De  facto  Officers. 

179 


§  80  OFFICERS   AND   AGENTS.  —  GENERAL  PRINCIPLES 

§  80.  Except  by  way  of  illustration,  it  would  be  superfluous 
to  cite  cases  upon  the  maxim,  Qui  facit  per  alium  facit  per  se,  or 
the  principles  of  estoppel  and  ratification,  and  that  the  essence 
of  a  contract  is  the  intent  of  the  parties,  which  underlie  a  great 
part  of  this  chapter,  or  those  familiar  propositions  which  flow 
from  these  axioms,  and  are  assumed  as  the  basis  of  decision  through- 
out the  country. 

The  Law  of  Agency  Supplies  the  Rules  of  This  Division 

The  business  of  an  incorporated  bank  ^  can  of  course  be  con- 
ducted only  by  agents  i"  of  the  corporation,  or,  as  they  are  com- 
monly styled,  officers  of  the  bank.  It  is  in  the  corporate  shape 
that  nearly  all  the  banking  business  in  the  United  States  is  carried 
on  ;  though  the  English  system,  by  which  private  individuals  and 
partnerships  enter  into  the  banking  business,  is  by  no  means 
unknown  among  us.  Even  in  this  latter  species  of  arrangement, 
however,  the  individual  or  partnership,  if  the  business  be  tolerably 
large,  must  appoint  clerks  or  agents,  v/ho  must  perform  the  func- 
tions, and  may  often  assume  the  titles,  of  certain  of  the  bank 
officers,  —  not  of  president  or  directors,  of  course,  but  of  cashier, 
teller,  bookkeeper,  and  the  like.  In  either  case,  the  official  or 
clerk  is  in  fact  strictly  the  agent  of  the  corporation,  partnership, 
or  individual ;  and  in  general  terms  it  may  be  stated  that  the 
ordinary  rules  of  the  law  of  agency  will  apply  for  the  settlement 
of  all  appropriate  questions.  These  rules  will  govern  all  trans- 
actions in  which  the  corporation  or  its  officials  are  parties,  just  as 
much  as  they  govern  all  transactions  in  which  the  individual  and 
his  clerk  are  parties.     It  makes  no  difference  that  the  principal 

1  §  80.  The  "associations"  of  New  York,  organized  under  the  statutes 
of  that  State,  differ  only  in  some  slight  and  insignificant  particulars  from 
ordinary  corporations.  For  all  the  purposes  of  the  matters  now  under 
discussion,  they  may  be  regarded  as  corporations.  The  National  Bank- 
ing Act,  §  8,  especially  declares  that  all  organizations  under  its  provisions, 
though  called  "associations",  shall  yet  have  the  legal  character  of  corpora- 
tions. 

1°  An  employee  of  the  bank  engaged  in  perpetration  of  a  fraud  upon  the 
depositor  is  not  an  agent  of  the  bank.  Brown  v.  Lynchburg  National  Bank, 
109  Va.  530,  64  S.  E.  950  (1909) ;  neither  is  a  bank  examiner  the  agent  of 
a  bank  to  agree  that  a  part  of  a  fund  deposited  with  the  bank  by  its  presi- 
dent to  secure  his  indebtedness  shall  be  applied  to  a  debt  due  the  bank  by 
a  customer,  and  for  which  the  president  of  the  bank  was  ultimately 
liable.  Culpeper  National  Bank  v.  Walter,  114  Va.  522,  77  S.  E.  484 
(1913). 

180 


WH.A.T   THE    STOCKHOLDERS   MUST   DO    AXD    iL\Y   DO  §  81 

is  a  corporate  body,  and  that  the  agent  has  an  official  designation. 
His  title  serves  only  to  show  in  what  class  of  dealings,  for  what 
purposes,  and  with  what  powers,  he  is  accredited  as  an  agent; 
and  the  simple  legal  relationship  of  principal  and  agent,  as  it  is 
well  understood  in  its  constant  occurrence  between  individuals,  is 
to  be  found  with  precisely  the  same  legal  attributes  beneath  the 
corporate  impersonality  and  the  official  dignity.- 

§81.  The  fourth  question  concerning  banking  business  was, 
"How?  "  And  in  considering  the  manner  in  which  it  is  done, 
the  chief  fact  calling  upon  our  attention  is  that  nearly  the 
whole  of  it  must  by  the  nature  of  the  case  be  carried  on 
through  agents. 

What  the  Stockholders  Must  Do  and  May  Do 

(a)  Some  acts  may  be,  some  must  be,  done  by  the  body  of 
stockliolders ;  for  example,  the  election  or  removal  of  directors, 
the  increase  of  capital,  a  voluntary  dissolution,  or  abandonment, 
or  any  act  involving  a  change  in  the  organization  of  the  bank, 
must  be  done  by  the  stockliolders ;  and  any  transaction  infringing 
on  the  private  rights  of  stockliolders,  as  a  gift  of  the  bank's  prop- 
erty, or  a  call  upon  the  shareholders,  requires,  in  the  absence  of 
statutory  provisoin,  the  consent  of  every  one  of  the  stockholders 
to  make  it  completely  valid. 

(h)  Besides  these  things,  which  must  be  attended  to  by  the 
corporate  body  itself,  there  are  many  others  which  may  or  may 
not  belong  to  its  sphere  of  action,  according  to  its  charter  or  the 
statute  under  which  it  is  organized,  and  the  action  of  the  cor- 
poration itself  in  the  disposal  of  its  powers.  For  example,  the 
power  of  making  by-laws  may  be  in  the  body  of  stockholders,  or 
in  the  board  of  directors  (11.  §  S)  ;  and  even  where  the  whole 
power  of  management  and  of  making  by-laws  resides  in  the  direc- 
tors, the  stockholders  may  be  called  upon  by  them  for  advice  and 
instructions, 

2  Frankfort  Bank  v.  Johnson,  24  Me.  490 ;  Atlantic  Bank  t'.  Merchants' 
Bank,  10  Gray  (Mass.)  .582. 

A  national  bank  has  power  under  the  banking:  laws  of  the  United  States 
to  intrust  to  its  agent  such  authority  as  is  required  to  perform  all  of  the 
legitimate  demands  of  its  authorized  business,  and  to  enable  it  to  conduct 
its  affairs  within  the  general  scope  of  its  charter,  safely  and  prudently. 
Ricker  National  Bank  v.  Stone,  21  Okla.  833,  97  Pac.  577  (190S). 

181 


§  82       OFFICERS  AND  AGENTS.  —  GENERAL  PRINCIPLES 

Necessity  of  Agents  and  the  Consequent  Questions.     Precedent  and 
Subsequent  Facts 

§  82.  However,  no  such  unwieldy  body  as  that  of  the  share- 
holders could  ever  receive  deposits,  certify  checks,  collect  debts, 
or  do  any  of  the  acts  that  make  up  the  daily  routine  of  business. 
Agents  are  necessary,  and  their  introduction  upon  the  scene  of 
action  gives  rise  to  complicated  and  important  questions.  What 
liabilities  exist  between  the  officer  and  the  bank?  When  is  the 
act  of  the  agent  the  act  of  the  bank  ?  When  is  the  individual  agent 
responsible  to  the  third  party?  The  problem  resembles  that  of 
the  three  bodies  in  astronomy,  and  is  one  of  the  most  interesting 
in  legal  dynamics.  Many  facts  have  to  be  considered  in  seeking 
a  solution.  The  agent  (iV.)  may  or  may  not  have  actual  authority 
from  the  bank  (B.)  or  from  the  board  to  perform  the  act  on  behalf 
of  the  bank.  The  third  party  (C.)  may  know  A.  is  acting  for  B., 
or  not.  B.'s  conduct  may  be  such  as  to  lead  C.  naturally  to  infer 
that  A.  acts  with  its  approval.  A.  may  make  representations,  or 
have  certain  knowledge,  during  and  affecting  the  transaction. 
C.  may  have  notice  of  restrictions  on  A.'s  power,  or  of  other  facts 
bearing  on  the  matter,  or  he  may  give  exclusive  credit  to  A.  The 
act  may  be  intra  vires  of  the  bank,  or  ultra  vires,  and  C.  may  or 
may  not  have  notice  of  this.  A,  may  know  he  is  going  beyond 
his  authority,  or  on  the  facts  as  known  to  him  his  act  may  be 
within  bounds,  and  yet  some  fact  out  of  sight  make  it  really 
wrongful.  An  agent's  action  may  be  subsequently  approved  by 
the  bank  or  the  board  of  directors,  or  they  may  take  the  bene- 
fit of  it  and  make  no  objection,  or  retain  A.  in  their  service  after 
knowing  of  his  wrong  conduct. 

§  83.  The  question  of  greatest  import  in  the  matter  before 
us  is.  Where  is  the  boundary  between  individual  and  corporate 
responsibility  ?  when  is  the  agent's  act  that  of  the  bank,  and  when 
is  it  merely  his  private  affair? 

Bank  v.  Officer 

As  between  the  bank  and  the  officer  his  act  is  the  bank's  only 
when  it  is  done  with  the  bank's  own  consent  or  approval,  or  is 
ratified  by  it  with  a  knowledge  of  the  facts,  or  when  it  is  done  by 
authority  or  approval  of  a  superior  officer,  the  subordinate  having 
no  notice  of  any  fact  making  the  order  of  the  superior  wrongful, 
182 


BANK   T.    SOVEREIGN  §  84 

or  when  it  is  ratified  by  a  superior  officer  who  could  lawfully  have 
authorized  it.  Otherwise  as  between  the  bank  and  the  agent, 
the  latter  is  responsible  for  all  loss  directly  resulting  from  his 
conduct  in  the  business  of  the  bank,  which  fails  to  come  up  to  the 
standard  of  reasonable  skill  and  competency,  ordinary  care  and 
attention  to  the  duties  of  his  oiiicc,  strict  obedience  to  the  law  on 
the  facts  reasonably  within  his  knowledge,  and  a  course  of  con- 
duct unstained  by  any  bad  faith. 

The  right  of  action  of  the  bank  against  an  officer  for  his  wrongful 
or  fraudulent  act  seems  not  to  be  barred  by  the  Statute  of  Limita- 
tions, if  his  act  has  only  been  known  to  himself  during  the  period. 
It  is  his  duty  to  disclose  the  fact  to  the  bank,  not  the  duty  of  the 
other  officers  to  inquire  of  him.  Thus,  where  the  president  of 
a  bank  receives  money  of  the  bank,  to  be  applied  in  payment  of 
a  specific  debt,  but  does  not  so  apply  it,  and  the  bank  remains  in 
ignorance  of  the  fact  until  it  is  subsequently  compelled  to  pay  to 
the  creditor,  the  president  cannot,  when  sued  by  the  bank,  set  up 
the  Statute  of  Limitations  in  his  defence.^ 

Bank  v.  Sovereign 

§  84.  As  between  the  bank  and  the  State,  there  is,  by  the  nature 
of  their  duties,  a  wide  difference  between  the  acts  of  the  board 
and  those  of  any  other  agent.  If  the  former  does  any  act  in  the 
management  of  the  bank's  business  or  its  property  which,  upon 
facts  known  to  them  or  which  might  be  known  by  the  exercise  of 
reasonable  diligence,  is  a  violation  of  the  law  under  which  the 
bank  is  organized,  it  is  the  act  of  the  bank,  and  however  innocent 
the  stocldiolders  may  be,  may  cause  a  forfeiture ;  they  have  in- 
trusted the  management  to  the  directors,  and  must  abide  the 
result.     (See  Forfeiture.) 

The  directors  are  the  real  brain  and  judgment  and  control  of 
the  bank,  and  for  the  protection  of  the  public  their  action  must 
be  deemed  that  of  the  bank,  so  far  as  its  business  and  property  are 
concerned ;  otherwise  the  bank  could  defy  forfeiture,  and  violate 
the  law  with  impunity,  by  a  continual  change  of  officers. 

But  if  any  subordinate  officer  breaks  the  law,  the  question  is. 
Did  the  bank  or  the  board  authorize  the  act,  or  knowingly  permit 
it  or  adopt  it,  by  retaining  the  wrongdoer  or  the  benefit  of  the 
transaction  knowing  the  facts?     If  so,  the  bank  is  liable  to  for- 

»  §  83.     Atlantic  National  Bank  v.  Harris,  118  Mass.  147. 

183 


5  84  OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES 

feiture  on  the  reasoning  above.  When,  however,  the  act  was 
unauthorized,  and  the  directors  have  exercised  due  care  in  super- 
vision, and  when  the  fact  comes  to  their  knowledge  they  repudiate 
and  so  far  as  possible  undo  the  wrong,  it  is  not  deemed  the  act 
of  the  bank,  but  that  of  the  individual  officer,  for  which  he  may 
suffer  the  penalty  of  the  law. 

The  difference  in  the  two  cases  lies  in  the  locus  of  control. 
The  reins  are  in  the  hands  of  the  directors,  and,  if  they  do  not 
do  their  duty  in  the  selection  of  horses  or  harness,  or  drive  im- 
properly, the  owner  of  the  coach  may  well  be  held ;  but  if  no 
fault  attaches  to  them  or  to  the  owner,  it  would  be  carrying  lia- 
bility to  a  great  extent  to  hold  the  latter  for  the  stumbling  of 
one  of  the  horses.  If  those  in  control  of  the  bank  obey  the  law, 
the  public  will  be  little  exposed  to  wrong,  or  excess  of  power ;  and 
no  necessity  for  the  public's  protection  existing,  as  in  the  case  of 
the  board,  it  would  be  hardly  fair  to  punish  the  innocent  stock- 
holders for  the  occasional  fault  of  a  subordinate. 

If  the  board  violates  the  law  by  action  entirely  aside  from  any 
handling  of  the  property  or  business  of  the  bank,  as  if  they  form 
a  conspiracy  to  do  some  felony  or  overthrow  the  government,  of 
course  that  is  not  the  act  of  the  bank ;  it  must  be  done  in  the  course 
of  their  management  of  the  bank,  its  interests,  or  property. 

Bank  v.  Surety 

§  85.  Between  the  bank  and  the  surety  upon  the  bond  of  an 
officer,  no  act  of  the  board,  nor  of  any  one  beside  the  stockliolders, 
can  relieve  the  surety  from  liability  for  the  guaranteed  officer's 
breach,  unless  it  is  otherwise  nominated  in  the  bond.  The  very 
purpose  of  the  bond  is  to  secure  the  bank  against  the  fraud  or 
incompetence  of  the  officer,  and  its  value  would  be  slight  if  the 
fraud  or  incompetence  of  another  officer  precedent  or  subsequent 
were  to  be  the  death  of  the  surety's  obligation.  (See  Official 
Bonds.) 

Bank  v.    Third  Parties  in  General 

§  86.  We  will  now  consider  the  last  phase  of  the  problem  in 
which  the  bank  is  a  factor.  When  is  the  bank  responsible  to  third 
parties  for  the  act  of  its  agent,  and  when  can  the  bank  hold  third 
parties  upon  their  dealings  with  A.?  A  distinction  must  be 
carefully  noted.  The  questions,  when  is  A.'s  act  B.'s  act,  and  when 
is  B.  bound  by  the  act,  are  very  different  questions.  The  latter  is 
18-1 


NEITHER   BOUND    ON   THE    CONTRACT  §  88 

not  a  question  of  agency.  B.  may  act  himself,  and  yet  not  be 
bound,  as  in  case  of  a  void  contract,  or  an  act  which  is  damnum 
absque  injuria,  where  no  responsibiUty  attaches  in  consequence 
of  his  act.  In  the  case  of  a  bank,  when  it  is  once  determined  that 
a  certain  act  is  that  of  the  corporation,  the  question  whether  it 
is  bound  by  the  act  in  contract,  or  responsible  for  it  as  a  tort,  or 
a  crime,  is  one  with  which  we  are  not  concerned  here,  as  it  does 
not  depend  upon  the  principles  of  agency.  It  may  just  be  noted 
in  passing,  that,  if  the  act  is  intra  vires,  the  bank  is  bound  just  as 
a  private  person  would  be;  if  ultra  vires,  its  responsibility  de- 
pends on  principles  discussed  in  §  722  et  seq. 

The  question  for  us  here,  and  it  is  one  of  great  importance,  is 
this:  When  is  an  agent's  contract,  tort,  knowledge,  representa- 
tion, payment,  or  other  act,  that  of  the  bank  as  to  third  parties? 

§87.  Contractual  Acts.  —  First,  of  acts  from  which  arise 
contract  liabilities,  considering  them  in  relation  to  such  liabilities, 
as  distinguished  from  liabilities  in  tort. 

Neither  Bound  on  the  Contract 

A  transaction  of  the  agent  A.  may  create  a  contract  between 
the  bank  B.  and  a  third  party  C,  or  between  A.  and  C,  or  both 
in  one  transaction;  or  though  one  of  these  relations  is  sought, 
they  may  all  fail ;  as  if  A.  act  beyond  or  without  authority  from 
B.,  or  the  contract  is  in  such  form  that  it  cannot  legally  be  the 
act  of  B.  (as  a  deed  in  A.'s  name),  or  if  C,  knowing  that  A.  is 
acting  as  an  agent,  gives  exclusive  credit  to  him,  and  with  one 
or  other  of  these  facts  which  prevent  B.'s  liability  on  the  transaction 
there  co-exists  a  fact  preventing  it  from  being  A.'s  contract,  as 
when  he  uses  no  words  in  a  written  contract  that  can  charge 
himself,  and  in  any  case  where  there  are  no  circumstances  showing 
that  any  credit  was  given  to  A. 

(There  are  other  cases  where  the  contract,  though  the  act  of  A. 
or  B.,  does  not  bind  either,  as  where  the  party  whose  act  the  con- 
tract is,  is  incapable,  or  the  consideration  fails,  or  is  immoral  or 
against  policy,  or  void  by  statute,  or  ultra  vires;  but,  as  said  above, 
these  are  matters  outside  the  subject  of  this  division.) 

§  88.  Ahhough  the  transaction  may  not  be  such  as  to  hold 
either  the  agent  or  the  bank  on  the  contract,  yet  one  or  both  may 
be  held  by  obligations  implied  by  law  on  the  facts. 

Thus  a  committee  of  a  corporation  contracting  for  the  company 

185 


S  88  OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES 

with  full  authority  used  their  individual  seals  instead  of  the  cor- 
porate seal,  which  is  essential  to  the  making  of  a  corporate  deed, 
drawing  therefor  an  instrument  that  was  not  their  own  contract, 
for  they  could  not  individually  deed  away  the  company's  land, 
nor  the  company's  contract,  because  of  its  form ;  yet,  as  they 
acted  with  due  authority,  assumpsit  could  be  brought  against  the 
company  founded  on  the  obligation  of  the  stipulations  in  the 
instrument. 

Benefit  Received  must  he  Accounted  For.     Agent  Liable  to   Third 

Party 

(a)  So  benefits  of  any  kind  received  under  a  transaction  that 
fails  as  a  contract  express,  must  be  accounted  for,  and  in  any  case 
where  an  agent  A.  fails  to  give  the  third  person  C.  a  right  of  action 
against  the  bank  according  to  the  tenor  of  his  agreement,  and  is 
not  himself  bound  on  the  contract,  still  A.  is  liable  to  C.  in  case, 
unless  the  failure  of  the  contract  is  due  to  facts  equally  within  the 
contemplation  of  both  parties  A.  and  C. ;  as  if  A.'s  authority  were 
by  facts  unknown  to  him  revoked. 

§  89.  Two  things  chiefly  must  be  taken  into  consideration  in 
determining  to  whom  belongs  a  given  contractual  act :  1st,  the 
intent  of  the  parties,  their  understanding  as  to  whom  credit  is 
given,  in  the  transactions ;  2d,  the  authority  of  the  agent,  actual, 
inferred,  or  arising  by  ratification. 

Third  Party   Holds  Bank 

(a)   The  general  principles  are :  — 

First.  Unless  the  case  comes  under  the  fifth  head  below,  C. 
has  a  right  to  consider  the  act  of  A.  to  be  that  of  B.  whenever  A. 
and  B.  are  really  identical  in  the  matter  (whether  A.  disclosed  to 
C.  that  he  was  acting  for  B.  or  not,  except  that  an  undisclosed 
principal  cannot  be  subsequently  held  to  his  injury,  as  if  he  has 
settled  with  A.  while  still  having  reason  to  believe  that  C.  is  giving 
exclusive  credit  to  A.),  and  whenever  B.'s  conduct  has  been  such 
as  to  warrant  a  man  of  ordinary  prudence  in  concluding  that  A. 
is  acting  for  B.  with  his  approval  and  consent. 

For  example,  a  national  bank,  with  the  knowledge  of  its  officers, 
was  in  the  habit  of  receiving  money  on  deposit,  and  issuing  certifi- 
cates therefor,  sometimes  in  its  own  name,  sometimes  in  that  of 
Van  Campen,  the  president.  This  course  of  business,  being  known 
186 


THIRD    PARTY    HOLDS    BANK  §  89 

to  and  permitted  by  the  officers,  was  with  authority  as  to  third 
parties,  and  the  bank  was  held  hable  to  a  depositor  who  took  a 
certificate  purporting  to  be  issued  by  Van  Campen  personally, 
the  depositor  believing  it  to  be  the  obligation  of  the  bank,  and  so 
accepting  it.^ 

Ratification 

(6)  Also,  if  A.'s  act  ostensibly  and  avowedly  for  B.  is  afterward, 
with  knowledge  of  the  facts,  ratified  by  the  power  which  could 
have  given  previous  authority. 

Benefit  Retained.      Ultra  Vires,  1st  Class  of  Cases 

(c)  And  one  class  of  cases  goes  a  step  beyond  all  this,  and  holds 
that,  even  when  C.  knew  that  the  officer  or  the  board  were  acting 
idtra  vires  of  the  bank,  and  therefore  of  course  beyond  their  au- 
thority, yet,  if  the  bank  receives  and  retains  the  benefit  of  the 
transaction,  it  cannot  interpose  the  plea  of  idtra  vires  in  a  suit  upon 
the  contract.^"  This  amounts  to  sustaining  against  the  principal 
a  contract  made  by  an  agent  beyond  his  authority,  for  it  is  not 
necessary  that  the  stockliolders  should  act  in  the  matter ;  it  is 
sufficient  if  the  board  of  directors  receive  and  retain  the  benefit  for 
the  bank.  This  applies,  of  course,  only  to  executed  contracts, 
no  agent's  executory  contract  ultra  vires  of  the  bank  can  bind  it, 
whether  C.  knew  or  not  of  its  true  character. 

True  Rule  2d  Class  of   Ultra  Vires  Cases 

(d)  Another  less  numerous  but  more  consistent  class  of  cases 
hold  that  the  act  of  an  agent  beyond  his  authority,  and  known 
by  C.  actually  or  constructively  to  be  so,  is  not  the  act  of  the  bank 
as  to  C,  and  it  cannot  be  held  on  the  contract,^''  although  if  it  has 
received  benefit  by  reason  of  the  transaction,  it  must  account  for 
the  same. 

(e)  In  general  all  acts  of  an  agent  that  are  done  officially ,2  and 
that  fall  within  the  scope  of  his  powers  and  duties,^  are  in  law  the 
acts   of   the   corporation   itself.     Whether   these   be   rightful    or 

1  §  89.  West  V.  First  National  Bank  of  Elmira,  20  ITun  (N.  Y.)  408. 
See  Smith  v.  Rathburn,  88  N.  Y.  G60 ;  Germania  Ins.  Co.  v.  R.  R.  Co., 
72  N.  Y.  91 ;  Upton  v.  Tribilcock,  91  U.  S.  50,  23  L.  ed.  206. 

>"  See  §  722.  ""  See  §  722. 

2  Hughes  i\  Bank  of  Somerset,  5  Litt.  (Ky.)  45. 

'New  Hampshire  Savings  Bank  v.  Downing,  16  N.  H.  187. 

187 


§  89  OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES 

wrongful,  innocent  third  parties  have  the  right  to  regard  them  in 
this  hght,  and  the  law  will  thus  construe  them.  In  like  manner, 
knowledge  obtained  by  the  agent  in  his  official  capacity,  and  within 
the  scope  of  his  agency,  will  affect  the  corporation ;  and  declara- 
tions made  by  him  in  the  like  manner,  and  within  the  like  range, 
will  bind  the  corporation.  But  acts  done,  knowledge  obtained, 
or  declarations  made,  beyond  such  scope,  or  not  in  an  official 
capacity,  do  not  affect  the  company  at  all.* 

The  bank's  liability  to  third  parties  is  not  affected  by  the  fraud 
of  the  officer  upon  the  bank  in  the  transaction,  if  it  was  unknown 
to  such  third  party .^ 

Bank  Holds  Third  Party.     Third   Party  caniiot  he  Prejudiced  by 

Ratification 

§  90.  Second.  The  bank  can  hold  a  third  person,  C,  as  to  a 
contract  made  with  it  directly,  so  far  as  its  agent  was  really  acting 
for  it  (under  authority  directly  from  the  organic  law,  or  from  the 
bank  itself,  or  from  the  lawful  order  of  a  superior  or  recognized 
usage,  or  necessity),  unless  exclusive  credit  was  given  to  A.  under 
the  fifth  head  below,  and  so  far  as  his  action,  though  without 
actual  authority,  was  ostensibly  for  the  bank,  and  with  knowl- 
edge of  the  facts  has  been  adopted  or  ratified  by  that  body  which 
could  have  authorized  the  act  previous  to  its  performance,  [bear- 
ing in  mind,  however,  that  although  the  general  rule  is  that  rati- 
fication discharges  an  agent  from  responsibility  to  his  principal, 
(or  to  the  third  person,  C,  except  so  far  as  expressly  bound  by  the 
contract,)  and  makes  the  act  of  the  same  effect  as  if  with  antece- 
dent authority,  yet  C.  cannot  be  affected  injuriously  by  the  rati- 
fication where  his  conduct  in  the  meantime  must  depend  on  the 
question  whether  the  act  was  with  power  at  the  time ;  for  example, 
if  A.  without  authority  demand  B.'s  goods  from  C,  no  ratification 
can  make  C.'s  refusal  a  conversion,  for  the  delivery  to  A.  would 
not  have  been  good.     So,  if  A.  makes  an  unauthorized  demand 

*  Bank  of  Columbia  v.  Patterson's  Adm'r,  7  Craneh  299,  3  L.  ed.  351 ; 
Fleckner  v.  Bank  of  United  States,  8  Wheat.  338,  5  L.  ed.  631 ;  Atlantic 
Bank  v.  Merchants'  Bank,  10  Gray  (Mass.)  532 ;  Fulton  Bank  v.  N.  Y.  & 
Sharon  Canal  Co.,  4  Paige  (N.  Y.)  137 ;  Boom  v.  City  of  Utica,  2  Barb. 
(N.  Y.)  104;  New  England  F.  &  M.  Ins.  Co.  v.  Schettler,  38  111.  1G6; 
Wright  V.  Georgia  R.  R.  &  Banking  Co.,  34  Ga.  330 ;  Wyman  v.  Hallowell 
&  Augusta  Bank,  14  Mass.  62  ;  Salem  Bank  v.  Gloucester  Bank,  17  id.,1; 
Madison  &  Indianapolis  R.  R.  Co.  v.  Norwich  Saving  f^oc,  24  Ind.  457. 

^  Citizens'  Savings  Bank  v.  Blakesley,  42  Ohio  St.  645. 

188 


EXCLUSIVE    CREDIT    TO    THE    BANK  §  94 

for  a  debt  due  to  B.  from  C,  a  ratification  will  not  prevent  C. 
from  pleading  a  previous  tender ;  for  if  he  had  paid  A.,  it  would 
have  been  no  discharge  of  the  debt.  So  also  notice  of  dishonor 
by  a  stranger  is  not  good  by  ratification.^] 

Also,  if  a  third  person,  C,  hold  the  bank,  B.,  to  a  contract 
made  by  A.  without  actual  authority,  and  not  ratified,  B.  can  hold 
C.  to  a  fulfilment  of  his  own  part  of  the  agreement. 

Ultra   I  'ires 

(b)  And,  under  the  first  head,  there  is  a  class  of  cases  holding 
that  the  bank  can  hold  C.  to  his  part  of  an  ultra  vires  contract 
when  C.  has  received  a  benefit  from  the  transaction  which  he  can- 
not or  will  not  give  up.- 

§  91.  Third.  If  A.  acts  neither  really  nor  ostensibly  for  the 
bank,  it  cannot  assume  the  contract. 

§  92.  Fourth.  If  A.  avowedly  contracts  for  the  bank,  but  is  him- 
self the  real  principal,  he  must  give  the  third  person,  C,  notice 
of  his  real  character  before  he  can  sue  him,  and  if  the  fact  that 
the  bank  was  supposed  by  C.  to  be  a  party  entered  into  the  con- 
sideration, A.  cannot  hold  C.  at  all,  if  the  contract  is  executory 
on  A.'s  side,  nor  can  he  in  any  case  avoid  anj^  defense  C.  could 
have  made  if  A.  had  told  the  truth. 

Exclusive  Credit  to  the  Agent 

§  93.  Fifth.  Intent  of  the  Parties.  —  If  the  third  person,  C. 
(not  being  ignorant  of  the  existence  of  a  principal  behind  A.,  to 
whom  he  might  have  given  credit  if  known),  gives  exchisive 
credit  to  the  agent,  A.,  as  where  a  bond  is  given  in  A.'s  name,  or 
the  circumstances  show  that  the  contract  was  intended  to  be 
exclusively  between  A.  and  C,  the  bank  can  neither  sue  nor  be 
sued  on  the  contract,  though  it  may  be  entitled  to  the  benefit  of  it, 
or  concluded  by  it,  and  entitled  to  collateral  rights,  and  subject 
to  and  entitled  to  remedies  growing  out  of  it. 

Exclusive  Credit  to  the  Bank 

§  94.   Sixth.   If  the  tliird  party,  C,  gives  exclusive  credit  to 

the  bank,  the  agent  is  not  generally  liable  on  the  contract,  though 

»  §  90.     Stanton  v.  Blossom,  14  Mass.  116.  '  See  ultra  vires,  §  722. 

189 


§  94  OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES 

he  may  be  liable  in  case  of  any  misrepresentation  or  fraud ; 
however,  if  A.  contracts  in  his  own  name  as  agent,  adding  his 
representative  character,  and  he  fails  to  sustain  his  right  to  this 
addition,  his  name  will  stand  without  the  annex,  and  he  will  be 
personally  bound  by  the  contract,  if  it  is  one  he  could  make  him- 
self.i 

Concurrent  Credit 

§  95.  Seventh.  Whenever  it  is  the  understanding  of  the  parties 
A.  and  C.  to  a  contract,  that  credit  is  given  to  both  the  agent.  A., 
and  the  bank,  B.,  or  both  A.  and  B.  are  really  interested  in  the 
contract,  or  one  is  a  party  and  the  other  interested,  it  is  the  contract 
of  both  A,  and  B.,  except  that  only  the  named  parties  to  a  sealed 
contract  can  sue  or  be  sued  directly  on  the  contract,  and  that, 
whenever  exclusive  credit  is  given  to  A.,  and  the  understanding 
is  that  the  principal  is  not  to  sue  or  be  sued  on  the  contract,  this 
excludes  B.  from  action  on  the  contract  directly.  But  A.'s  right 
to  sue  on  a  concurrent  contract  is  subordinate  to  that  of  B.,  (as, 
if  B.  sues  first  or  discharges  C,  A.'s  right  is  superseded,)  except 
when  A.  has  a  lien  or  other  interest -in  the  subject  matter  of  the 
agency,  then  he  may  enforce  his  right  against  both  B.  and  C. 

Presumption  when  Contract  is  in  A.'s  Name 

{a)  There  is  a  concurrent  contract  by  presumption  of  law 
whenever  A.,  having  authority  to  make  a  contract  (not  under  seal), 
makes  it  in  his  own  name,  unless  the  circumstances  make  it  clear 
that  exclusive  credit  was  given  to  A.,  and  both  parties  intended 
that  no  resort  should  be  had  by  or  against  the  bank  on  the  contract 
in  any  event.  And  this  whether  A.  describes  himself  as  an  agent 
or  not,  and  whether  the  third  party,  C,  knew  of  the  principal, 
B.,  or  not.^  Either  A.  or  B.  can  sue  and  be  sued  in  such  cases, 
A.  as  the  party  to  the  contract,  B.  as  the  party  in  interest,  and 
for  whose  benefit  the  contract  was  made. 

(b)  When  A.  does  not  disclose  that  he  is  acting  as  an  agent  for 
B.,  C.  cannot  be  held  to  have  elected  to  give  exclusive  credit  to 
A. ;  for,  not  knowing  of  any  one  else  in  the  matter,  he  had  no 
chance  to  make  the  election  which  might  have  resulted  if  he  had 
known  A.  was  acting  as  agent,  and  this  holds  except  where,  as  in 
the  case  of  a  foreign  agent,  it  would  be  a  conclusion  of  law  that 
exclusive  credit  was  given  to  A.,  even  though  B.  were  known. 

1  §  94.     See  §  128,  n.  i  §  95.     Story  on  Agency,  §  160  a. 

190 


ACTUAL    AUTHORITY  §  97 

If  A.  contracts  in  his  own  name,  and  his  principal  afterward 
becomes  known,  C.  may  elect  which  he  will  hold.^ 

Note  to  Cashier 

(c)  A  note  payable  to  the  cashier  of  a  bank,  beinj];  the  property 
of  the  bank,  is  by  fair  construction  a  contract  with  the  bank, 
and  it  can  sue  in  its  own  name,  as  the  real  party  in  interest.^  It 
can  also  be  sued  on  by  the  cashier.^  So  an  order  payable  to  "  D. 
H.  Neale,  Pres.",  may  be  the  subject  of  suit  by  the  corporation 
as  the  real  party .^ 

Land  Bought  in  Name  of  President 

(d)  So,  where  land  conveyed  in  trust  to  secure  a  debt  due  the 
bank  was  sold  under  a  prior  incumbrance,  and  the  president 
bought  the  land,  taking  a  deed  in  his  own  name,  delivering  the 
note  held  by  the  bank,  and  giving  his  own  note  for  the  balance 
secured  by  deed  of  trust,  it  was  held  that,  as  the  facts  clearly 
showed  the  purchase  to  have  been  for  the  bank,  and  that  the 
president  had  power  to  make  it,  although  the  president  was  the 
legal  party,  yet  in  equity  the  bank  must  relieve  the  estate  by  paying 
the  note  given  by  the  president,^ 

And  this  is  an  agreement  with  the  whole  current  of  reason  and 
decision,  though  Walker  and  Schofield,  JJ.,  dissented.^ 

§  96.  Authority  of  Agent.  —  A  third  party,  C,  can  hold  the 
bank  to  A.'s  act  as  if  it  were  the  bank's  own  act,  if  A.  had  actual 
or  inferred  authority. ^  The  converse,  however,  is  not  true ;  for, 
as  was  seen  under  the  first  head,  some  cases  hold  the  act  B.'s 
where  there  was  no  authority,  either  actual  or  inferred,  and  ratifi- 
cation may  transfer  A.'s  act  to  B. 

§  97.  Eighth.  Actual  Authority  is  really  existing  a  priori 
ground  for  holding  the  act  of  A.  to  be  that  of  B.     It  may  arise,  — 

*  2  Smith's  L.  C.  375. 

3  Commercial  Bank  v.  French,  21  Pick.  (Mass.)  486 ;  Lookout  Bank 
V.  AuU,  93  Tenn.  647,  27  S.  W.  1014  (1894). 

*  Johnson  ;'.  Catlin,  27  Vt.  89. 

5  Eastern  R.  R.  Co.  v.  Benedict,  5  Gray  (Mass.)  561. 

«  Libby  v.  Union  National  Bank,  99  111.  622. 

'  §  96.  When  negotiations  for  a  loan  are  made  at  the  rooms  of  the  bank 
by  a  director  who  consulted  in  the  matter  ^\^th  otlier  directors  then  in 
session  as  a  body  there  is  evidence  which  tends  to  show  that  he  had  au- 
thority to  act  for  the  bank.  Woodsville  Guaranty  Savings  Bank  v. 
Rogers,  86  Vt.  121,  83  Atl.  537  (1912). 

191 


§  97  OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES 

(1)  By  the  organic  law,  as  in  case  of  the  power  of  directors  of 
a  national  bank.     (II.  §  8.) 

(2)  By  action  of  the  corporate  body. 

(3)  By  lawful  vote  or  verbal  order  of  the  board  of  directors, 
or  other  superior  officer  to  the  one  doing  the  act.  But  if  the 
superior  exceeds  his  powers  in  giving  the  command,  there  is  no 
actual,  though  there  may  be  inferred  authority. 

(4)  By  appointment  to  an  office  to  which  certain  powers  belong 
inherently,  so  far  as  these  are  not  restricted  by  the  bank  or  the 
directors. 

(5)  By  a  long  continued  course  of  dealing,  or  series  of  acts  with 
the  knowledge  of,  and  without  objection  from,  the  power  which 
could  expressly  authorize  the  acts.  This  is  the  way  in  which 
inherent  powers  arose.  They  are  usages  judicially  ascertained, 
the  latest  addition  of  large  importance  being  the  inherent  authority 
of  a  cashier  to  certify.  But  no  authority  is  born  of  a  series  of  acts, 
if  each  one  is  done  under  special  authority.     (See  7  below.) 

(6)  By  necessity.  Whenever  an  emergency  exists  calling  for 
immediate  action  for  the  manifest  interest  of  the  bank,  the  officer 
has  authority  to  do  the  act  by  necessity. 

No  Usage  Groivs  from  Special  Authority 

(7)  Performing  an  act  a  series  of  times,  but  each  time  under 
special  authority,  creates  no  general  authority.  The  fact  that 
an  act  has  been  several  times  done  by  an  officer,  who  has,  however, 
on  each  occasion  performed  it  in  pursuance  of  a  vote  or  instruc- 
tions of  the  directors,  does  not  constitute  such  a  custom  for  him 
to  do  the  act  as  to  make  it  binding  upon  the  bank  when  he  does 
it  without  such  authority;  and  this  is  the  case  even  where  the 
outside  party  with  whom  he  is  dealing  knows  that  the  act  or  duty 
has  been  frequently  performed  by  him  in  the  past.  Thus,  where, 
by  verbal  consent,  or  under  direction  of  the  investment  com- 
mittee of  the  directors  of  a  savings  bank,  the  treasurer  had  fre- 
quently assigned  mortgages  to  a  purchaser,  it  was  held  that  no 
such  general  or  implied  authority  for  him  to  execute  assignments 
of  mortgages  arose  as  to  make  his  assignment  of  one  valid,  in  a 
case  where  he  did  so  without  instruction  from  the  committee, 
though  the  assignee  knew  that  such  assignments  had  often  pre- 
viously been  executed  by  this  officer.^ 

1  §  97.     Holden  v.  Phelps,  135  Mass.  61. 
192 


INFERRED   AUTHORITY  §  Qg 

§  98.  Ninth.  Inferred  Authority  of  an  agent  is  such  as  reason- 
ably appears  to  exist  upon  t\\c  fads  of  which  the  party  C,  deahng 
with  him  as  agent,  has  actual  or  constructive  knowledge,  though 
in  fact  there  may  be  no  actual  authority.  C.  in  this  matter  must 
be  held  to  a  knowledge  of  the  law  and  of  facts  to  which  he 
would  have  been  led  l)y  the  exercise  of  sucli  diligence  as  men  of 
ordinary  prudence  display  under  similar  circumstances,  and  to 
correct  reasoning  upon  such  facts. 

It  is  important  to  remember  that  no  authority,  actual  or  in- 
ferred, can  arise  except  by  law,  or  the  act  of  the  bank,  or  of  a 
superior  officer.  A.  himself  cannot,  by  any  mere  words  or  acts 
of  his  own,  create  or  enlarge  his  powers.  The  inference  must  be 
from  the  conduct  of  those  who  can  command  him,  and  it  must 
be  a  reasonable  inference  from  the  facts  fairly  within  C.'s  reach. 
For  example,  if  the  directors  order  the  cashier  to  make  a  loan,  and 
C  has  no  notice  that  it  is  ultra  vires  as  being  beyond  the  legal 
limit,  his  inference  that  it  is  with  authority  is  proper. 

Course  of  Action  without  Objection 

(a)  If  A.  openly,  and  for  a  long  time,  does  certain  things  with- 
out special  authority,  and  there  is  no  objection  from  the  directors, 
C.  properly  infers  A.'s  authority;  for  if  the  directors  knew  of  A.'s 
conduct  it  is  a  clear  case  of  estoppel,  and  if  this  action  was  so  open 
and  long  continued  that  they  would  have  known  of  it  by  reasonable 
diligence,  the  bank  cannot  take  advantage  of  the  neglect  of  its 
agents  in  their  duty,  as  against  one  misled  and  injured  thereby. 

Legal  Appointment  Inferred 

(h)  If  the  directors  allow  A.  to  perform  the  duties  of  a  given 
office  for  a  length  of  time,  a  third  person,  C,  is  justified  in  inferring 
liis  regular  appointment  and  authority  to  act  according  to  the 
customs  of  that  office,  and  the  same  principle  applies  to  the  di- 
rectors themselves. 

Officers  de  Facto 

The  bank  will  be  bound  by  the  acts,  within  the  scope  of  his 
apparent  agency,  of  any  one  who  is  its  officer  de  facto.  The  bank 
holds  him  out  as  its  officer,  and  as  having  the  right  and  duty  to 
perform  certain  functions ;  and  it  is  as  fully  responsible  as  if  this 
right  and  duty  had  been,  in  every  stage  of  its  growth,  perfect. 
VOL.  I— 1.3  193 


§  98  OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES 

Such  facts  as  that  he  has  never  been  regularly  or  formally  inducted 
into  office,  that  all  the  requisites  for  his  entry  upon  the  active 
performance  of  its  duties  have  not  been  complied  with,  —  even 
that  originally  he  was  not  legally  ehgible  for  the  office,  —  will 
not  suffice  to  free  the  bank  from  its  liability  upon  the  acts  which 
it  has  permitted  him  to  do  in  its  behalf.  Thus,  directors  coming 
into  office  through  formalities  purporting  to  be  legal  and  sufficient^ 
are  directors  de  facto,  and  if  their  election  w^as  actually  illegal, 
they  can  yet  only  be  ousted  by  writ  of  quo  icarranto.  One  formally 
appointed  cashier  may  bind  the  bank  as  a  teller,  if  he  is  allowed 
as  a  matter  of  fact  to  perform  the  functions  of  a  teller.  Neither 
does  the  fact  that  one  appointed  to  an  office  fails  to  take  the  oath, 
or  to  file  the  bond,  which  may  be  prescribed  by  statute  or  by-laws, 
vitiate  or  invalidate  any  of  the  acts  done  by  him  during  his  actual 
incumbency.!  In  the  cited  case  of  Baird  v.  Bank  of  Washington, 
less  than  a  quorum  of  the  directors  elected  a  person  to  fill  a  va- 
cancy in  their  board.  The  proceeding  was  of  course  irregular  and 
illegal.  But  the  person  so  chosen  appeared  at  a  subsequent  meet- 
ing and  voted.  His  presence  and  his  vote  were  necessary  to  make 
a  majority  in  the  quorum  then  present.  Nevertheless,  the  action 
taken  at  the  meeting,  and  only  taken  by  his  assistance,  was  sus- 
tained as  binding  the  bank,  on  the  ground  that  he  had  come  in 
under  color  of  title,  had  never  been  ousted,  and  so  was  a  director 
de  facto. 

An  assignment  executed  by  bank  officers  after  their  term  had 
expired,  under  authority  from  stockliolders  granted  before,  held 
valid ;  the  charter  providing  that,  if  election  did  not  take  place 
on  the  proper  day,  the  corporation  should  not  be  deemed  dissolved. 
The  president  and  cashier  were  officers  de  facto,  if  not  de  jure}" 

Inherent  Poivers  Inferred 

(c)  Whenever  A.  really  holds  an  office,  or  C.  properly  infers 
that  he  does,  the  powers  inherent  in  such  office  are,  in  the  absence 
of  notice  of  restriction,  properly  inferred  to  belong  to  A.  An 
official  title  denotes  certain  powers  and  duties,  and  the  officers 

1  §  98.     Bank  of  the  United  States  v.  Dandridge,  12  Wheat.  64,  6  L.  ed. 
552 ;    Minor  v.  Mechanics'  Bank  of  Alexandria,  1  Pet.  46,  7  L.  ed.  47 
Delaware  &  Hudson  Canal  Co.  v.  Pennsylvania  Coal  Co.,  21  Pa.  St.  131 
Cooper  V.  Curtis,  30  Me.  488 ;    Smith  v.  Bank  of  the  State,  18  Ind.  327 
Baird  v.  Bank  of  Washington,  11  Serg.  &  R.  (Pa.)  411.     See  §  40. 

1"  Milliken  v.  Steiner,  56  Ga.  251. 

194 


mFERRED   AUTHORITY  §  98 

of  a  bank  are  held  out  to  the  pubHc  as  having  authority  to  act 
according  to  the  general  usage,  practice,  and  course  of  business 
of  such  office  in  such  institutions;  and  their  acts  within  this 
scope  bind  the  bank  in  favor  of  third  persons  having  no  knowledge 
that  their  position  does  not  truly  rei)resent  their  power.^ 

(d)  This  matter,  being  of  much  importance,  will  be  expanded 
to  some  degree  in  order  fully  to  illustrate  the  operation  of  the 
principle. 

Expansion,  —  Any  person  who  deals  innocently  with  the  agent 
or  officer  of  a  corporation  within  the  scope  of  that  agent's  or 
officer's  functions  will  be  fully  protected,  and  will  have  his  contract 
enforced  by  the  law.  This  rule  accords  so  perfectly  with  both  law 
and  justice  that  it  has  never  been  directly  assaulted,  save  in  one 
class  of  cases.  These  are  where  the  agent,  acting  indeed  within 
the  general  and  ordinary  scope  of  the  agency,  is  yet  in  fact  contra- 
vening some  express  order,  or  exceeding  some  special  limitation 
of  authority,  imposed  upon  him  in  derogation  of  his  natural  and 
usual  power.  When  such  cases  have  arisen,  corporations  have 
sometimes  sought  to  avoid  responsibility  by  insisting  that,  since 
their  agent  had  exceeded  his  powers  he  had  not  bound  his  principal. 
In  such  cases  the  simple  question  is,  whether  or  not  the  third 
party  dealing  with  the  agent  had  a  right  to  suppose  that  the  agent 
was  dealing  within  the  scope  of  his  authority.  If  the  ordinary 
functions  of  an  agent  are  well  known,  a  secret  limitation  of  those 
functions  will  not  be  allowed  to  operate  to  invalidate  his  act  done 
in  excess  of  the  secret  limitation,  but  within  the  ordinary  scope. 
The  secret  limitation  can  take  eft'ect  only  when  notice  of  it  is 
directly  brought  home  to  the  third  party.  Any  other  rule  would 
open  wide  the  door  to  endless  deceit  and  false  dealing.^  As  a 
general  principle,  this  is  suflBcicntly  clear  and  well  established. 
But  in  the  case  of  banking  corporations  it  is  liable  to  confusion 
from  the  uncertainty  attendant  upon  the  knowledge  which  any 
individual  has  of  the  real  limits  of  the  powers  and  duties  of  any 
particular  officer.     If  a  statute  defined  accurately  the  acts  which 

2  Minot  V.  Mechanics'  Bank  of  Alexandria,  1  Pet.  46,  70,  7  L.  ed.  47 ; 
Fleckner  v.  Bank  of  United  States,  8  Wheat.  360,  361,  5  L.  ed.  636  ;  P>ank- 
fort  Bank  v.  Johnson,  24  Me.  490 ;  Merchants'  Bank  v.  State  National 
Bank,  10  Wall.  604,  19  L.  ed.  1008 ;  Cooke  v.  State  National  Bank,  52 
N.  Y.  96. 

'Mavall  V.  Boston  &  Maine  R.  R.  Co.,  19  N.  H.  122;  Farmers  & 
Mechanics'  Bank  v.  Champluin  Transportation  Co..  23  Vt.  186;  Clarke 
National  Bank  v.  Bank  of  Albion,  52  Barb.  (N.  Y.)  592. 

105 


§  98      OFFICERS  AND  AGENTS.  —  GENERAL  PRINCIPLES 

each  officer  should  be  competent  to  perform,  this  difficulty  would 
be  decreased.  But  in  the  absence  of  such  enactments  every 
board  of  directors  may  assume,  and  very  many  in  fact  do  assume, 
to  define  the  functions  of  the  respective  officers  according  to  their 
own  notions  of  propriety  in  such  matters.  Or  it  may  be  that  the 
board  will  conceive  it  preferable  to  attempt  no  such  definition, 
but  simply  to  appoint  one  person  to  be  "  cashier  ",  another  to  be 
"  receiving  teller  ",  another  to  be  "  paying;  teller  ",  and  so  on 
through  the  various  offices.  Now  in  either  of  these  cases  it  is 
natural,  indeed  it  is  necessary,  that  a  third  person  should  suppose 
that  these  various  officers  are  empowered  to  perform  the  duties 
wdiich  the  ordinary  usage  and  method  in  the  transaction  of  bank- 
ing business  leave  in  the  hands  of  such  officers.  Upon  this  sup- 
position it  is  practically  necessary  that  the  public  should  act  in 
dealings  with  the  bank.  Certainly  the  supposition  is  sufficiently 
vague.  The  basis  of  usage  on  which  it  rests  is  little  more  stable 
than  a  quicksand.  It  is  not  uniform  in  different  cities,  often  not 
in  different  institutions  in  the  same  city,  and  perhaps  is  not  per- 
manent in  the  same  city  or  institutions  throughout  a  long  course 
of  years.  Still,  a  small  nucleus  of  certainty  has  grown  by  degrees 
into  existence  amid  the  great  uncertainty.  The  word  "cashier  " 
means  something;  the  word  "teller"  means  something.  This 
is  shown  very  conclusively  by  the  frequency  with  which  directo- 
rial boards  content  themselves  with  simply  installing  a  person 
in  one  or  other  of  these  offices  without  any  effort  to  name  the 
appurtenant  duties,  but  assuming  by  unavoidable  implication 
that  of  course  there  is  a  certain  well-known  range  of  powers  and 
duties  as  naturally  and  necessarily  constituting  the  office,  and  as 
publicly  known  and  understood  to  do  so,  as  if  they  should  be 
embodied  in  a  written  vote.  Courts  have  many  times  recognized 
the  same  fact,  and  have  decided  that  president,  directors,  cashier, 
and  teller  have  or  have  not  either  exclusive  or  concurrent  powers 
to  do  acts  of  the  nature  designated  in  the  particular  case.  For 
example,  the  power  to  discount  is  exclusive  in  directors,  as  such. 
The  power  to  draw  checks  is  in  the  cashier  by  virtue  of  his  office. 
The  president  qua  president  is  empowered  to  defend  suits  and  en- 
gage counsel  on  behalf  of  the  bank.  There  are  then  certain 
classes  of  acts  which  the  law  recognizes  as  properly  to  be  per- 
formed by  certain  officers.  These  classes  may  be  enlarged  by 
future  decisions.  The  only  absolute  limit  yet  established  is  when 
judicial  dicta  have  declared  some  special  power  not  to  be  inherent 
196 


INFERRED   AUTHORITY  §  98 

in  some  special  oflBcer.  Starting  then  from  this  position,  tluit 
there  are  certain  powers,  only  a  portion  of  which  are  yet  known 
by  the  certain  knowledge  which  grows  out  of  a  judicial  ruling, 
which  belong  to  and  constitute  a  certain  office,  it  is  clearly  reason- 
able and  just  that  the  public,  and  any  individual  member  thereof, 
dealing  with  a  person  notoriously  filling  such  an  office,  sliould 
have  the  right  to  presume,  in  the  absence  of  express  notification 
to  the  contrary,  that  such  person  has  such  powers.  It  may  be 
that  a  board  of  directors  could  by  vote  declare  that  their  cashier 
should  not  have  power  to  draw  a  check.  But  if  they  still  allow 
him  to  fill  the  office  of  cashier,  as  to  all  third  parties  dealing  with 
him  in  ignorance  of  this  unusual  limitation,  he  must  still  be  al- 
lowed to  bind  the  bank  by  the  exercise  of  this  customarily  in- 
herent authority.  That  he  has  exceeded  the  scope  of  his  agency 
may  be  urged  by  the  bank  against  him  personally,  and  may  be 
an  abstract  truth ;  but  it  is  one  which  public  policy  will  never 
allow  the  bank  to  set  up  against  the  claim  of  a  third  party  who 
dealt  in  ignorance  of  this  peculiar  and  extraordinary  limitation. 
If  therefore  the  corporation,  or  any  authority  within  and  on  be- 
half of  the  corporation,  undertake  to  set  strange  limits  to  the 
powers  which  it  will  allow  to  be  exercised  by  its  oflScers,  it  must 
either  refrain  from  giving  to  these  officers  the  titles  usually  re- 
garded as  indicative  of  such  powers,  and  for  that  reason  equi\alent 
to  a  general  holding  out  of  them  to  the  world  as  possessing  such 
powers,  or  it  must  bring  home  to  persons  dealing  with  them  a 
knowledge  of  the  limitations  it  has  seen  fit  to  draw  round  the 
offices.  Otherwise  the  corporation  will  be  bound  by  acts  of  its 
president  within  the  scope  of  the  ordinary  and  legally  inherent 
duties  and  powers  of  a  president ;  by  acts  of  its  cashier  within  the 
scope  of  the  ordinary  and  legally  inherent  duties  and  powers  of  a 
cashier ;  and  so  on,  through  the  whole  range  of  oflBcers, 

All  Official  Title  Connotes  Certain   Powers  which,   in   the   Absence 
of  Notice  to  the  Contrary,  Bind  the  Bank  a^  to  Third  Parties 

(e)  Obviously  the  names  and  titles  by  which  the  various  agents 
are  denominated  are  intended  to  designate,  and  must  be  pre- 
sumed to  designate,  the  nature  and  scope  of  their  respective 
agencies.  If  a  banking  corporation  gives  to  an  individual  a  title 
which  in  ordinary  banking  i)arlance  is  attached  to  a  certain  range 
of  powers  and  duties,  it  cannot  afterwards  be  heard  to  say  that 
the  secret  instructions  of  the  corporate  government,  or  the  pecu- 

197 


§  98       OFFICERS  AND  AGENTS.  —  GENERAL  PRINCIPLES 

liar  by-laws  adopted  by  it,  have  deprived  the  officer  of  these 
powers  and  duties,  or  any  of  them.  One  dealing  with  the  officer 
of  a  bank,  within  the  ordinary  and  legal  scope  of  such  an  officer's 
authority,  is  entitled  in  justice  and  at  law  to  assume  as  against 
the  bank  that  the  officer  is  invested  with  this  customary  authority. 

Neither  does  it  make  any  difference  in  this  respect  that  the 
charter,  or  the  statute  under  which  the  corporation  exists,  gives 
to  the  board  of  directors  power  to  settle  the  respective  functions 
of  the  subordinate  officers.  Our  National  Banking  Act  ^  empowers 
the  directors  to  "  appoint  a  president,  vice-president,  cashier,  and 
other  officers,  define  their  duties'',  etc. ;  also  "  to  define  and  regu- 
late by  by-laws  ...  the  manner  in  which  ...  its  officers  [shall  be] 
appointed,  its  property  transferred,  its  general  business  con- 
ducted, and  all  the  privileges  granted  by  this  act  to  associations 
organized  under  it  shall  be  exercised  and  enjoyed."  Occasionally, 
in  other  enactments, the  expression  "to  define  and  limit "  duties  has 
been  used.  But,  after  all,  these  phrases  probably  give  to  the  direc- 
tors no  power  over  their  officers  which  they  would  not  be  allowed 
to  exercise  by  virtue  of  their  common  law  authority.^  The  direc- 
tors are  the  government  of  the  bank,  and  must  have  power  to  direct 
and  control  the  acts  and  doings  of  the  other  and  subordinate 
agents.  But  whether  at  common  law  or  under  such  statutory 
enactments  they  seek  to  curtail  the  ordinary  powers  of  any  of 
their  officers,  their  action  in  so  doing  can  only  be  valid  as  between 
the  officer  and  the  bank.  If  the  officer  does  what  they  have  ex- 
pressly forbidden  him  to  do,  though  it  be  an  act  ordinarily  within 
the  range  of  his  functions,  he  will  be  liable  only  to  the  corporation 
for  the  results  of  his  disobedience.  The  directors  unquestionably 
have  the  power,  as  against  him,  to  "  define  "  his  duties  generally, 
or  to  "  regulate  "  or  "  limit  "  them  upon  any  particular  occasion, 
and  in  any  particular  matter.  They  may  also  have  the  same 
power  as  towards  any  individuals  among  the  public,  or  even  as 
towards  the  entire  public.  But  it  is  an  absolutely  indispensable 
preliminary  to  the  exercise  of  the  power  in  this  direction  that  the 
individuals  or  the  public  should  receive  actual  notice  of  the  fact. 

The  judicial  authorities  seem  fully  to  sustain  the  propounded 
doctrine.  The  matter  is  one  of  sufficient  importance  to  justify 
the  quotation  of  the  more  conclusive  passages.  The  New  York 
Court  of  Appeals  say:    "The  whole  tenor  of   authority  is   in 

*  Stat.  1863-64,  chap.  106,  §  8. 

6  Merchants'  Bank  v.  State  Bank,  10  Wall.  604,  19  L.  ed.  1008. 

198 


INFERRED    AUTHORITY  §  98 

favor  of  holding  corporations  for  the  acts  of  their  officers,  espe- 
cially executive  officers  and  general  agents,  within  the  general 
scope  and  apparent  sphere  of  their  duties,  and  not  holding  them 
for  acts  done  without  special  authority  in  cases  without  such 
scope  and  general  sphere  of  duty.  The  cases  are  all  reconcilable 
and  sustainable  on  this  principle,  and  no  other.  Courts  and 
judges  have  spoken  cautiously  on  the  subject,  but  the  language 
has  been  uniform,  limiting  the  responsibility  of  corporations  for 
the  acts  of  their  officers  and  agents,  in  the  absence  of  an  express 
authority  to  do  the  particular  act,  to  those  performed  in  the  dis- 
charge of  their  ordinary  duties  in  the  usual  course  of  business, 
and  within  the  sphere  and  scope  of  such  duties.  Such  are  pre- 
sumed to  be  by  authority  of,  and  within  the  knowledge  of,  the 
directors ;  and  within  the  rule  are  included  such  acts  as  are  shown 
to  have  been  performed  with  the  knowledge  and  implied  consent 
of  the  directors,  although  out  of  the  line  of  ordinary  duty  and 
usual  course  of  business.  ...  It  must  be  assumed,  therefore,  and  the 
public  and  those  dealing  or  having  business  transactions  with  the 
bank  had  the  right  to  assume,  that  they  [the  officers  of  the  bank] 
had  and  exercised  the  powers  and  performed  the  duties  usually 
devolved  upon  and  performed  by  persons  occupying  the  same 
positions  in  other  banks,  and  such  as  they  were  in  the  habit  of 
performing  in  the  transaction  of  the  current  and  ordinary  business 
of  the  bank  ;  and  within  this  limit  the  corporation  would  be  bound 
by  their  acts,  in  the  absence  of  proof  that  their  powers  were  lim- 
ited or  restricted,  and  that  such  restriction  or  limitation  was 
known  to  the  persons  dealing  with  them.  Whatever  may  be  the 
extraordinary  or  incidental  powers  of  the  corporation  under  its 
charter,  power  to  bind  the  corporation  can  only  be  presumed  to 
exist  in  its  executive  agents  and  officers  within  the  scope  of  its 
ordinary  business  and  their  ordinary  duties."  ^  In  ]\Iinor  v. 
Mechanics'  Bank  of  Alexandria,'  the  court  say :  "  Officers  of  a 
bank,  as  of  any  other  corporation,  are  held  out  to  the  public  as 
having  authority  to  act  according  to  the  general  usage,  practice, 
and  course  of  their  business.  Their  acts  within  the  scope  of  such 
authority  will  generally  bind  the  bank  in  favor  of  third  persons 
possessing  no  other  knowledge."  In  The  Bank  of  Vergennes  v. 
Warren,^  discussing  the  legality  of  an  act,  which  the  court  held 
to  fall  within  the  scope  of  the  cashier's  power,  qua  "  cashier  ",  the 

«  First  National  Bank  v.  Ocean  National  Bank.  60  N.  Y.  278. 
■'  1  Pet.  46.  7  L.  ed.  47.  »  7  Hill  (N.  Y.)  91. 

199 


§  98  OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES 

judge  said,  "  Indeed  I  think  it  would  not  defeat  the  purchase  if 
it  could  be  shown  that  the  cashier  had  been  forbidden  by  the 
principals  to  transact  such  business."  In  Commercial  Bank  of 
Buffalo  V.  Kortright,^  the  court  applies  to  banks  and  their  officers 
the  general  rule  of  agency,  as  laid  down  in  Story  on  Agency,  §§  127, 
133,  that  the  principal  is  bound  by  acts  which  he  holds  out  his 
agent  as  competent  to  perform,  despite  that  they  may  contravene 
secret  instructions  or  orders.  Unquestionabl}^  any  person  invested 
with  the  familiar  title  of  an  official  position  in  a  bank  is  held  out 
to  the  public  as  competent  to  perform  all  the  usual  and  inherent 
or  essential  functions  of  the  office.  In  Wild  v.  Bank  of  Passa- 
maquoddy,^°  it  was  said,  that  any  bank  choosing  to  restrict  the 
ordinary  scope  of  its  cashier's  authority  is  at  perfect  liberty  to 
do  so  ;  but  that,  in  such  case,  it  is  incumbent  on  the  bank  to  show, 
not  only  the  fact  that  it  has  imposed  a  certain  restriction,  but, 
further,  that  the  imposition  of  this  restriction,  being  of  a  peculiar 
and  unwonted  kind,  is  knoicn  to  those  with  whom  it  is  in  the 
habit  of  doing  business.  In  Franklin  Bank  v.  Steward,i^  it  was 
said  that  the  cashier's  "  true  position  appears  to  be  that  of  a  gen- 
eral agent  for  the  performance  of  his  official  and  accustomed 
duties.  While  acting  within  the  scope  of  this  authority,  he 
would  bind  the  bank,  although  he  might  violate  his  private  in- 
structions." 

Act  in  Violation  of  Charter  may  Bind  the  Bank 

if)  The  case  of  Lloyd  «.  W^est  Branch  Bank  i-  is  perhaps  even 
stronger  than  any  of  the  others.  For  though  the  judge  in  that 
cause  is  considering,  not  the  case  of  a  circumscribing  vote  of  a 
directorial  board,  but  the  actual  charter  of  the  bank  itself,  he 
does  not  hesitate  to  apply  the  same  principle.^-"  The  decision  is 
rather  striking  by  reason  of  the  vigor  and  oddity  of  its  expression, 
but  it  is  certainly  sound.  It  is,  briefly,  to  the  effect  that  recognized 
and  known  functionaries,  especially  the  officers  of  a  bank,  are  held 
out  to  the  world  as  having  authority  to  act  according  to  the  general 
usage,  practice,  and  custom  of  the  husiness  in  such  institutions. 
Otherwise  there  could  be  no  safety  for  the  public  in  doing  business 
with  them.  Their  charters  differ  in  some  respects,  and  individ- 
uals cannot  be  presumed  to  "  carry  these  documents  in  their 

9  22  Wend.  (N.  Y.)  348.  i"  3  Mason  505.  "  37  Me.  519. 

12  15  Pa.  St.   172.  120  See  Ultra  vires,  §§  89a,  722. 

200 


INFERRED    AUTHORITY  §  98 

pockets  as  a  vade  mecum.''  The  acts  of  officers,  therefore,  in  the 
scope  of  such  general  usage,  practice,  and  course  of  business, 
bind  the  corporation  in  favor  of  third  persons  who  did  not  know 
at  the  time  that  tlie  officer  was  exceeding  the  course  of  his  au- 
thority. In  the  Commercial  Mutual  IVIarine  Ins.  Co.  v.  Union 
Mutual  Ins.  Co.,i^  —  which,  though  not  a  bank  case,  yet  covers 
the  point  now  in  discussion  with  great  thoroughness  and  accuracy, 
—  a  contract  made  by  the  president  in  contravention  of  secret 
limitations  was  upheld.  The  court  declared  that,  in  order  to  show 
that  the  corporation  held  out  their  officer  as  competent  to  make 
such  a  contract,  it  was  sufficient  evidence  to  show  a  usage  among 
such  companies  to  make  such  contracts  through  such  officer.  In 
Neiffer  v.  Bank  of  Knoxville,"  a  contract,  made  not  in  accordance 
with  the  provisions  of  the  charter,  was  nevertheless  upheld  on  the 
ground  that  customarily  such  a  contract  could  have  been  made 
by  the  officer  who  had  in  this  case  irregularly  undertaken  to  make 
it ;  and  that  therefore  it  should  be  enforced  in  favor  of  the  third 
party  who  had  entered  into  it  in  good  faith  and  in  ignorance  of 
the  charter  restriction.     But  see  pp.  203,  209,  and  §  722. 

The  cases,  it  will  be  observed,  relate  especially  to  the  acts  of 
cashiers,  —  a  circumstance  fully  explained  by  the  fact  that  the 
cashier  is  the  chief  executive  officer,  and  that  naturally  his  acts 
are  more  often  the  subject  of  controversy  than  those  of  other 
officials.  But  the  general  principle  which  runs  through  the  de- 
cisions is  equally  applicable  to  a  president,  teller,  or  other  agent 
whomsoever. 

The  Bank  may  Restrict  or  Enlarge  Officer's  Powers 

(g)  None  of  the  above  cases  deny  or  infringe  the  statutory 
right  of  defining,  restricting,  or  limiting  official  powers.  On  the 
contrary,  nearly  all  of  them  in  terms  distinctly  recognize  the  power 
of  the  directorial  board,  or  the  government  of  the  corporation, 
to  prescribe,  either  with  the  effect  of  enlargement  or  circumscrip- 
tion, the  functions  of  any  officer.  They  only  superadd  to  this 
right  (making  no  distinction,  as  we  have  above  pointed  out, 
whether  it  owes  its  existence  to  conmion  law,  charter,  or  general 
statute)  the  duty  of  bringing  home  knowledge  of  their  action  to 
the  individual  dealing  with  the  officer,  whenever,  in  tlie  absence 
of  such  knowledge,  he  would  naturally  be  deceived  and  injured 
"  19  How.  318,  15  L.  ed.  636.  "  1  Head  (Tenn.)  162. 

201 


§  98  OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES 

by  relying  simply  upon  the  usual  course  and  usage  of  banking 
business.  Since  the  power  to  define  and  limit  does  exist,  it  must 
be  supposed  to  have  some  value,  and  the  language  of  the  statute 
must  be  allowed  to  describe  some  substantial  privilege.  The 
power  is  indeed  valuable,  and  the  privilege  substantial,  and  no 
definite  limit  can  be  set  to  either,  provided  only  that  the  one 
requisition  is  complied  with  of  giving  due  and  sufficient  notice  of 
its  exercise  in  any  instance.  It  must  then  necessarily  affect  and 
bind  the  party  notified. 

If  C.  has   Notice  the   Agent  is  not  Acting  within    His    Inherent 
Power,   He  is  Put  to   His  Inquiry 

(h)  Two  English  cases  well  illustrate  this  rule.  A  cashier 
indorsed  negotiable  paper,  which  ordinarily  he  would  have  been 
empowered  to  do  by  the  inherent  authority  of  his  office.  But 
he  preceded  this  indorsement  by  the  words  "  per  proc."  He  was 
in  fact  acting  under  a  peculiar  and  special  authoritj-,  distinct 
from  that  ordinarily  vested  in  him  by  his  office ;  and  these  words 
were  intended  to  notify  the  dealer  of  this  circumstance,  and  were 
words  customarily  having  this  warning  or  admonitory  significance. 
The  court  held  that  the  notice  that  the  authority  was  special  and 
peculiar,  and  therefore  wholly  distinct  from  that  appurtenant  to 
the  cashier  as  such,  was  sufficient. ^^  In  fact,  the  cashier,  though 
doing  an  ordinary  act,  was  not  doing  it  under  his  general  official 
authority,  but  under  an  independent  and  unwonted  delegation  of 
power.  The  words  prefixed  were,  by  their  well-known  meaning, 
equivalent  to  a  direct  statement  to  this  effect  to  the  dealer,  who 
was  then  and  thereby  put  upon  his  inquiry  if  he  wished  to  ascertain 
precisely  the  nature  and  extent  of  the  special  authority.  If  he 
did  not  care  to  be  at  the  pains  of  satisfying  himself  on  this  point, 
but  relied  on  his  opinion  of  the  cashier's  character,  or  simply 
yielded  to  indolence  or  carelessness,  any  resulting  loss  must  prop- 
erly fall  wholly  on  him.  He  had  received  a  full  and  sufficient 
warning  that  the  cashier  w^as  not  in  this  matter  authorized  to  deal 
with  him  by  virtue  and  in  the  exercise  of  his  customary  official  au- 
thority, and  he  could  not  afterward  be  allowed  to  appeal  to  that 
customary  official  authority  to  support  the  regularity  and  valid- 
ity of  an  act  which  he  was  distinctly  notified  at  the  time  was  not 
done  under  it. 

15  Alexander  v.  MacKenzie,  6  C.  B.  766  ;  Stagg  v.  ElUott,  12  C.  B.  (n.  s.) 
373 ;   s.  c.  31  L.  J.  C.  P.  260. 

202 


INFERRED   AUTHORITY  §  98 

(^)  The  authority  implied  from  a  i)iil)lic  holding  out,  tacit 
acquiescence,  or  usage  and  ordinary  course  of  dealing,  can  never 
go  beyond  the  power  which  the  bank  could  legally  confer  on  the 
officer  U7ider  the  circumstances  of  which  C.  has  notice;  i.e.  if,  as  a 
matter  of  law  on  the  facts  within  C.'s  reasonable  reach,  the  act 
is  one  for  which  previous  authority  could  not  have  been  given  by 
that  power  whose  conduct  is  the  basis  of  inference  in  the  matter, 
then  C.  has  no  right  to  infer  authority  from  the  facts  named. 
They  only  suffice  to  confer  ui)on  the  officer  just  as  much  authority 
in  the  premises  as  he  could  have  derived  from  an  empowering 
resolution  of  the  board  of  directors,  or  of  the  corporate  body. 
Whatever  limitation  there  is,  if  any,  upon  the  functions  which 
the  government  of  the  corporation  can  by  their  direct  vote  enable 
him  to  assume,  that  same  limitation  equally  curtails  the  functions 
which  usage,  acquiescence,  or  public  holding  out  will  enable  him 
legally  to  exercise  on  behalf  of  the  bank.  If  any  official  undertakes 
to  exercise  any  authority  with  which  the  corporate  government 
have  no  legal  right  to  invest  him,  he  does  not  in  its  exercise  bind  or 
affect  the  bank,  no  matter  how  old,  how  well  known,  or  how  fre- 
quent has  been  the  previous  practice. 

Yet  it  must  be  kept  in  mind  that  though  executory  contracts 
beyond  authority  will  not  be  enforced,  yet,  if  partly  executed,  they 
may  be.     (See  First,  above.)  • 

In  Minor  i).  Mechanics'  Bank  of  Alexandria, ^^  it  was  said  that 
the  power  by  implication  w^ould  be  held  good,  provided  it  were  one 
which  could  be  conferred  by  a  written  vote  of  the  board  of  direc- 
tors. Circumstances  may  be  shown,  among  which  are  especially 
usage  and  holding  out,  which  dispense  with  proof  of  the  vote,  and 
either  estop  the  corporation  to  deny  it  or  make  its  supposed  ex- 
istence a  conclusive  i)resumption  of  law.  But  this  does  not  aft'ect 
the  imperative  requisition  that  such  a  vote,  if  it  ever  had  been 
passed,  should  have  been  legal  and  valid,  and  within  the  powers 
of  tlie  board.  Since  no  one  can  allege  ignorance  of  the  law,  persons 
dealing  with  the  bank  are  held  to  know  those  limits  which  sur- 
round the  possible  powers  of  each  particular  officer,  and  which 
can  be  exi:ended  by  no  process  whatsoever,  be  it  by  the  most  per- 
fect of  usages  or  by  the  most  formal  of  votes.  If  one  deals  with 
an  officer  beyond  these  described  limits,  there  is  nothing  which 
he  can  prove  which  will  protect  him  ;  if  it  is  matter  of  law  that 
a  certain  function  or  act  falls  exclusively  or  inalienably  within 
i«  1  Pet.  46,  7  L.  ed.  47. 

203 


§  98  OFFICERS   AND   AGENTS.  —  GENERAL  PRINCIPLES 

the  range  of  the  powers  and  duties  of  one  officer,  no  state  of  af- 
fairs can  cause  the  performance  of  that  function  or  act  by  another 
officer  to  affect  or  bind  the  bank.  There  are  such  exclusive  and  in- 
alienable functions  in  the  various  officers,  as  will  be  seen  hereafter ; 
and  it  behooves  the  public  to  become  acquainted  with  them,  since 
usurpation  by  bank  officers  of  each  other's  functions,  though 
often  innocently  done  through  ignorance  and  mistake,  is  not  un- 
common, and  frequently,  by  force  of  the  above  doctrine,  works  a 
mischief  to  the  customer  which  the  law  is  impotent  to  cure.  The 
case  of  Farmers  and  Mechanics'  Bank  v.  Butchers  and  Drovers' 
Bank  ^^  furnishes  a  good  example  in  this  matter.  Seldon,  J., 
delivering  the  opinion,  said  that,  though  a  custom  for  a  cashier 
or  a  teller  to  certify  a  check  might  be  perfectly  good,  yet  it  was 
subject  to  the  limitation  that  it  could  only  be  good  where  the 
drawer  had  funds  in  the  bank.  In  the  case  under  consideration 
the  drawer  had  not  funds,  and  the  holder  was  aware  that  he  had 
not.  The  legal  limitation  of  the  power  of  certifying,  which  ren- 
dered certification  under  these  circumstances  invalid,  was  a  rule 
of  law  of  which  the  holder  of  the  check  could  not  be  heard  to  de- 
clare himself  ignorant.  It  was  an  absolute  rule  of  law,  and  the 
holder  must  be  held  to  know  that  it  was  such,  and  that  nothing 
could  dispense  with  its  operation.  Knowing  the  fact  of  the 
deficiency  of  the  draw;er's  assets,  which  brought  that  principle 
of  law  into  operation,  he  ought  also  to  have  known  that  as  an 
unavoidable  consequence  the  certifying  officer  was  exceeding  the 
possible  limits  of  his  authority.  The  loss,  therefore,  must  rest 
upon  him  for  having  accepted  a  certification  which  the  law  would 
conclusively  presume  that  he  knew  to  be  invalid. 

(j)  An  interesting  case  on  the  subject  of  authority  has  been 
decided  in  the  Court  of  Appeals  of  New  York.  It  has  been  laid 
down  that  an  officer  may  conclude  the  bank  by  an  act  obviously 
pertaining,  by  strict  right,  to  quite  a  different  functionary.  A 
customer  of  the  bank,  having  overdrawn  his  bank  account,  went 
to  the  bank  and  paid  in  somewhat  more  than  enough  to  cover 
the  deficiency,  handing  the  money  over  the  counter  to  the  paying 
teller.  The  court  held  that  this  constituted  a  sufficient  payment 
to  the  bank.  It  did  not  appear  whether  or  not  the  receiving  teller 
was  in  the  bank  at  the  time,  and  it  did  appear  that  an  entry  to  the 
credit  of  the  customer  was  made  on  the  books  of  the  bank  for  the 

1^  16  N.  Y.  125.  To  the  same  effect  is  Mussey  v.  Eagle  Bank,  9  Met. 
(Mass.)  306.     See  also  Salem  Bank  v.  Gloucester  Bank,  17  Mass.  1. 

204 


mFERRED    AUTHORITY  §  98 

amount  paid  in  to  the  paying  teller.  But  these  facts  do  not  seem 
to  have  been  regarded  as  indispensable  for  furnishing  a  founda- 
tion for  the  decision  of  the  court.  The  breadth  of  the  ruling  will 
appear  from  this  quotation :  "  When  one  goes  into  a  bank  and 
finds  behind  the  counter  one  of  its  officers  employed  in  its  busi- 
ness, and  upon  his  demand  pays  a  debt  due  the  bank  in  good 
faith,  without  any  knowledge  that  the  officer's  authority  is  so 
limited  that  he  has  no  right  to  receive  it,  he  must  be  protected, 
and  the  bank  must  be  bound  by  the  payment."  If  one  were 
inclined  to  question  or  criticise  this  dictum,  it  might  be  fair  to 
say  that  a  person  who  undertakes  to  pay  his  debt  to  the  bank  to 
a  person  whom  he  knows  to  be  the  "  paying  "  teller  cannot  be 
said  to  make  his  payment  "  without  any  knowledge  that  the 
officer's  authority  is  so  limited  that  he  has  no  right  to  receive  it  "  ; 
—  more  especially  since  in  this  case  the  customer  knew  not  only 
that  there  was  a  cashier,  but  also  that  there  was  a  receiving  teller. 
The  paying  teller  had  written  to  the  customer  on  the  matter  of 
the  overdraft,  asking  him  to  adjust  the  overpayment,  and  as  there 
was  no  evidence  that  the  receiving  teller  was  present,  but  it  was 
shown  that  in  his  absence  the  other  officers  acted  in  his  place,  it 
may  be  presumed  that  together  with  the  presumption  of  regularity 
these  facts  made  out  a  case  of  a  substitution  in  the  mind  of  the 
court,  and  at  any  rate  the  ruling  must  be  confined  to  the  facts. 

It  is  in  general  held  that,  when  C.  pays  money  to  an  officer  to 
whom  its  reception  does  not  belong,  such  officer  is  the  agent  of 
C.  to  bring  the  money  to  the  possession  of  the  bank  by  delivery 
to  the  proper  officer.^^  But  a  misstatement  by  an  officer  as  to 
the  proper  designation  of  his  office  cannot  prejudice  the  rights 
of  third  parties,  dealing  with  the  bank.^^" 

Upon  the  same  principle,  it  has  also  been  held  that  to  make  a 
subscriber's  pajTuent  of  his  subscription  money  for  capital  stock 
a  sufficient  pa>Tnent  and  binding  upon  the  bank,  it  must  have 
been  made  to  an  officer  authorized  to  receive  it.^^  So  where  the 
bank  has  a  receiving  teller,  whose  proper  province  it  is  to  receive 
deposits,  the  bank  is  not  liable  to  reimburse  a  depositor  who  has 
handed  in  his  funds  to  the  bookkeeper,  if  it  happens,  that,  after 
their  receipt  by  that  improper  and  unauthorized  officer,  they  are 

J8  East  River  National  Bank  v.  Gove,  57  N.  Y.  507  ;  Manhattan  Co.  v. 
Lydig,  4  .Johns.  (N.  Y.)  377. 

'8«   Biekley  v.  Bank,  43  S.  C.  528,  21  S.  E.  886  (1894). 
19  State  V.  Commercial  Bank,  6  Sm.  &  M.  (Miss.)  218. 

205 


§  98       OFFICERS  AND  AGENTS.  —  GENERAL  PRINCIPLES 

lost  or  embezzled  before  they  come  to  the  hands  and  possession 
of  some  one  whose  special  function  it  is  to  receive  or  to  keep  them.-*^ 
On  the  other  hand,  the  bank  has  been  held  liable  to  reimburse  in 
a  case  where  its  manager  had  succeeded  in  obtaining  and  mis- 
appropriating the  money  of  a  customer,  inasmuch  as  in  the  conduct 
of  the  transaction  the  officer  had  done  no  act  which  was  not 
strictly  within  the  scope  of  his  legal  functions,  and  had  induced 
the  customer  to  believe  that  he  was  acting  simply  in  the  regular 
and  ordinary  course  of  the  business  of  the  banking-house.^^  We 
see,  therefore,  that,  in  general,  no  act  binds  the  bank  unless  done 
by  the  officer  actually  empowered,^!"  or  whom  the  customer  has 
a  right  to  believe  empowered,  to  do  it ;  and  that  every  act  done 
by  an  officer  within  this  scope  will  bind  the  bank.  The  rule  will 
hold  good  even  though  the  act  is  in  fact  fraudulent,  provided  the 
customer  has  no  knowledge  of  the  fraud,  but  is  himself  dealing 
bona  fide,  and  believes  the  official  to  be  dealing  in  the  like  good 
faith  in  the  business  of  his  principals. 

Representations.     Notice 

(k)  If  an  officer  is  acting,  speaking,  or  receiving  information 
in  matters  which  the  ordinary  usage  of  the  banking  business  casts 
within  the  range  of  his  functions,  the  bank  is  bound  and  affected 
thereby,  as  any  other  principal,  by  the  act,  declaration,  or  knowl- 
edge of  the  agent. 22  No  corporate  vote  is  necessary  to  give  valid- 
ity to  a  contract  made  by  an  agent  in  a  matter  concerning  which 
he  has,  from  any  source,  the  power  to  contract.^^     But  no  officer 

20  Manhattan  Co.  v.  Lydig,  4  Johns.  (N.  Y.)  377  ;  Thatcher  v.  Bank  of 
State  of  New  York,  5  Sandf.  (N.  Y.)  121.  Though  a  later  case  seems, 
in  spite  of  the  effort  of  the  court  to  draw  a  distinction,  to  establish  a  con- 
trary rule.    East  River  National  Bank  v.  Gove,  57  N.  Y.  597. 

21  Thompson  v.  Bell,  26  Eng.  L.  &  Eq.  536. 

21"  A  national  bank  examiner  is  not  an  officer  or  agent  of  the  bank  and 
has  no  authority,  as  such,  to  act  for  a  bank,  and  cannot  bind  it  by  any 
act  done  in  its  behalf.     Witters  v.  Sowles,  32  Fed.  762. 

22  Wyman  v.  Hallowell  &  Augusta  Bank,  14  Mass.  58 ;  Salem  Bank  v. 
Gloucester  Bank,  17  id.,  1 ;  Hooker  v.  Eagle  Bank,  30  N.  Y.  83 ;  New 
Hampshire  Savings  Bank  v.  Downing,  16  N.  H.  187 ;  Second  National 
Bank  v.  Howe,  40  Minn.  390,  42  N.  W.  200. 

23  Eastman  v.  Coos  Bank,  1  N.  H.  23 ;  Lime  Rock  Bank  v.  Macomber, 
29  Me.  564;  North  Brookfield  Savings  Bank  v.  Flanders,  161  Mass. 
335,  37  N.  E.  307  (1894). 

A  vice-president  who  is  in  charge  of  a  bank  has  authority  to  make 
contracts  and  may  bind  the  bank  by  extending  the  time  of  a  demand  note 
for  a  specified  time  and  may  suspend  the  right  to  sell  collateral  until  the 

206 


INFERRED   AUTHORITY  §  98 

can  bind  or  affect  the  bank  by  any  dealing  in  the  department 
allotted  to  another  officer.  The  bank,  in  appointing  various  (jf- 
ficers,  is  simply  creating  various  perfectly  distinct  and  independent 
agencies.  Each  agent  can  act  only  in  his  own  agency .■'•^''  In  like 
manner,  demand  or  notice  can  affect  the  bank  only  if  it  be  made 
upon  or  given  to  the  officer  having  charge  of  the  subject  matter 
which  the  notice  concerns.  If  it  be  given  to  one  within  whose 
sphere  the  business  in  question  does  not  fall,  the  bank  is  not 
chargeable  with  it ;  neither  is  it  answerable  for  negligence  if  it 
fails  to  act  upon  it.-^  For  example,  the  bookkeeper  of  a  bank  has 
nothing  to  do  with  its  litigation,  and  notices  in  a  lawsuit  served 
upon  him  would  not  ordinarily  be  valid  as  notices  served  upon 
the  corporation.  So  it  has  been  hekl,  that  knowledge  on  the  part 
of  a  clerk  in  a  bank  of  the  residence  of  an  indorser  on  a  note  would 
not  prevent  the  holder  of  the  note  from  asserting  and  availing 
himself  of  the  ignorance  of  this  fact  on  the  part  of  those  officers 
of  the  bank  having  charge  of  this  department.  Their  ignorance 
was  the  ignorance  of  the  corporation ;  but  the  knowledge  of  the 
clerk  was  not  the  knowledge  of  the  corporation.^^ 

Holding  Out  by    Usage  ivithout  Objection 

(I)  A  very  simple  and  unquestionable  method  of  holding  out 
is  by  allowing  an  officer  repeatedly  to  perform  any  specific  act, 
and  recognizing  his  i)erformance  as  proper  and  valid.  Long 
usage  implies  authority  equally  with  an  express  resolution.-^  It 
has  been  said  that  a  corporation  is  not  bound  by  any  act  of  its 
agent  simply  because  it  has  been  his  previous  practice  to  do  similar 
acts,  unless  knowledge  of  this  previous  practice  is  brought  home 
to  the  corporate  government.^^  As  a  broad  statement  in  tech- 
expiration  of  the  time.  Wyckoff  v.  Riverside  Bank,  135  App.  Div.  400 
(1909),  119  N.  Y.  S.  937. 

23a  Where  an  attorney,  acting  for  a  bank  which  has  received  from  a 
debtor  conveyances  of  cattle  encumbered  by  other  del)ts,  is  sent  to  the 
cattle  range  to  collect  and  receive  the  cattle,  he  is  not  authorized  to  promise 
to  pay  certain  liens  on  the  cattle.  Panhandle  National  Bank  v.  Emery,  78 
Tex.  498,  15  S.  W.  23  (1890). 

2^  Goodloe  V.  Godley,  13  S.  &  M.  (Miss.)  233 ;  Commercial  Bank  of 
Manchester  v.  Bonner,  id.,  649. 

"  Goodloe  V.  Godlev,  13  S.  &  M.  (Miss.)  223. 

2«  Hoyt  V.  Thompson,  1  Seld.  (N.  Y.)  320 ;  Elwell  v.  Dodge,  33  Barl). 
(N.  Y.)  336 ;  Llovd  v.  West  Branch  Bank,  15  Pa.  St.  172 ;  Lohman  v. 
N.  Y.  &  Erie  R.  R.  Co.,  2  Sandf.  Super  (N.  Y.)  39 ;  Northern  Central 
Railway  Co.  v.  Bastian,  15  Md.  494  ;  Dougherty  v.  Hunter,  54  Pa.  St.  3S0. 

"  Lawrence  v.  Gebhard,  41  Barb.  (N.  Y.)  575. 

207 


§  98       OFFICERS  AND  AGENTS.  —  GENERAL  PRINCIPLES 

nical  terms  of  a  legal  doctrine,  this  is  unobjectionable  enough. 
But  it  should  be  understood  that  the  knowledge  may  be  such  as 
arises  or  is  implied  by  imperative  implication  of  law,  as  well  as 
knowledge  which  exists  in  fact.  The  directorial  board  of  a  bank, 
which  is  its  corporate  government,  and  which  for  most  legal  con- 
siderations is  in  fact  the  corporation  itself,  is  obliged  to  meet 
frequently,  and  to  keep  a  close  and  constant  supervision  over  the 
daily  course  and  conduct  of  its  business.  In  many  species  of 
corporations  the  position  of  director  is  almost  a  sinecure ;  the 
board  constitutes  only  a  sort  of  advisory  body,  which  may  meet 
only  on  comparatively  infrequent  occasions,  to  discuss  large  and 
important  questions  concerning  the  general  business  policy  of  the 
corporation.  But  it  is  not  thus  with  banks.  Their  directors  are 
bound  to  constant  activity  and  thorough  acquaintance  with  the 
daily  course  of  the  affairs  and  dealings  of  the  institution.  It  is 
their  duty  to  make  this  acquaintance  so  thorough  that  no  officer 
can  continue  long  and  consistently  to  usurp  a  function  of  any 
degree  of  importance  whatsoever  without  their  knowledge. 
Unquestionably  the  public  has  a  right  to  suppose  that  this  board, 
which  probably  meets  once  or  oftener  in  a  week  with  the  express 
duty  of  inquiring  into  the  proceedings  of  the  very  few  days  which 
have  intervened  since  the  last  convention,  has  an  ordinarily  ac- 
curate knowledge  of  how  those  proceedings  are  usually  and  uni- 
formly conducted.  This  is  an  obvious  duty  of  the  board,  and 
therefore  strictly  of  the  corporation ;  for  the  board  is,  in  the  eye 
of  the  law,  the  corporation.  The  community  are  entitled  to  as- 
sume that  the  board  or  corporation  do  their  duty,  and  can  hold 
the  corporation  liable  for  the  results  of  their  neglecting  it.  So  if 
a  board  of  bank  directors  suffer  the  assumption  of  a  certain  func- 
tion by  their  cashier  or  teller  to  grow  into  a  usage,  it  is  not  to  be 
conceived  that  they  could  be  heard  to  say  that  they  had  never 
had  any  knowledge  of  his  conduct,  and  so  shift  the  mischief  of  their 
own  default  upon  the  shoulders  of  an  innocent  third  person.  In 
other  words,  instead  of  its  being  necessary  that  the  practice  of 
the  officer  should  have  been  brought  to  the  actual  knowledge  of  the 
government,  it  must  suffice  to  show  that  such  practice  has  con- 
tinued so  long  and  has  been  so  public  that  it  must  have  been 
brought  to  the  knowledge  of  the  government  had  not  that  body 
been  unduly  lax  and  careless  in  the  performance  of  its  duties.^ 

28  Beers  v.  Phoenix  Glass  Co.,  14  Barb.  (N.  Y.)  358;    Smith  v.  Hull 
Glass  Co.,  11  C.  B.  897,  9  Eng.  L.  &  Eq.  442. 

208 


INFERRED   AUTHORITY  §  98 

A  board  of  bank  directors,  with  responsibilities  so  much  greater 
and  duties  so  much  more  exacting  than  fall  to  the  lot  of  directors 
in  the  majority  of  other  species  of  corporations,  must  be  very 
quickly  estopped  to  deny  their  knowledge  of  any  practice  which 
grows  up  among  their  subordinates.  In  Minor  v.  Mechanics' 
Bank  of  Alexandria,^  it  was  said  that  it  is  a  presumption  of  law 
that  the  ordinary  usage  and  practice  of  a  bank,  "  in  the  absence 
of  counter  proof  "  results  from  regulations  of  the  directors.  What 
"  counter  proof  "  would  be  regarded  as  sufficient,  or  what  species 
of  evidence  would  be  admissible  as  going  to  constitute  "  counter 
proof",  is  not  intimated.  But  it  would  seem  that  law  and  jus- 
tice would  equally  require  that  only  evidence  going  to  show  that 
such  was  not  in  fact  the  ordinary  usage  and  practice  of  the  bank, 
or  that  the  circumstances  attendant  upon  it  were  not  such  as  to 
give  the  public  or  the  individual  a  conclusive  right  to  regard  such 
usage  and  practice  as  being  established  and  binding,  should  be 
allowed.  To  allow  the  bank  to  show  more  than  this,  by  way  of 
"counter  proof",  would  in  effect  be  to  enable  them  to  make 
others  suffer  for  their  fault.  The  "  interests  of  the  mercantile 
world  "  should  be  imperative  in  this  matter.^*' 

Where  one  deals  with  a  corporation  in  good  faith,  and  the  trans- 
action is  not  I'dtra  vires,  and  he  is  unaware  of  any  defect  or  irregu- 
larity on  the  part  of  those  acting  for  the  corporation,  and  there  is 
nothing  to  excite  suspicion  of  such,  the  corporation  is  bound, 
although  such  defect  or  irregularity  really  exists.  Habitual  ex- 
ercise of  powers  by  an  officer  with  the  knowledge  and  acquiescence 
of  the  bank  defines  as  to  the  public  his  authority,  if  it  is  such  as 
the  directors  could  confer  without  violating  the  charter.^^  So 
far  as  the  public  are  concerned,  it  is  immaterial  that  such  powers 
are  contrary  to  a  by-law.^^ 

Where  a  bank  president,  by  fraud  and  collusion  between  him- 
self and  the  payee  of  a  draft  drawn  on  the  bank,  raised  money  dis- 
honestly upon  the  draft  by  the  wrongful  use  of  his  official  powers, 
it  was  held  that  a  bona  fide  indorsee  for  value  of  the  paper  might 
recover  thereon  from  the  bank.^^  So  if  negotiable  paper  be  in- 
dorsed for  accommodation  solely,  it  is  irregular,  and  even  illegal ; 

»  1  Pet.  46,  7  L.  ed.  47. 

»» Andrews  i-.  Knodand.  6  Cow.  (N.  Y.)  354. 

3>  Merchants'  Bank  v.  State  Bank.  10  Wall.  604,  19  L.  ed.  1008. 

32  Royal  Bank  v.  Turquand,  6  Ellis  &  Black.  327 ;  Agar  v.  Athenaeum 
Ins.  Co.,  3  C.  B.  N.  s.  725. 

33  Ridgway  v.  Farmers'  Bank,  12  Serg.  &  R.  (Pa.)  256. 

VOL.  1-14  209 


§  98  OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES 

and  is  of  course  an  unauthorized  and  wrongful  act  on  the  part  of 
the  officer  doing  it.  Yet  if  the  indorsement  of  the  negotiable 
paper  of  the  bank  is  the  proper  function  of  this  officer,  the  bank 
will  be  bound  to  the  holder  of  this  wrongfully  indorsed  paper, 
provided  he  came  by  it  in  due  course  of  business,  and  without 
notice  of  the  fact  that  the  indorsement  was  for  accommodation.^* 
Though,  by  the  principle  already  laid  down,  holding  the  taker  to 
knowledge  of  the  law  provided  he  has  knowledge  of  the  facts,  if 
he  had  been  aware  that  it  was  solely  an  accommodation  indorse- 
ment he  could  not  have  recovered  on  the  ground  that  he  did  not 
know  but  that  the  officer  might  be  authorized  to  make  such.  The 
absolute  and  necessary  illegality,  the  impossibility  of  its  being 
legal,  except  perhaps  by  virtue  of  special  legislation,  which  no 
one  can  assume,  is  a  principle  of  law  which  everybody  is  impera- 
tively presumed  to  know.  In  this  case  none  of  the  reasons  given 
sometimes  for  holding  parties  to  ultra  vires  acts  exist. 

Signing  Contracts 

(m)  So  with  the  ordinary  statutory  requisition  that  all  formal 
contracts  of  the  bank  shall  be  signed  by  the  president  and  cashier. 
The  contracts  must  be  first  made  by  the  directors,  for  power  to 
sign  is  not  power  to  make,  and  then  only  does  the  function  of  the 
president  and  cashier  come  in.  They  are  authorized  to  sign  con- 
tracts which  have  been  thus  previously  entered  into,  but  they  are 
authorized  to  sign  none  others ;  for  none  others  are  in  fact  con- 
tracts of  the  bank.  So,  if  they  do  sign  others,  it  is  an  unauthorized 
exercise  of  a  power  or  duty,  which  yet  properly  inheres  in  them. 
But  it  has  been  strongly  intimated  that  their  signatures  should 
be  regarded  as  conclusive  of  the  validity  of  a  contract,  in  favor 
of  third  parties  affected  thereby  and  ignorant  of  the  irregularity 
lying  behind  this  procedure,  which,  though  irregular,  has  yet 
been  done  prima  facie  in  strict  pursuance  of  an  existent  function.^^ 

(n)  If  the  officer  or  agent  of  a  corporation  is  clothed  with  a 
certain  power,  either  by  charter,  statute,  or  by  the  lawful  act  of 
the  corporation,  and  if  he  uses  that  power  for  an  unauthorized 
or  even  prohibited  purpose,  or  fraudulently,  yet  the  corporation 
will  be  answerable  for  his  action  to  any  innocent  third  person 

34  Mechanics'  Banking  Association  v.  N.  Y.  Saugerties  Lead  Co.,  23 
How.  Pr.  (N.  Y.)  74 ;  Bank  of  Genesee  v.  Patchin  Bank,  3  Kern.  (N.  Y.) 
309 ;   Kaiser  v.  U.  S.  National  Bank,  99  Ga.  258,  25  S.  E.  620  (1898). 

3*  GiUett  V.  CampbeU,  1  Den.  (N.  Y.)  520. 

210 


ADVERSE    INTEREST  §  99 

affected  thereby .^^  Ordinarily,  whenever  the  act  is  one  not  upon 
its  face  illegal,  or  in  excess  either  of  the  general  corporate  powers,  or 
of  the  powers  which  the  officer  undertaking  it  may  legally  exercise, 
and  is  held  out  as  authorized  to  exercise,  regularity  is  always 
])resumed  in  favor  of  any  person  who  had  no  notice  contravening 
the  correctness  of  these  appearances. 

§  99.  Tenth.  Adverse  Interest.  —  As  between  an  agent  and 
the  bank  an  act  will  be  without  authority  in  any  transaction  in 
which  A.  has  an  interest  adverse  to  that  of  B.,  unless  B.,with  full 
knowledge  of  all  the  facts,  authorizes  or  ratifies  the  act ;  for  B. 
contracts  for  the  disinterested  skill  and  industry  of  A.  for  his 
own  (B.'s)  benefit,  and  the  law,  to  protect  him  from  all  possi- 
bility of  fraud,  declares  that  no  such  transaction  shall  bind  him 
as  to  A.,  whether  A.  has  really  gained  by  it  or  not.  Thus  all 
profits  resulting  from  the  agency  belong  to  B.,  and  an  agent  to 
sell  cannot  himself  buy,  nor  if  it  is  his  duty  to  buy  can  he  buy 
of  himself. 

But  as  to  a  third  person  C,  B.  may  be  held  by  a  transaction 
in  which  A.  is  adversely  interested,  if  C.  was  not  aware  of  such 
defect,  on  the  principle  of  inferred  authority.  (For  illustration 
see  chapter  on  Directors,  §  114.) 

The  president  and  cashier  of  a  national  bank  controlling  its 
finances  cannot  use  the  bank's  property  in  their  private  business, 
nor  in  general  bind  the  bank  by  any  contract  to  which  either  of 
them    is   a   party.^     And,    by   statute,    they  may  be  criminally 

^G  Sheehan  v.  Davis,  17  Ohio  St.  571;  Madison  &  Indianapolis  R.  R. 
Co.  V.  Norwich  Saving  Soc,  24  Ind.  457  ;  Barnes  v.  Ontario  Bank,  19  X.  Y. 
152;  Curtis  v.  Lea\att,  15  id.,  9;  Leavitt  v.  Yates,  4  Edw.  Ch.  (X.  Y.) 
134;  Stoney  v.  Amer.  Life  Ins.  Co.,  11  Paige  (X.  Y.)  035;  Gillett  v. 
Campbell,  1  Den.  (N.  Y.)  520;  Kaiser  /•.  U.  S.  National  Bank,  99  Ga.  258, 
25  S.  K.  G20  (1898) ;  Chemical  Xatioaal  Bank  v.  Armstrong,  59  Fed.  372; 
Wiggins  V.  Stevens,  33  App.  Div.  (Ilun,  N.  Y.)  83  (1898) ;  Murray  t'. 
Pauly,  5G  P\'d.  9G2. 

1  §  99.  Rhodes  v.  Webb,  24  Minn.  292 ;  Richards  v.  Bank,  26  Can. 
S.  C.  Rep.  381 ;  Ruohs  v.  Bank,  94  Tenn.  71,  28  S.  W.  303  (1894) ;  Dowd 
V.  Stephenson,  105  N.  C.  4G7,  10  S.  E.  1101  (1890) ;  Merchants'  Bank  v. 
Denmere,  92  Ga.  735,  19  S.  E.  38  (1893) ;  Bank  of  Le  Roy  v.  Purdy,  100 
App.  Div.  G4  (1905),  91  N.  Y.  S.  310. 

Where  a  bank  holds  a  note  upon  which  its  president  and  another  are 
sureties  and  takes  a  renewal  note  executed  by  the  principal  only,  it  is  not 
bound  by  an  undisclosed  agreement  between  the  president  and  his  co- 
surety that  the  renewal  note  should  discharge  and  e.xtinguish  the  original. 
State  Bank  v.  Mutual  Telephone  Co.,  123  Minn.  314,  143  N.  W.  912, 
1915A  Ann.  Cas.  1082,  n. 

211 


§  99       OFFICERS  AND  AGENTS.  —  GENERAL  PRINCIPLES 

liable    for   making    a    loan   to   themselves    beyond    a    specified 
amount.^" 

In  Bank  v.  Bradshaw  it  was  held  that  a  bank  manager  cannot 
lawfully  loan  the  bank's  money  to  a  company  in  which  as  a  stock- 
holder he  is  largely  interested,  but,  if  he  holds  only  a  small  amount 
of  stock  he  is  not  liable  for  money  so  loaned  if  it  may  reasonably 
be  presumed  from  the  circumstances  that  his  intent  was  solely 
to  promote  the  interests  of  the  bank.^  And  in  North  Carolina 
it  has  been  held  that  where  the  president  of  a  bank  together  with 
the  cashier  constitutes  the  discount  committee,  and  the  president 
indorses  a  note  for  value,  before  maturity,  for  his  own  benefit, 
the  bank  takes  the  note  subject  to  all  the  equities  by  which  the 
president  was  bound,  the  presumption  being  that  his  knowledge 
was  that  of  the  bank.^ 

§  100.  Eleventh.  Revocation.  —  The  clear  principle  of  justice 
approved  by  the  Roman  law,  and  the  jurisprudence  of  modern 
commercial  nations,  is  that  the  bank,  or  the  power  appointing 
the  agent,  may  revoke  his  authority  at  pleasure,  but  not  to  the  in- 
jury of  A.  or  any  person,  C,  with  whom  A.  has  dealt  as  agent. 
Upon  any  contract  not  yet  legally  consummated,  so  as  to  be 
binding  in  law,  the  revocation  operates  fully  ;  as  to  A.  from  the  time 
he  knows  of  it,  as  to  C.  from  the  time  he  knows  of  it,^  or  ought 
to  know  of  it  .2 

If  a  transaction  is  partly  executed,  and  is  severable,  the 
unexecuted  part  may  be  revoked.  But  if  A.  would  be  damaged 
by  a  revocation,  it  cannot  be  made  without  full  indemnity  to 
him,  and  C.'s  acquired  legal  rights  can  never  be  affected  by 
revocation. 

An  authority  coupled  with  an  interest,  or  given  for  a  valuable 
consideration,  cannot  be  revoked ;  but  just  what  constitutes 
such  interest  is  not  perfectly  clear  on  the  authorities.     Wilde,* 

1°  Thornton  v.  State,  5  Ga.  App.  397,  63  S.  E.  301  (1908). 

2  16  Lower  Can.  Rep.  3. 

3  Le  Due  v.  Moore,  111  N.  C.  516,  15  S.  E.  888  (1892). 

1  §  100.  An  agency  by  writing  revoked,  but  left  in  A.'s  hands, 
and  C.  deals  with  him  on  faith  of  it,  B.  held.  Beard  v.  Kirk,  11  N.  H. 
397. 

2  Salte  V.  Field,  5  Durn.  &  E.  211;  Spencer  v.  Wilson,  4  Munf.  (Va.) 
130.  A  general  notoriety  is  equal  to  notice ;  if  the  principal  does  what 
he  can  to  prevent  third  parties  from  being  misled,  and  to  give  notice 
of  revocation  as  general  as  that  of  the  agency  was,  it  is  sufficient. 

3  Smart  v.  Sandars,  5  C.  B.  (Eng.)  895,  917. 

212 


RATIFICATION  §  101 

C.  J.,  says,  "  An  authority  given  on  sufficient  consideration  for 
tlie  purpose  of  securing  some  benefit  to  the  donee  of  the  authority 
is  irrevocable  "  (except  it  may  be  by  death,  as  the  case  shows 
was  understood).  Marshall,^  C.  J,,  says,  "  Tlie  interest  that  can 
protect  a  power  fully  xluring  life  (or  after  death  of  the  one  who 
creates  it)  must  be  an  interest  in  the  thing  itself  which  is  the  sub- 
ject of  the  agency,  or  power,  and  not  merely  in  that  which  is  pro- 
duced by  the  exercise  of  the  power." 

§  101.  Twelfth.  Ratification.  —  A  bank  may,  in  the  same  way 
as  any  other  principal,  ratify  after  performance  unauthorized  acts 
of  its  agents."  Such  ratification  ^^  may  be  direct,  or  it  may  be 
presumed  from  the  ordinary  circumstances  which  constitute 
practical  ratification  in  the  eye  of  the  law ;  as,  for  example,  from 
its  receiving  the  benefit  of    the  acts.^     But  where  benefits  are 

*  Hunt  V.  Rousmanier,  8  Wheat.  204,  5  L.  ed.  597. 

"  §  101.  A  bank  cannot  ratify  an  agreement  which  it  has  no  power  to 
make,  or  where  the  law  expressly  forbids  it.  Swindell  v.  Bainbridge  State 
Bank,  3  Ga.  App.  364,  60  S.  E.  480  (1907) ;  Shaw  v.  Crandon  State  Bank, 
145  Wis.  639,  129  N.  W.  794  (1911). 

""  A  bank  has  the  burden  of  proof  to  show  that  a  contract  made  by  its 
officers  was  not  authorized  or  ratified.  Ida  Co.  Savings  Bank  v.  Johnson, 
156  Iowa  234,  136  N.  W.  225  (1912). 

1  Lime  Rock  Bank  v.  Macomber,  29  Me.  564 ;  Hooker  v.  Eagle  Bank, 
30  N.  Y.  83  ;  Roe  v.  Bank  of  Versailles,  167  Mo.  406,  67  S.  W.  303  (1902) ; 
Washington  State  Bank  r.  Dickson,  35  Wash.  641,  77  Pac.  1067  (1904); 
Shaw  V.  Crandon  State  Bank,  145  Wis.  639,  129  N.  W.  794  (1911) ;  Wynn 
V.  Tallapoosa  County  Bank,  168  Ala.  469,  53  So.  228  (1910).  A  bank 
cannot  repudiate  a  contract  so  that  it  continues  to  enjoy  the  benefits  and 
escape  the  liabilities  of  the  transaction.  Owens  v.  Stopp,  32  111.  App.  6.53  ; 
Wayne  Title  and  Trust  Co.  v.  Schuylldll  Electric  Ry.  Co.,  191  Pa.  St.  90, 
43  Atl.  135  (1899) ;  Kendrick  State  Bank  v.  First  National  Bank,  206 
Fed.  940  (1913).  A  lease  which  the  cashier  made  without  authority  may  be 
ratified.  Spongberg  v.  First  National  Bank,  18  Idaho  524,  1 10  Pac.  716,  31 
L.  R.  A.  (n.  s.)  736,  1912A  Ann.  Cas.  95.  If  the  contract  is  ratified  at 
all  it  must  be  in  its  entirety.  National  Citizens'  Bank  v.  Bowen,  109  Minn. 
473,  124  N.  W.  241  (1910). 

Accepting  payment  on  a  note  is  a  ratification  of  the  alteration  of  the 
date  of  the  note  by  the  manager.  Bodine  i'.  Berg,  82  N.  J.  L.  662,  82  Atl. 
901,  1913D  Ann.  Cas.,  721,  n.  Retaining  the  sum  received  by  bank's  vice 
president  for  extending  the  time  of  a  note  ratifies  the  same.  Wycloff  v. 
Riverside  Bank,  135  App.  Div.  400  (1909),  119  N.  Y.  S.  937.  Suing  on  a 
check  paid  by  its  cashier  ratifies  his  act.  Preston  v.  Dozier,  135  Ga.  25, 
68  S.  E.  793  "(1910). 

When  the  directors  know  that  the  cashier  has  loaned  money  of  the 
bank  to  a  speculative  corporation  in  which  he  was  a  stockholder,  and  made 
no  objection  thereto  until  after  five  years'  deaUng  with  the  corporation 
the  bank  will  be  held  to  have  ratified  the  credit.  First  National  Bank  v. 
Gaddis,  31  Wash.  59(5,  72  Pac.  460  (1903). 

213 


§  101      OFFICERS  AND  AGENTS.  —  GENERAL  PRINCIPLES 

received  without  full  knowledge  by  the  bank  it  does  not  constitute 
a  ratification.  1" 

Any  act  done  avoivedly  for  the  bank  may  be  adopted  with  full 
actual  knowledge  of  the  facts,  so  as  to  have  the  same  effect  as  if 
previously  authorized  by  the  same  power  ivhich  ratifies,  except  that 
such  subsequent  action  can  have  no  retroactive  effect  to  establish 
duties,  a  compliance  with  which  was  not  obligatory  on  C.  at  the 
time  of  the  act,  perhaps  would  have  been  unjustifiable  on  his  part. 
(See  §  90,  above.)  If  the  directors,  or  a  majority  of  them,  know 
actually,  not  merely  constructively,  of  the  contract,  and  acquiesce, 
it  is  a  ratification  without  any  vote. 

If  the  act  is  ratified  by  a  power  which  could  legally  have  author- 
ized it,  all  parties  may  of  course  be  held  upon  it  as  a  valid  act.  If 
the  ratifier  could  not  have  given  legal  authority  for  the  act,  the 
adoption  of  course  cannot  render  it  any  more  valid  than  previous 
command  could  have  done.  The  best  law  is,  that  no  act  of  an 
agent  beyond  the  authority  his  principal  could  rightfully  give  him 
shall  be  recognized  as  binding,  although  benefit  received  must  be 
accounted  for ;  but,  as  we  have  seen  (§  90),  the  cases  are  not 
agreed  upon  this. 

One  thing  is  clear,  however,  ratification  by  the  board  of  direc- 
tors makes  the  act  their  own,  and  that  of  the  bank  if  previous 
authority  from  the  directors  would  have  made  it  so,  and  ratifica- 
tion by  the  bank  makes  the  act  theirs ;  whether  it  will  bind  them 
fully  depends  on  other  considerations  than  those  with  which  this 
division  is  chiefly  concerned.  (See  Ultra  vires.)  Some  of  the 
cases  upon  these  points  will  now  be  more  particularly  noticed. 

(a)  It  is  a  well  settled  rule,  that  a  ratification  by  a  principal 
of  the  unauthorized  acts  of  an  agent,  in  order  to  be  effectual, 
must  be  made  with  a  knowledge  on  the  part  of  the  principal  of  all 
the  material  facts.  And  the  burden  is  upon  the  party  who  relies 
upon  a  ratification  to  prove  that  the  principal,  having  such  knowl- 
edge, acquiesced  in  and  adopted  the  acts  of  the  agent.  It  is  not 
enough  for  him  to  show  that  the  principal  might  have  known  the 
facts  by  the  use  of  diligence.^ 

1"  Fort  Dearborn  National  Bank  v.  Seymour,  71  Minn.  81,  73  N.  W. 
724  (1898). 

2  Combs  V.  Scott,  12  Allen  (Mass.),  493;  Swindell  v.  Bainbridge  State 
Bank,  3  Ga.  App.  364,  60  S.  E.  13  (1907) ;  Coffee  Springs  Bank  v.  Me- 
Gilorav,  167  Ala.  408,  52  So.  473  (1910) ;  Baker  v.  Berry  Hill  Mineral 
Springs  Co.,  112  Va.  280,  71  S.  E.  626  (1911) ;  Campbell  v.  Manufacturers' 
National  Bank,  67  N.  J.  L.  301,  51  Atl.  497,  91  Am.  St.  Rep.  438  (1902). 

214 


RATIFICATION  §  101 

When  the  alleged  principal  is  a  corporation,  a  ratification  may 
be  shown  by  proving  that  the  officers  who  had  the  power  to  author- 
ize the  act  knew  of  it,  and  adoj^ted  it  as  a  valid  act  of  the  corjiora- 
tion,  although  no  formal  vote  was  passed  by  them.^ 

It  is  incumbent  upon  the  plaintiff  to  show  that  the  directors, 
or  at  least  a  majority  of  them,  knew  of  the  contract,  and  its  terms, 
and  that  with  such  knowledge  they  acquiesced  in  and  adopted  it.'* 

Constructive  Knowledge  not  Enough 

So  where  the  cashier  of  a  bank  had  been  carrying  on  trans- 
actions with  the  bank  contrary  to  its  rules,  for  his  own  benefit, 
it  was  held  that  the  fact  of  such  transactions  having  been  entered 
on  the  books  of  the  bank  did  not  import  knowledge  on  the  part 
of  the  directors,  and  consequent  ratification.^ 

(6)  A  contract  may  be  ratified  by  the  stockholders  of  a  corpora- 
tion if  it  is  made  with  full  knowledge  of  all  the  material  facts,  al- 
though in  ignorance  of  the  legal  effect  of  such  facts.^ 

(c)  Retention  of  the  proceeds  of  the  transaction  renders  the 
officer's  act  as  binding  as  if  expressly  authorized.^  The  president 
of  a  bank  in  Nebraska  which  was  about  to  be  reorganized,  pro- 
fessing to  act  on  behalf  of  the  bank,  promised  D.  to  gi^■e  him  ten 
shares  of  the  stock  if  he  would  act  as  a  director  and  would  con- 
tinue the  dealings  of  his  (D.'s)  firm  with  the  bank.     D.  was  elected 

'  Sherman  v.  Fitch,  98  Mass.  59 ;  Lyndeborough  Glass  Co.  v.  Massa- 
chusetts Glass  Co.,  Ill  Mass.  315;  Kelley  v.  Newburyport  Horse  Rail- 
road, 141  Mass.  496,  6  N.  E.  745. 

The  foreclosure  of  a  mortgage  by  entry  and  sale  resulting  from  a  vote 
of  the  board  of  investment  is  a  ratification  of  a  bank's  treasurer  procuring 
an  assignment  of  a  mortgage  to  a  bank.  Gerrity  v.  Wareham  Savings 
Bank,  202  Mass.  214,  88  N.  E.  1084  (1909). 

*  Murray  v.  Nelson  Lumber  Co.,  143  Mass.  251,  9  N.  E.  634. 

Specific  acts  of  ratification  ought  to  be  alleged  and  proved.  Swindell  r. 
Bainbridge  State  Bank,  3  Ga.  App.  364,  60  S.  E.  13  (1907). 

5  First  National  Bank  of  Fort  Scott  ;-.  Drake,  29  Kan.  311;  citing 
Citizens'  National  Bank  v.  Elliott,  .55  Iowa  104,  7  N.  W.  470. 

6  Kelley  v.  Newburyport  Horse  Railroad,  141  IMass.  496,  6  N.  E.  745. 

^  People's  Bank  of  Belleville  r.  Manufacturers'  National  Bank,  101 
U.  S.  181,  25  L.  ed.  907  (1879) ;  Third  National  Bank  v.  St.  Charles  Sav- 
ings Bank,  244  Mo.  5,54,  149  S.  W.  495;  Cantrell  v.  Davidson,  180  Mo. 
App.  410,  168  S.  W.  271  (1914).  When  a  bank  affirms  an  act  by  retaining 
money  it  necessarily  assumes  the  knowledge  that  its  agent  had  in  doing 
the  act.  Fairfield  v.  Southport  National  Bank,  80  Conn.  92,  67  Atl.  471 
(1907)  ;  and  the  bank  is  estopped  to  deny  the  authority  of  its  officers  in 
pledging  assets  for  the  loan.  First  National  Bank  v.  State  Bank,  15  N.  D. 
594,  109  N.  W.  61  (1906) ;  or  in  collecting  draft  against  shipment  of  gold. 
First  National  Bank  v.  Bakken,  17  N.  D.  224,  116  N.  W.  92  (1908). 

215 


§  101      OFFICERS  AND  AGENTS.  —  GENERAL  PRINCIPLES 

director  by  the  bank,  which  thus  held  him  out  as  owning  ten 
shares  at  least,  for  that  is  required  by  R.  S.  §  5146  as  a  quahfication, 
and  on  the  bank  list  of  shareholders  D.  was  down  as  owner  of  ten 
shares.  The  court  held  that  there  was  sufficient  consideration 
for  the  contract  to  give  D.  the  shares,  (it  appeared  that  D.'s  firm 
was  about  to  withdraw  its  business  from  the  bank,)  and  that,  as 
the  president  avowedly  acted  for  the  bank,  and  the  latter  had 
received  the  benefit  of  the  transaction,  it  had  ratified  his  action.* 
Where  a  majority  of  the  directors  of  a  bank  make  an  informal 
agreement  to  take  the  assets  and  assume  the  liabilities  of  a  private 
banking  business,  and  the  corporation  thereupon  takes  and  retains 
such  assets  under  the  agreement,  it  will  be  held  to  have  ratified 
the  action  of  the  directors,  and  to  be  bound  by  all  the  terms  of 
the  agreement.^ 

(d)  A  cashier  accepted  a  note  in  payment.®"  He  had  no  au- 
thority to  do  so,  but  a  ratification  was  inferred  from  the  directors* 
approval  of  it  in  connection  with  an  entry  of  "  paid  "  in  a  certain 
book  showing  the  transaction,  which  was  submitted  to  them.^° 

The  president  of  bank  A.  instructed  its  correspondent  bank, 
B.,  to  charge  against  A.  the  amount  of  a  private  note  of  his  held 
by  B.  An  account  was  rendered  showing  the  transaction,  which 
was  accepted  by  A.  Held,  that  A.  was  estopped  to  deny  the  cor- 
rectness of  the  charge,  as  was  also  its  receiver.^^ 

(e)  Wlien  a  bank  brings  suit  upon  a  bond  taken  by  its  cashier 
it  ratifies  his  act  in  connection  with  the  bond.^- 

8  Rich  V.  State  National  Bank  of  Lincoln,  7  Neb.  201. 

9  Bank  of  New  London  v.  Ketehum,  64  Wis.  7  (1885). 

^"  A  bank  may  ratify  the  act  of  its  cashier  in  attempting  to  pay  his 
own  debt  to  the  bank  by  his  acceptance,  as  cashier,  of  the  note  of  a  third 
party.  First  National  Bank  v.  Gunhus,  133  Iowa  409,  110  N.  W.  611, 
9  L.  R.  A.  (N.  s.)  471,  n.  (1906). 

10  Ecker  v.  First  National  Bank  of  New  Windsor,  59  Md.  291  (1882). 
"  Burton  v.  Burley,  9  BisseU  253  (lU.,  1880).     See  Pensacola  etc.  Bank 

V.  National  Bank,  59  Fla.  347,  52  So.  294  (1910). 

12  German- American  Bank  v.  Schwinger,  178  N.  Y.  569,  70  N.  E.  1099 
(1904),  affirming  75  App.  Div.  .393  (1902),  78  N.  Y.  S.  38.  See  also  War- 
ren Deposit  Bank  v.  Maryland  Fidehty  etc.  Co.,  116  Ky.  38,  74  S.  W.  1111 
(1903),  acceptance  of  a  fidehty  bond  ;  Bodine  v.  Berg,  82  N.  J.  L.  662,  82 
Atl.  901,  1913D  Ann.  Cas.  721,  40  L.  R.  A.  (n.  s.)  65,  acceptance  of  pay- 
ments and  assignment  of  note  altered  by  bank's  general  manager  ;  German 
Sav.  Bank  v.  Des  Moines  National  Bank,  122  Iowa  737,  98  N.  W.  606 
(1904)  ;  Preston  v.  Dozier,  135  Ga.  25,  68  S.  E.  793  (1910),  bringing  suit 
on  a  note ;  Selma  Sav.  Bank  v.  Harlan,  167  Iowa  673,  149  N.  W.  882 
(1914),  smng  on  a  note;  German-American  Bank  v.  Schwinger,  75  App. 
Div.  393  (1902),  78  N.  Y.  S.  34. 

216 


TORT  §  102 

Agent  Responsible  to  Bank 

§  102.  Tort.  —  An  agent,  A.,  is  responsible  to  the  bank  for  all 
damage  °  occasioned  to  the  bank  by  tortious  conduct  not  com- 
manded or  ratified  by  the  bank;  and  the  order  of  a  superior 
officer  is  no  excuse,  if  A.  has  notice  of  the  wrongful  character  of  the 
act.^ 

Agent  Responsible  to   Third  Person 

(a)  An  agent  is  responsible  to  a  third  person,  C,  for  misfeasance 
or  positive  wrong,  always,  whether  the  bank  is  also  responsible 
or  not  ^" ;  but  for  A.'s  negligence  or  omission  in  the  course  of  his 
agency,  C.  must  look  to  the  principal. 

Ba7ik  Responsible  to  Agent 

(b)  The  bank  is  responsible  to  its  agent  for  injury  resulting 
from  its  oicn  negligence  or  wrongful  conduct,  but  not  for  that 
resulting  from  the  negligence  or  fault  of  properly  selected  fellow 
servants;  for  this  danger  is  within  the  contemplation  of  the 
parties  at  the  time  of  the  contract  for  service,  and  may  be  supposed 
to  be  allowed  for  in  the  compensation,  and  is  as  likely  to  be  known 
to  and  is  as  easily  guarded  against  by  A.  as  by  B.,  or  perhaps 
more  easily.^  But  if  A.  is  injured  by  the  tort,  not  of  a  felloiv  ser- 
vant, but  of  one  in  command  over  him,  the  best  opinion  is  that  the 
corporation  is  liable  to  A.  as  it  would  be  to  a  third  party .» 

0  §  102.     Jones  v.  Johnson,  86  Ky.  543  (1888). 

1  Minor  v.  ISIechanics'  Bank,  1  Pet.  46,  7  L.  ed.  47 ;  Pendleton  v.  Bank 
of  Kentucky,  1  T.  B.  Alon.  (Ky.)  177. 

1°  State  V.  Commercial  Bank,  37  Neb.  174,  55  N.  W.  640  (1893) ;  Porter 
V.  Sherman  Bank,  36  Neb.  271,  54  N.  W.  424  (1893) ;  Williams  v.  McKay, 
46  N.  J.  Eq.  25,  18  Atl.  824;  Minton  v.  Stahlman,  96  Tenn.  98,  34  S.  W. 
222  (1895) ;  Cooper  v.  Hill,  94  Fed.  582  (1899) ;  Dodd  v.  Wilkinson,  42 
N.  J.  Eq.  647,  9  Atl.  685  (1887) ;  Barth  v.  Graf,  101  Wis.  27,  76  N.  W.  1100 
(1898) ;   Coclvrill  v.  Abeles,  86  Fed.  505  (1898). 

An  officer  is  liable  for  deposits  received  after  he  knows  the  bank  is 
insolvent  or  in  failing  circumstances.  State  v.  Oleson,  35  Wash.  149, 
76  Pac.  686  (1904). 

2  As  this  is  a  point  on  which  the  cases  are  not  uniform,  authoriti(>s  are 
quoted  only.  Harrison  r.  Central  R.  R.  Co.,  2  Vroom  (X.J.)  296;  Snow 
V.  Housatonic  R.  R.  Co.,  8  Allen  (Mass.)  441 ;  Farwell  v.  Boston  &  Wor- 
cester R.  R.  Co.,  4  Met.  (Mass.)  49. 

3  Cleveland,  etc.  R.  R.  Co.  v.  Keary,  3  Ohio  St.  201 ;  citing  Di.xon  v. 
Ranken,  1  Am.  R.  R.  Cas.  569  (Scotch  case) ;  Hayes  v.  Western  R.  R. 
Co.,  3  Cush.  (Mass.)  270. 

217 


§  102      OFFICERS  AND  AGENTS.  —  GENERAL  PRINCIPLES 

Bank  Responsible  to  Third  Person 

(c)  The  bank  is  not  responsible  to  a  third  party  for  loss  remotely 
caused  by  its  negligence,  as  where  felony  intervenes,  nor  if  such 
party  has  deprived  himself  of  the  right  to  redress  by  his  own 
contributory  fault,  nor  when  the  loss  is  occasioned  by  an  act  of  A. 
entirely  outside  the  business  of  his  agency .3" 

Grounds  of  Liahility  in   Tort 

The  grounds  of  liability  for  tort  are,  1st,  causation,  2d,  adop- 
tion, and,  3d,  such  position  of  control  as  gives  the  best  oppor- 
tunity of  guarding  against  the  injury.*  Every  one  must  so  con- 
duct his  affairs  as  not  to  damage  another  by  any  action  or  omission, 
whether  he  does  the  business  himself  or  by  an  agent,  unless  the  con- 
duct causing  loss  is  clearly  recognized  as  so  necessary  for  the  good 
of  society  that  it  must  be  sustained,  even  though  producing 
damage  to  some  individual,  in  which  case  it  is  set  down  as  damnum 
absque  injuria. 

General  Rule.      Ultra  Vires 

Upon  these  grounds  a  bank  is  liable  for  damage  directly  and 
naturally  resulting  (1)  from  the  nature  ^  of  an  act  ordered  by  itself 
or  its  general  directions,  or  (2)  from  the  act  of  an  agent  which  in- 

3-  Hansford  v.  National  Bank,  10  Ga.  App.  270,  73  S.  E.  405  (1912). 
When  a  bank  agreed  to  make  a  loan  against  certain  collateral  it  was 
entitled  to  turn  over  the  borrower's  note  and  collateral  to  an  officer  of  the 
bank  who  personally  made  the  loan,  and  the  bank  is  not  liable  for  any 
conversion  of  the  collateral  by  such  officer.  McKinnon  v.  Western 
Development  Co.,  212  Fed.  702  (1914). 

*  For  example,  a  railroad  company  is  held  as  an  insurer  because  it  can 
best  guard  against  danger  and  loss,  and  because  it  would  be  extremely 
difficult  for  the  owner  of  goods  to  prove  embezzlement  or  other  actual 
fault  or  negligence  ;  and  holding  the  company  to  such  liability  saves  much 
litigation  and  intricate  and  costly  inquiry,  and  works  no  injustice  for  the 
extra  risk  to  company,  and  security  to  the  customer  is  allowed  for  in  the 
compensation  for  the  company's  service.  See  C.  J.  Shaw's  opinion,  m 
Farwell  v.  Boston  &  Worcester  R.  R.  Co.,  4  Met.  (Mass.)  49.  In  the  ease 
of  a  bank,  it  is  not  generally  deemed  necessary  to  carry  responsibility  be- 
yond the  consequences  of  its  own  conduct,  and  that  of  its  agents  acting  in 
its  business  and  under  its  control.  There  is  a  possible  exception  in  the 
case  of  collections  by  a  correspondent  bank.  See  §  264.  Generally  the 
question  is,  who  has  the  efficient  control,  on  whose  account,  for  whose 
benefit,  and  under  whose  orders  is  the  business  done,  the  conduct  of  which 
occasions  the  loss. 

5  Peaehey  v.  Rowland,  16  E.  L.  &  E.  442 ;   Rex  v.  Nutt,  Fitzg.  47. 

218 


TORT  §  102 

volves  a  breach  of  the  duty  of  the  bank,^  or  (3)  from  the  maimer 
in  which  any  agent  performs  the  functions  of  his  office,  or  any 
business  that  he  may  expressly  or  impHedly  be  authorized  to  do, 
whether  it  be  malfeasance,®"  nonfeasance,®*  or  negligence  that 
causes  the  damage.  (4)  And  a  tort,  like  a  contract,  can  be 
adopted.  If  the  bank  or  the  board  of  directors  expressly  adopt 
and  ratify  the  act,  or  knowingly  retain  the  benefit  of  it,  or  in  some 
cases  the  services  of  the  wrongdoer,  it  will  make  the  tortious  con- 
duct that  of  the  bank,  and  it  makes  no  difTerence  how  clearly 
nltra  vires  the  act  may  be,  except  as  bearing  upon  (3)  or  (4)  by 
showing  the  original  act  or  the  adoption  not  to  be  within  the  course 
of  the  agency  of  the  officer  or  board. 

If  the  board  of  directors  order  or  ratify  an  act  which  is  entirely 
outside  the  business  of  the  bank,  or  the  handling  of  its  interests 
and  property,  it  is  not  the  bank's  tort ;  ^'^  but  if  they  publish  a 
libel  or  fraudulent  statements  ^  in  the  corporate  reports,  the  bank 
is  liable,  as  it  would  probably  be  for  assault  and  battery  if  the 
paying  teller  should  attempt  forcibly  to  recover  an  overpayment,^ 
or  the  cashier  should  break  the  peace  in  attempting  to  seize  the 
property  of  C.  in  payment  of  his  debt  to  the  bank. 

Wilfulness  not  the   Test 

In  some  cases  it  has  been  said,  that,  although  the  principal  is 
liable  for  the  agent's  tort  in  the  bona  fide  prosecution  of  his  master's 

« Weed  V.  Panama  R.  R.  Co.,  17  N.  Y.  362 ;  Philadelphia  R.  R.  Co. 
V.  Derby,  14  How.  468,  14  L.  ed.  502;   Sinclair  v.  Pearson,  7  N.  H.  227. 

If  the  receiving  teller,  while  acting  for  the  bank,  converts  the  depositor's 
money,  the  bank  is  liable  ;  but  if  the  act  is  done  independently  of  employ- 
ment, the  bank  is  not  liable  even  though  the  teller  was  at  the  time  in  the 
bank's  employ.     Schuck  v.  Bramble,  122  Md.  411,  89  Atl.  719  (1914). 

6°  Second  National  Bank  v.  Howe,  40  Minn.  390,  42  N.  W.  200. 

^i' An  unauthorized  action  of  the  directors  of  a  bank  in  withholding 
assets  and  the  transfer  of  stock  to  a  purchaser  thereof  and  thus  preventing 
him  from  selling  the  stock  before  the  insolvency  of  the  bank  became 
known  is  not  in  itself  evidence  of  fraud  on  the  purchaser.  Penfold  v. 
Charlevoix  Sav.  Bank,  140  Mich.  120,  103  N.  W.  572  (1905). 

*«  The  board  of  directors  and  others  are  impotent  to  ratify  any  act  ultra 
vires  in  its  nature,  e.g.  instituting  prosecutions  for  violation  of  the  public 
criminal  laws  of  the  state,  or  causing  requisition  papers  to  be  issued  for 
alleged  criminals.  Hansford  v.  National  Bank,  10  Ga.  App.  270,  73  S.  E. 
405  (1911);  Roberts  v.  National  Bank,  10  Ga.  App.  272,  73  S.  E.  407 
(1911). 

^  Cullen  V.  Thomson,  4  Macq.  H.  L.  Cas.  (Sc)  431,  9  Jur.  (n.  s.)  85. 

8  Ramsden  v.  Boston  &  Albany  R.  R.  Co.,  104  Mass.  117. 

219 


§  102  OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES 

business,  yet  he  is  not  responsible  for  the  agent's  wilful  ^  act,  — 
that  the  wilfulness  of  the  act  is  the  determining  fact.  But  it  is 
perfectly  clear  that  in  many  cases,  if  not  all,  the  line  is  not  drawn 
in  that  way,  and  that  wilfulness  is  of  import  only  as  expressing 
the  fact  that  the  agent  stepped  aside  ^°  deliberately  from  the  con- 
duct called  for  by  his  agency.  If  the  damage  really  results  from 
the  doing  of  any  act  which  is  really,  or  upon  the  facts  as  known 
to  A.^^  is  properly  inferred  to  be,  within  the  scope  of  A.'s  duties 
as  agent,  the  bank  is  liable.  And  even  where  the  principal  has 
given  instructions  to  A.  not  to  do  the  act,  yet,  if  it  is  done  by  him 
in  the  course  of  the  regular  business  of  his  office,  B.  is  liable.^^ 
This  of  course  is  not  consistent  with  the  idea  that  wilfulness  ex- 
cuses the  principal.  It  is  impossible  to  reduce  the  cases  to  anything 
like  harmony,  except  upon  the  theory  that  B.  is  responsible  for 
all  torts,  whether  wilful  or  not,  which  involve  a  breach  of  B.'s 
duty,  or  result  naturally  from  B.'s  orders,  or  arise  from  the  manner 
in  which  A.  performs  the  duties  which  he  has  actual  or  implied 
authority  to  do.  Except  as  regards  a  notary  or  correspondent 
bank,  the  whole  matter  of  a  bank's  responsibility  for  tort  reduces 
itself  to  express  authorization,  ratification,  and  control.  The  re- 
sponsibility of  B.  for  A.  for  tort  in  the  course  of  business  grows 
out  of  and  is  measured  by,  begins  and  ends  with,  his  control  of 
A.,1^  and  therefore  does  not  cover  the  act  of  one  exercising  an  in- 
dependent calling  who  has  contracted  to  do  the  work,i*  unless  the 
injury  results  from  the  wry  nature  of  the  thing  contracted  for.  In 
that  case,  the  bank  is  responsible  as  the  cause  of  loss. 

The  following  decision  of  the  United  States  Supreme  Court, 
in  a  suit  against  a  corporation  for  libel,  presents  the  law  clearly. 

"  A  railroad  corporation  was  held  responsible  for  the  publication 
by  them  of  a  libel,  in  which  the  capacity  and  skill  of  a  mechanic 

9  M'Manus  v.  Crickett,  1  East  106 ;  Thayer  v.  Boston,  19  Pick.  (Mass.) 
516;  Davis  v.  Bangor,  42  Me.  522;  Watson  v.  Bennet,  12  Barb.  (N.  Y.) 
196 ;  Wright  v.  Wilcox,  19  Wend.  (N.  Y.)  343  ;  Fox  v.  Northern  Liberties, 
3  Watts  &  S.  (Pa.)  103. 

1°  Fraud.  Trespass  vi  et  armis.  Weed  v.  Panama  R.  R.  Co.,  17  N.  Y. 
362 ;  Ranger  v.  Great  Western  R.  R.  Co.,  5  H.  L.  Cas.  72 ;  Bloodgood  v. 
Mohawk  R.  R.  Co.,  14  Wend.  (N.  Y.)  51 ;  Edwards  v.  Union  Bank  of 
Florida,  1  Fla.  136.  See  case  of  the  Druid,  1  Wm.  Rob.  405  ;  and  Reeves's 
Dom.  Rel.  357. 

11  Goff  V.  Great  Northern  Railway,  30  L.  J.  Q.  B.  148. 

12  Philadelphia  &  Reading  R.  R.  v.  Derby,  14  How.  468,  14  L.  ed.  502 ; 
Southwick  V.  Estes,  7  Cush.  (Mass.)  385. 

"  McGuire  v.  Grant,  1  Dutch.  (N.  J.)  356. 
"  9  M.  &  W.  710 ;   5  Esch.  721. 

220 


TORT  §  102 

and  builder  of  depots,  bridges,  station-houses,  and  other  struc- 
tures for  railroad  companies,  were  falsely  and  maliciously  dis- 
paraged and  undervalued.  The  publication  in  that  case  consisted 
in  the  preservation,  in  the  permanent  form  of  a  book  for  distri- 
bution among  the  persons  belonging  to  the  corporation,  of  a  report 
made  by  a  committee  of  the  company's  board  of  directors,  in 
relation  to  the  administration  and  dealings  of  the  plaintifi'  as  a 
superintendent  of  the  road. 

"  For  acts  done  by  the  agents  of  a  corporation,  either  in  con- 
tractu or  in  delicto,  in  the  course  of  its  business,  and  of  their  employ- 
ment, the  corporation  is  responsible,  as  an  individual  is  responsible 
under  similar  circumstances. 

"  The  result  of  the  modern  cases  is,  that  a  corporation  is  liable 
civiliter  for  torts  committed  by  its  servants  or  agents,  precisely 
as  a  natural  person ;  and  that  it  is  liable  as  a  natural  person  for 
the  acts  of  its  agents  done  by  its  authority,  express  or  implied, 
though  there  be  neither  a  written  appointment  under  seal,  nor 
a  vote  of  the  corporation  constituting  the  agency  or  authorizing 
the  act."  1^ 

(f/)  A  bank  is  not  generally  held  responsible  for  the  negligence 
of  a  notary  public  in  the  performance  of  his  duties,^^  unless  it 
makes  the  notary  peculiarly  its  agents  by  appointing  him  to  act 
for  it  for  a  definite  time,  and  taking  bond  for  his  faithful  per- 
formance of  duty,^^  and  even  then  opinion  is  not  uniform  that  the 
bank  is  liable. ^^ 

The  ground  of  this  rule  is  that  the  notary  is  an  officer  whose 

15  Philadelphia,  Wilmington,  &  Baltimore  R.  R.  v.  Quiglev,  21  How.  202, 
16  L.  ed.  73.  See  also  Salt  Lake  City  v.  HolUster,  118  U.  S.  256,  260,  30 
L.  ed.  176,  6  Sup.  Ct.  105.5;  New  Jersey  Steamboat  Co.  v.  Broekett,  121 
U.  S.  037,  30  L.  ed.  1049,  7  Sup.  Ct.  1039 ;  National  Bank  v.  Graham,  100 
U.  S.  699,  702,  25  L.  ed.  750  ;  Hyre  v.  Central  Bank,  4S  IVIo.  App.  434. 

Bank  is  liabl(>  for  injury  to  one  relying  upon  false  statcnnents  in  cer- 
tificates is.aied  by  its  cashier  in  respect  to  deposits.  Hindman  v.  First 
National  Bank,  112  Fed.  931,  .57  L.  R.  A.  108  (1902). 

When  the  officers  of  a  bank  aided  gangsters  they  and  the  bank  are  liable 
to  the  defrauded  party,  there  being  no  innocent  stockholders  to  suffer. 
Hobbs  V.  Boatright,  195  Mo.  693,  93  S.  W.  934,  113  Am.  St.  Rep.  709,  n., 
5L.  R.  A.  (n.  s.)  906,  n.  (1906). 

16  Britton  V.  Niccolls,  104  U.  S.  757,  26  L.  ed.  917  ;  First  National  Bank 
of  Galveston  v.  Butler,  41  Ohio  St.  519 ;  Baldwin  v.  Bank  of  Louisiana,  1 
La.  Ann.  13. 

iMVarren  v.  Suffolk  Bank,  10  Cush.  (Mass.)  582;  Gerhardt  v.  Boat- 
man's Savings  Inst.,  38  Mo.  60. 

1*  Baldwin  v.  Bank  of  Louisiana,  1  La.  Ann.  13.  See  Title,  "Notary 
PubHc  ",  §  264. 

221 


§  102      OFFICERS  AND  AGENTS.  —  GENERAL  PRINCIPLES 

duties  are  prescribed  by  law  (and  in  most  States  an  official  bond 
is  required  to  secure  the  public  against  his  negligence,  and  this 
should  be  the  case  in  all  States),  and  as  this  ground  does  not  apply 
to  giving  notice  of  dishonor,  that  not  being  a  duty  peculiarly  be- 
longing to  a  notary,  but  capable  of  being  done  by  any  agent  of 
the  bill  holder,  the  bank  is  not  relieved  of  responsibility  for  its 
proper  performance  by  employing  a  notary  to  do  it.^^ 

Correspondent  Bank  in  Collection 

As  we  shall  see  hereafter,  there  is  much  conflict  on  the  point 
whether  a  bank  is  to  be  held  responsible  for  the  negligence  of  a 
correspondent  bank  to  which  paper  is  sent  for  collection.     (§  264.) 

Cases  on  Negligence.     Tort  beyond  Scope  of  Official  Business 

(e)  We  may  here  notice  a  few  cases  upon  the  liability  of  a  bank 
for  negligence.  The  elaborate,  thorough,  and  luminous  opinion 
deUvered  by  Parker,  C.  J.,  in  the  case  of  Foster  v.  The  Essex  Bankj^*^ 
stands  forth  as  the  leading  authority.  The  facts  in  this  well  known 
case  were  as  follows.  A  cask  of  gold  doubloons  was  left  with 
the  bank  for  safe  keeping,  the  circumstances  of  its  reception 
constituting,  in  the  opinion  of  the  court,  a  purely  gratuitous  bail- 
ment. It  was  kept  in  the  bank  vaults  with  precisely  the  same  care 
with  which  the  funds  and  property  of  the  bank  were  kept.  But 
the  cashier  of  the  bank,  with  the  connivance  of  a  subordinate 
clerk,  stole  from  the  vaults  a  quantity  of  bank  property,  and  also 
a  considerable  amount  of  this  gold.  It  was  no  part  of  the  duty  of 
either  the  cashier  or  clerk  to  open  or  meddle  with  the  keg  in  which 
the  doubloons  had  been  secured  by  their  depositor;  and  no  of- 
ficer of  the  bank  had,  from  the  nature  of  the  mandate,  any  right 
to  examine  or  so  much  as  touch  the  contents  of  the  keg.  The 
counsel  for  the  plaintiff  urged  that  the  principal  was  liable  for 
the  tortious  act  of  its  agent,  the  cashier.  But  the  court  said, 
upon  the  authority  of  Mechanics'  Bank  v.  Bank  of  Columbia,2i^ 
that  the  liability  of  the  principal  depends  upon  the  facts,  (1)  that 
the  act  was  done  in  the  exercise,  and  (2)  within  the  limits,  of  the 
power  delegated.     For  example,  for  money  credited  in  the  books 

"  AUen  V.  Merchants'  Bank,  22  Wend.  (N.  Y.)  215. 
2«  17  Mass.  479,  followed  in  GibUn  v.  McMullen,  2  L.  R.  P.  C.  317, 
and  in  Scott  i>.  National  Bank  of  Chester  Valley,  72  Pa.  St.  471. 
21  5  Wheat.  326,  5  L.  ed.  100. 

999 


TORT  §   102 

of  the  teller,  or  proved  to  have  been  deposited  with  him,  though 
not  credited,  the  bank  is  answerable.  The  inquiry  then,  in  this 
case,  must  simply  be,  whether,  when  the  gold  was  taken  from  the 
cask  by  the  cashier  and  clerk,  they  were  in  the  course  of  their 
official  emplo\Tnent.  Their  master,  the  bank,  had  no  right  to 
meddle  with  or  to  open  the  cask ;  it  neither  could  delegate,  nor 
did  it  attempt  to  delegate,  any  authority  to  any  of  its  officers  so 
to  tlo.  It  was  not  within  the  duty  of  the  cashier  to  know,  or  to 
take  any  account  of,  the  contents.  He  was  not  therefore  acting 
within  the  scope  of  his  authority  when  he  committed  the  villainy  ; 
and  the  bank  is  no  more  answerable  than  if  he  had  stolen  the 
pocket-book  of  an  individual  from  the  bank  counter.  "  If,  then," 
the  learned  judge  proceeds,  "  it  be  asked,  for  what  acts  of  a  cashier 
or  clerk  the  bank  would  be  answerable,  I  should  answer :  for  any 
which  pertain  to  their  official  duty ;  for  correct  entries  in  their 
books,  and  for  a  proper  account  of  general  deposits ;  so  that,  if 
by  any  mistake,  or  by  fraud,  in  these  particulars,  any  person  be 
injured,  he  would  have  a  remedy .2-  .  .  .  For  the  correct  conduct 
of  all  their  servants,  in  their  proper  sphere  of  duty,  they  are  an- 
swerable." In  this  especial  case,  "  if  the  cashier  had  any  official 
duty  to  perform  relating  to  the  subject,  it  was  merely  to  close  the 
doors  of  the  vault  when  banking  hours  were  over,"  but  neither 
to  open  the  keg,  nor  to  touch  its  contents.  The  bank  is  "  not  answer- 
able for  special  deposits,  stolen  by  one  of  their  officers,  any  more 
than  if  stolen  by  a  stranger ;  or  any  more  than  the  owner  of  a 
warehouse  would  be,  who  permitted  his  friend  to  deposit  a  bale 
of  goods  there  for  safe  keeping,  and  the  goods  should  be  stolen  by 
one  of  his  clerks  or  servants." 

Banks  do  not  Warrant  the  Honesty  of  Their  Officers  beyond  Their 

Duties 

(J)  "  The  undertaking  of  banking  corporations  with  respect 
to  their  officers  is,  that  they  shall  be  skillful  and  faithful  in  their 
employments:  they  do  not  warrant  their  general  honesty  and 
uprightness.'    And  it  is  the  same  with  individuals."  -^     The  cited 

^^  To  the  point  that  the  bank  is  liable  for  frauds  or  mistakes  of  the 
cashier  or  clerk  in  their  entries  in  the  books  of  the  bank,  and  in  false  ac- 
counts of  deposits,  may  be  cited  also  Salem  Bank  v.  Gloucester  Bank.  17 
Mass.  1  ;  Gloucester  Bank  v.  Salem  Bank,  id.,  33 ;  Andrews  v.  President, 
etc.  of  Suffolk  Bank,  12  Gray  (Mass.)  461. 

"  Citing  Finucane  v.  Small,  1  Esp.  315. 

223 


§  102  OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES 

case  of  Finucane  v.  Small  "is  in  all  respects  like  the  one  before 
us,  except  that  the  goods  were  to  be  kept  for  hire,"  a  difference 
altogether  in  favor  of  the  present  defendants.  In  answer  to  this 
case,  it  was  observed  in  argument  that  "  the  cashier  of  the  bank 
was  trusted,  and  therefore  the  doctrine  of  Lord  Kenyon  did  not 
apply.  But,  if  we  are  right  in  the  principles  before  stated,  he  was 
not  trusted  in  this  business ;  neither  he  nor  his  principal,  the 
bank,  having  anything  to  do  with  the  chest  or  cask  but  to  give 
it  a  place  in  the  vault,  and  to  lock  it  up  when  the  hours  of  business 
were  over  ;  and  so  the  cashier  must  be  considered  like  the  servant 
in  the  case  cited." 

Negligence  of  Directors 

(g)  It  was  acknowledged  by  the  counsel  for  the  bank,  in  this 
case,  that  a  more  difficult  question  would  have  been  presented 
had  the  board  of  directors,  or  their  predecessors,  shown  any  neg- 
ligence in  the  original  appointment  or  the  subsequent  retention 
of  the  defaulting  officials.  Had  these  persons  borne  bad  char- 
acters, or  had  circumstances  of  suspicion  demanding  inquiry 
come  to  the  knowledge  of  the  board,  or  had  the  board  for  any 
reason  been  unwilling  to  trust  their  own  property  with  them  in 
the  same  manner  in  which  they  trusted  the  property  of  the  bank, 
then  the  plaintiff  might  have  had  a  better  case.  No  adjudicated 
cause  aids  us  in  determining  what  redress,  if  any,  the  law  would 
allow  to  the  sufferer  who  had  lost  a  special  deposit  under  such 
circumstances  of  additional  aggravation.  An  opinion  must  be 
matter  of  speculation.  Very  probably  he  might  be  allowed  to 
recover.  But  if  he  were,  it  is  obvious  that  his  action  could  not, 
as  in  this  case,  be  assumpsit.  It  should  be  an  ordinary  action  on 
the  case  for  damages,  laying  an  injury  or  loss  directly  resulting 
from  the  wrongful  default  of  the  corporation.  The  chief  difficulty 
in  the  way  of  the  plaintiff's  success  in  such  a  suit  would  probably 
be  in  showing  that  the  default  of  the  directors  was  in  fact  the  causa 
proxima  of  his  mishap.  It  would  of  course  be  easy  to  show  that  it 
facilitated  the  occurrence  of  the  mishap,  but  the  only  immediate 
cause  in  the  eye  of  the  law  might  perhaps  be  regarded  as  the 
felony  of  the  officials. 

Trunk  Case 

(h)   There  is  an  English  case  of  very  similar  facts  and  law,^* 
and  also  another  English  case  is  to  the  same  effect,  going,  however, 
24  Giblin  v.  McMuUen,  2  L.  R.  P.  C.  317. 
224 


TORT  §  102 

even  further.  The  customer  kept  his  trunk  of  securities  with  his 
bankers,  and  one  of  the  bankers  himself  obtained  access  to  the 
trunk,  and  abstracted  securities  therefrom.  It  was  held  that  the 
customer  could  have  recourse  for  reimbursement  only  against 
the  estate  of  the  guilty  partner,  not  against  the  property  of  the 
firm ;  inasmuch  as  it  did  not  appear  that  the  firm  had  any  au- 
thority to  open  the  trunk  or  examine  its  contents.^^  Apparently, 
if  the  firm  had  had  such  authority,  the  act  of  the  individual  partner 
in  reaching  the  securities,  being  thus  within  the  scope  of  this  au- 
thority as  a  partner,  would  have  subjected  the  firm  to  responsi- 
bility for  his  wrongful  act,  done  within  the  scope  of  this  authority. 

But  where  the  customer  deposited  with  his  bankers  certain 
certificates  of  stock  for  the  purpose  of  having  the  dividends  col- 
lected by  the  bankers  for  his  account,  paying  them  a  small  commis- 
sion for  their  trouble,  and  the  manager  fraudulently  abstracted 
the  certificates  and  by  forged  transfers  got  possession  of  the 
stock,  the  customer  was  allowed  to  recover  the  value  of  the  stock 
from  the  company,  but  without  costs.  He  then  sought  to  collect 
the  costs  from  the  bankers.  The  court  held  that  the  bankers 
were  bailees  for  reward,  and  had  been  guilty  of  culpable  negli- 
gence in  keeping  the  certificates  in  a  safe  to  which  the  manager 
had  such  uncontrolled  access ;  but  nevertheless  that  the  plaintiff 
could  not  prevail  in  this  suit,  since  the  loss  of  his  costs  was  too 
remote  a  consequence  of  the  negligence  of  the  bankers  to  permit 
of  their  being  held  liable.^^ 

If  the  bankers  themselves  are  guilty  of  a  misappropriation  of 
property  deposited  with  them  for  a  special  purpose,  it  seems. 
hardly  necessary  to  say  that  they  will  be  liable  ,^^ 

Bank  not  Responsible  for  Remote  Result  of  its  Negligence. 
Stolen  Bills 

(0  Upon  this  point  the  same  seventeenth  volume  of  the  Mas- 
sachusetts Reports,  which  is  peculiarly  rich  in  interesting  and 
ably  argued  bank  cases,  contains  a  valuable  decision.  The  facts  of 
the  case  of  The  Salem  Bank  v.  The  Gloucester  Bank  ~^  were  as 
follows.  A  large  number  of  the  bills  or  notes  of  the  bank  were 
prepared  for  circulation,  and  were  signed  by  the  cashier.     They 

25  Ex  parte  Eyre,  1  Phil.  Ca.  227. 

2*  In  re  United  Service  Company,  Ex  parte  Johnston,  6  L.  R.  Ch.  212. 

27  Ex  parte  Bond,  1  M.  D.  &  De  G.  10.  ^s  17  ]^iass.  1. 

VOL.  I  — ir.  225 


§  102  OFFICERS   AND   AGENTS.  —  GENERAL  PRINCIPLES 

only  needed  for  their  perfection  the  signature  of  the  president. 
This,  however,  they  did  not  receive,  and  they  were  kept  in  this 
condition  for  several  years,  lying  in  the  cashier's  desk  in  the  open 
room  of  the  bank.  Thieves  broke  into  the  bank,  and  attempted 
to  break  its  vault  without  success.  But  they  broke  open  the  desk 
and  stole  the  incomplete  bills,  forged  the  president's  signature 
upon  them,  and  put  them  in  circulation.  The  holders  sought  to 
recover,  among  other  pleas,  under  a  declaration  for  damages, 
alleging  that  their  loss  was  the  result  of  the  excessive  and  wrong- 
ful negligence  of  the  bank  in  allowing  notes  so  nearly  perfect  to 
lie  in  so  exposed  a  place.  Of  course  no  business  man  could  deny 
that,  practically,  the  manner  in  which  these  notes  were  kept  was 
unpardonably  careless.  Had  they  been  in  the  vault,  it  was  prac- 
tically proved  that  they  would  have  remained  intact,  since  the 
vaults  were  not  opened.  But  the  plaintiffs  were  not  allowed  to 
recover.  The  court  said  that  for  the  "  indirect  and  remote  con- 
sequences of  the  negligence  "  the  corporation  was  not  answerable. 
They  did  not  leave  finished  notes  in  this  exposed  condition,  but 
only  paper  which  required  the  further  and  independent  act  of 
forgery,  an  act  which  is  a  felony,  to  make  them  capable  of  working 
a  deception.  The  neglect  was  only  causa  reniota,  and  the  bank 
could  not  be  held.  The  decision  is  clearly  reasoned  and  per- 
fectly satisfactory  in  law.  Unfortunately,  its  value  is  rather 
negative  than  positive,  for  it  furnishes  very  little  aid  towards 
the  determination  of  what  species  of  directorial  negligence  the 
results  would  be  regarded  as  sufficiently  immediate  to  be  answered 
for  by  the  bank.  It  should  perhaps  be  remarked  that  it  was  not 
intimated  in  this  case  that  the  directors  had  been  in  any  default 
in  choosing  or  keeping  a  cashier  whose  character  they  ought  to 
have  known  to  be  such  as  to  render  him  unfit  for  the  responsi- 
bility imposed  upon  him. 

(j)  It  is  a  general  rule,  that,  except  under  very  peculiar  cir- 
cumstances, a  bank  will  not  be  held  liable  to  make  good  such  acts 
or  undertakings  of  their  officers  as  are  unwarrantable,  unusual, 
or  indirectly  in  contravention  of  any  law.^^ 

29  Wyman  v.  Hallowell  &  Augusta  Bank,  14  Mass.  58 ;  where  the  ques- 
tion was  whether  a  bank  could  be  bound  to  pay  the  bank  notes  and  bills 
of  its  predecessor,  of  the  same  name,  by  reason  of  promises  to  that  effect 
made  by  its  president  and  cashier.  Lloyd  v.  West  Branch  Bank,  15  Pa. 
St.  172 ;  where  the  cashier  had  received,  without  consideration,  a  bundle 
of  notes  "the  issuing  of  which  had  been  interdicted"  by  a  statute.  Fos- 
ter V.  Essex  Bank,  17  Mass.  479. 

226 


REPRESENTATIONS  §  103 

(k)  A  bank  is  liabk',  if  negligent  in  failing  to  examine  bonds 
received  by  it  for  a  correspondent,  as  collateral  for  a  loan,  although 
the  bank  acts  gratuitously. ^° 

When  the  president  of  a  bank  leaves  certificates  of  stock  signed 
in  blank,  with  its  cashier  who  fraudulently  issues  them  to  himself 
and  pledges  them  as  collateral  for  a  loan,  the  bank  is  liable  to  the 
pledgee  for  the  value  of  the  stock  even  though  the  certificate  recites 
that  they  are  transferable  only  on  the  books  of  the  bank.^^ 

A  bank  is  liable  to  the  fiancee  of  its  cashier  when  he,  acting  for 
the  bank,  practices  fraud  upon  her  through  advantage  of  the  rela- 
tionship between  them.^- 

Although  a  bank  may  legitimately  receive  on  deposit  the  money 
of  a  gambler,  with  reason  to  believe  it  was  won  in  gaming,  yet, 
when,  with  conscious  knowledge  that  the  depositor  is  obtaining 
the  money  by  fraud  or  theft,  it  does  acts  in  aid  of  the  means  by 
which  the  money  is  thus  obtained,  it  is  liable  therefor,^^ 

§  103.  Representations.  —  An  agent,  A.,  cannot  indirectly  by 
declarations  make  a  contract  for  the  bank  (B.),  which  he  could  not 
make  directly,  nor  ever  affect  B.  by  his  representations  or  admis- 
sions beyond  the  scope  of  the  business  for  which  he  has  actual  or 
inferred  authority.^ 

But  if  A.  has  authority  to  make  a  declaration,  expressly  or  by 
usage,  or  by  imi)lication,  as  from  his  acting  in  an  office  in  which 
such  authority  inheres,  or  if  the  course  of  transacting  business 
for  the  bank  with  C,  for  which  he  has  actual  or  inferred  authority, 
he  makes  declarations  pertinent  to  that  business,  such  statements 
are  as  to  C.  the  statements  of  the  bank,  and  afl'ect  it  just  as  they 
would  if  made  by  a  principal  transacting  the  business  for  himself, 
viz. :  1st,  if  material  {i.e.  (a)  enter  substantially  into  the  induce- 
ment to  C.'s  conduct  in  the  matter),  and  are  such  as  he  has  a  right 
to  rely  upon  {i.e.  {b),  not  mere  expressions  of  opinion,  or  rcconi- 

30  Clinton  National  Bank  v.  Park  National  Bank,  37  App.  Div.  (Hun, 
N.  Y.)  601  (1899). 

31  Havens  v.  Bank  of  Tarboro,  132  N.  C.  214,  43  S.  E.  039,  95  Am.  St. 
Rep.  627  (1903). 

32  Hallett  V.  Fish,  120  Fed.  986  (1903). 

33  Wright  V.  Stewart,  130  Fed.  905  (1904) ;  Stewart  v.  Wright,  147  Fed. 
321  (1906). 

0  §  103.  Franklin  Bank  r.  Stewart,  37  Me.  519 ;  Kennedy  v.  Otoe  Co. 
Bank,  7  Neb.  65.  See  Washington  Bank  v.  Lewis,  22  Piek.  (Mass.)  24; 
Llovd  V.  West  Braneh  Bank,  15  Pa.  St.  172;  Merchants'  Bank  v.  State 
Bank,  10  Wall.  675,  19  L.  ed.  102S ;  Thomas  v.  City  National  Bank,  40 
Neb.  501,  58  N.  W.  943  (1897) ;   Rich  v.  State  National  Bank,  7  Neb.  201. 

007 


§  103  OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES 

mendation,  or  (c)  statements  regarding  matters  equally  within 
the  knowledge  of  C,  or  (d)  of  the  falsity  of  which  C.  has  notice), 
(e)  and  made  not  in  jest,  but  in  such  manner  as  naturally  to  influ- 
ence C,  and  therefore  presumably  made  with  that  intent,  (/)  and 
C.  does  actually  rely  upon  them,  and  sustains  damage  thereby, 
the  bank  is  liable  for  deceit  if  the  statements  were  false  to  the 
(g)  knowledge  of  the  officer,  or  made  without  such  reason  for 
belief  as  a  man  of  ordinary  prudence  would  require  for  his  own 
guidance,  or  C.  may  upon  such  cause  rescind  his  contract.^  2d,  if 
made  during  (not  after)  the  negotiation  for  sale  of  goods  with  the 
qualities  (a),  (6),  (e),  and  (/),  it  is  a  warranty  if  so  intended  and 
understood  by  the  parties.-  If  (g)  is  present,  it  is  a  warranty  and 
also  a  fraud.  If  made  in  good  faith,  it  is  still  a  warranty.  If,  how- 
ever, it  was  intended  only  as  a  bare  affirmation,  it  is  a  representa- 
tion, not  a  warranty.^  Any  affirmation  of  the  quality  or  condition 
of  the  goods  with  the  above  limitations  (a),  (b),  (e),  and  (/),  is  a 
warranty.^  3d,  the  declaration  or  admission  may  amount  to  a 
contract  or  the  renewal  of  one,  as  when  a  cashier  declares  a  check 
drawn  on  his  bank  to  be  "  good",^  or  when  the  president,  having 
power  by  usage,  takes  a  debt  out  of  the  Statute  of  Limitations  by 
his  acknowledgment.^ 

C.  must  be  careful  not  to  rely  upon  A.'s  representations  until 
assured  that  he  has  either  authority  for  the  very  purpose  of  making 
them,  or  authority  to  do  the  business  to  which  they  are  pertinent, 
and  in  the  course  of  which  they  are  made  ;  he  must  never  take  an 
agent's  own  representations  as  to  the  extent  of  his  authority.'^ 

Past   Transactions 

As  a  general  rule,  information  as  to  a  past  and  completed  trans- 
action is  courtesy,  and  no  more  ;  but  if  the  knowledge  has  a  bearing 

1  See  Kerr  on  Fraud  and  Mistake ;  Prewitt  v.  Trimble,  92  Ky.  176, 
17  S.  W.  356  (1891). 

2  Bacon  v.  Brown,  3  Bibb  (Ky.)  35  Davis  v.  Meeker,  5  Johns.  (N.  Y.) 
354 ;   Roscorla  v.  Thomas,  3  Q.  B.  234. 

3  Swett  V.  Colgate,  20  Johns.  (N.  Y.)  196;  Conner  v.  Henderson,  15 
Mass.  320. 

4  Hillman  v.  Wilcox,  30  Me.  170;  Beals  v.  Olmstead,  24  Vt.  115;  Os- 
good V.  Lewis,  2  Harr.  &  G.  (Md.)  495. 

5  Espy  V.  Bank  of  Cincinnati,  18  Wall.  604,  21  L.  ed.  947. 

^  Morgan  v.  Merchants'  National  Bank  of  Memphis,  13  Lea  (Tenn). 
234. 

^  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  16  N.  Y. 
125. 

228 


REPRESENTATIONS  §  103 

on  a  present  or  future  dealing  with  the  bank,  it  will  come  within  the 
sphere  of  liability  as  above,  at  least  if  matter  to  which  it  is  material, 
or  the  effect  of  the  statement  upon  such  dealings  may  be  supposed 
fairly  within  the  contemplation  of  the  parties. 

(a)  Some  cases  in  illustration  will  be  noticed.  In  the  Farmers 
and  Mechanics'  Bank  of  Kent  County  i\  Butchers  and  Drovers' 
Bank,^  the  teller,  duly  authorized  to  certify  a  check  if  the  drawer 
had  funds  in  the  bank,  certified  the  check  of  a  drawer  who  hatl 
no  funds.  The  certification  under  the  circumstances  was  clearly 
unauthorized ;  but  the  holder  had  no  notice  of  the  facts  which 
rendered  it  so.  IMr.  Justice  Seklen,  delivering  the  opinion  in  the 
New  York  Court  of  Appeals,  said  in  substance :  The  bank  leads 
persons  to  put  confidence  in  its  teller,  through  whom  they  are 
obliged  to  deal  with  the  bank.  For  his  acts,  therefore,  within  the 
scope  of  his  employment  and  authority,  so  far  as  can  be  known,  the 
bank  must  be  responsible.  Here  the  fact  of  whether  or  not  there 
were  funds  was  one  which  could  only  be  learned  by  asking  the 
teller  himself.  Knowledge  that  he  could  not  certify  without  funds 
is  not  knowledge  of  the  extrinsic  fact  that  there  are  no  funds.  A 
check,  taken  on  the  faith  of  the  officer's  representation  that  he  has 
authority  to  certify,  does  not  bind  the  bank,  if  he  had  really  no  such 
authority.  But,  provided  he  has  the  authority,  then  a  check 
taken  on  the  strength  of  his  representation  that  there  are  funds 
binds  the  bank,  unless  the  holder  knows  as  a  fact  that  the  rei)resen- 
tation  is  false.  The  sound  rule  seems  to  be,  that,  where  a  party 
dealing  with  an  agent  ascertains  that  the  agent's  act  corresponds 
exactly  with  the  terms  of  the  power,  he  may  take  the  agent's 
representation  as  to  any  extrinsic  fact,  peculiarly  within  the  agent's 
knowledge,  and  not  ascertainable  by  a  comparison  of  the  power 
with  the  act  done  under  it.  The  distinction  is  clear,  and  is  well 
put  by  the  learned  judge.  The  hnuk  does  not  hold  out  the  officer 
as  authorized,  and  he  is  not  authorized,  to  state  what  are  or  are 
not  his  proper  functions.  But  all  his  acts,  however  irregular  or 
fraudulent,  done  in  pursuance  of  a  function  which,  as  a  matter  of 
fact,  the  bank  has  in  any  manner  made  properly  his,  must  affect 
the  bank,  if  the  party  dealing  with  him  acted  in  good  faith.  To 
the  like  effect  was  the  holding  in  Ex  parte  Overend,  Gurney,  &  Co.' 
Acceptances  made  by  an  officer  duly  authorized  to  accept  upon 
the  receipt  of  collateral  security,  but  who  in  this  instance  had 
accepted  without  such  receipt,  were  holden  good  as  against  the 
8  16  N.  Y.  125.  »  L.  R.  4  Ch.  400. 

229 


§  103  OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES 

bankers  in  the  hands  of  a  third  party,  holding  for  value  and  igno- 
rant of  the  facts  which  had  rendered  the  acceptance  really  irregular 
and  unauthorized. 

Since  the  power  of  selling  railroad  bonds  does  not  pertain  to  a 
bank  organized  under  the  act  of  Congress  of  1864,  if  a  bank  under- 
takes so  to  sell,  and  the  teller  makes  false  representations  to  a 
purchaser,  no  action  will  lie  for  the  purchaser  against  the  bank  to 
recover  damages  for  the  deceit.^" 

Declarations  and  admissions  of  the  officer  or  agent  of  a  bank 
bind  the  bank  only  when  they  are  made  by  him  officially,  with  the 
intent  of  binding  the  bank,  and  either  within  the  scope  of  his 
general  official  employment,  or  by  virtue  of  a  special  authority 
lodged  in  him  by  the  directors.  Otherwise,  like  the  remarks  of  any 
third  person,  they  are  utterly  incompetent.^^  The  declarations  of 
directors,  even  more  than  those  of  other  officers,  are  impotent  to 
bind  the  bank ;  for  the  reason  that  no  individual  director,  as  such, 
has  any  power  whatsoever  in  reference  to  the  affairs  of  the  bank.^^" 
Only  when  and  as  he  is  acting  in  conjunction  with  his  co-directors 
is  he  intrusted  with  what  may  be  described  as  an  undivided  share 
in  the  general  administration  of  its  affairs.  But  to  him  individually, 
at  least  strictly  in  his  capacity  as  director,  no  department  of  those 
affairs  is  allotted,  and  his  sole  admission  or  declaration  in  any  de- 
partment is  therefore  in  excess  of  both  his  duty  and  his  authority, 
and  is  null  and  meaningless  in  law.^^ 

Past   Transactions 

(b)  As  a  general  rule  statements  made  by  a  bank  officer  concern- 
ing any  past  transaction,  though  the  matter  to  which  they  refer  is 
one  which  falls  within  the  scope  of  his  emplojTnent,  will  not  be 
regarded  as  binding,  upon  the  bank.  They  are  considered  to  be 
given  simply  as  a  matter  of  favor  to  the  inquirer.     The  officer 

^^  See  also  the  cases  of  Atlantic  Bank  v.  Merchants'  Bank,  10  Gray 
(Mass.)  532  ;  Skinner  v.  Merchants'  Bank,  4  Allen  (Mass.)  290 ;  Weckler 
V.  First  National  Bank,  42  Md.  581. 

"  Stewart  v.  Huntingdon  Bank,  11  Serg.  &  R.  (Pa.)  2G7. 

""  The  statement  of  a  director  at  home  or  on  the  street  is  not  binding 
on  the  bank ;  but  if  he  gives  the  promise  or  assurance  in  the  name  of  the 
corporation  which  subsequently  acts  upon  it  or  acquiesces  in  it  the  bank 
is  bound.  West  Branch  State  Bank  v.  Haines,  135  Iowa  313,  112  N.  W. 
552  (1907). 

*2  Pemigewassett  Bank  v.  Rogers,  18  N.  H.  255 ;  Loomis  v.  Eagle 
Bank,  Disney  (Ohio)  285.  See  also  Soper  v.  Buffalo  &  Rochester  R.  R. 
Co.,  19  Barb.  (N.  Y.)  310. 

230 


REPRESENTATIONS  §  103 

owes  no  duty  to  the  bank  to  answer  interrogatories  which  relate 
only  to  a  completed  transaction.  He  is  not  employed  for  that 
purpose,  or  held  out  by  the  bank  as  intrusted  to  fulfil  such  a  func- 
tion. The  interrogator  simply  requests  a  favor  from  the  officer 
personally,  which,  if  granted,  can  create  no  liability  as  against 
the  bank.i*  But  an  exception  will  arise  to  this  rule  where  the 
officer  of  the  bank  knows  that  his  answer  to  the  inquiry  is  to  form 
the  ground  of  future  action  on  the  part  of  the  inquirer,  so  that 
accurate  information  is  not  merely  desired  to  satisfy  a  curiosity 
as  to  an  occurrence  wholly  in  the  past,  but  is  sought  and  needed  for 
governing  important  dealings  in  the  present  and  future.  So,  too, 
if  the  declarations  or  admissions,  though  relating  to  something 
that  is  in  mere  point  of  time  past,  yet  have  for  any  reason  a  present 
interest  and  weight,  or  from  any  combination  of  circumstances 
assume  a  still  subsisting  importance,  they  will  then  be  admissible 
as  constituting  a  part  of  the  res  gestoB,  without  regard  to  the  fact 
that  the  precise  act  itself  to  which  they  relate  was,  strictly  speak- 
ing, concluded  some  time  before.  Thus  where  a  person  who  had 
been  called  upon  to  pay  a  note,  insisted  that  it  had  been  paid  ;  and 
in  the  discussion  the  president  examined  the  books  of  the  bank, 
became  satisfied  of  the  payment,  and  admitted  it  to  hixve  been 
made ;  it  was  afterward  held  that  evidence  of  his  admission  was 
competent  to  bind  the  bank,  because  in  fact  it  constituted  a  part 
of  the  res  gestcB,  and  was  made  by  him  in  the  execution  of  his 
ordinary  official  duties.^'* 

The  cashier  and  a  director  falsely  told  C.  that  they  considered 
G.,  the  maker  of  a  note,  perfectly  good.  C.  indorsed  the  note,  and 
G.  thereupon  obtained  its  discount  by  the  bank.  The  representa- 
tions not  being  in  the  course  of  the  agency  of  the  officers,  the  bank 
could  not  be  held,  though  they  were  wilfully  false.^^ 

L.,  who  owned  six  shares  of  bank  stock,  asked  C.  for  a  loan  on 
pledge  of  them.     C,  calling  at  the  bank  to  ask  if  the  stock  was 

13  Pemigewassett  Bank  v.  Rof?ers,  IS  N.  H.  255;  Franklin  Bank  r. 
Steward,  37  Me.  519;  Lime  Rock  Bank  v.  Hewett,  52  id..  531 ;  Franklin 
Bank  v.  Cooper,  39  id.,  542  ;  Sterling  v.  Marietta  &  Susquehanna  Trading 
Co.,  11  Serg.  &  R.  (Pa.)  179. 

"  Franklin  Bank  v.  Steward,  37  Me.  519 ;  Bank  of  Monroe  v.  Field,  2 
Hill  (N.  Y.)  445. 

15  Mapes  V.  Second  National  Bank  of  Titusville,  80  Pa.  St.  163.  See 
Liggett  V.  Union  National  Bank.  233  Mo.  590,  136  S.  W.  299.  1912C  Ann. 
Cas.  70,  n.,  where  the  question  of  whether  or  not  the  bank  is  liable  to  one 
who  relies  upon  a  letter  of  credit  or  commendation  signed  by  its  second 
vice  president  is  undecided. 

231 


§  103  OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES 

unencumbered,  was  told  by  the  officer  in  charge  of  the  bank's 
business  that  the  stock  was  free,  and  he  might  safely  take  it ;  and 
it  was  held  that  the  bank  was  estopped  from  declaring  the  stock 
forfeit  for  dues  to  it  from  L.  before  the  shares  were  pledged  to  C.^^ 
And,  where  one  is  induced  to  sign  a  note  as  surety  upon  the  assur- 
ance of  an  officer  of  the  bank  that  certain  stock  of  the  maker  is 
retained  as  security,  the  surety  is  only  liable  for  the  difference 
between  the  value  of  the  stock  and  the  amount  of  the  note.^*^" 

(c)  A  bank  cannot  escape  the  consequences  of  misrepresentation 
made  by  its  officer  by  showing  that  the  falsehood  was  told  such 
officer  by  another,  also  an  officer  of  the  bank.J^ 

{d)  A  bank  is  not  bound  by  its  teller's  statement  that  the  in- 
dorsement on  a  check  is  genuine. ^^ 

{e)  If  C.  lends  money  to  the  cashier  (A.)  for  his  private  use,  and 
receives  from  him  a  certificate  in  the  lender's  name  and  signed 
by  the  president,  but  stating  that  shares  are  transferable  only  on 
the  bank-books  and  on  surrender  of  former  certificate,  and  no  cer- 
tificate has  been  surrendered,  and  the  bank  has  neither  ratified 
the  transaction  nor  received  benefit  therefrom,  C,  though  de- 
frauded by  the  cashier,  has  no  remedy  against  the  bank.  The 
bargain  was  with  A.  personally.  C.  lent  him  money  for  his  own 
use,  not  for  the  bank ;  and,  his  representations  being  in  his  own 
business,  could  not  affect  the  bank.  Moreover,  the  certificate  on 
its  face  gave  C.  notice.^^ 

If  A  bank  receives  a  general  inquiry  from  B  bank  as  to  the 
financial  standing  of  a  customer,  and,  in  answering,  fails  to  disclose 
the  fact  that  the  customer  was  indebted  to  A  bank,  and  that  it 
held  liens  on  certain  of  his  property,  it  will  not  be  estopped  in  the 
absence  of  fraud  to  assert  such  liens  as  against  a  mortgage  subse- 
quently taken  by  B  bank.^'' 

§  104.  When  the  Bank  has  Notice.^  —  The  grounds  of  decision 
in  this  matter  are  :  — 

16  Moore  v.  Bank  of  Commerce,  52  Mo.  377  (1S73). 

"«  Packard  v.  Harrington,  41  Kan.  469,  21  Pac.  621  (1889). 

"  Gould  V.  Cayuga  National  Bank,  56  How.  Pr.  (N.  Y.)  505  (1877). 

18  Walker  v.  St.  Louis  National  Bank,  5  Mo.  App.  214  (1878). 

19  Moores  v.  Citizens'  National  Bank  of  Piqua,  111  U.  S.  156,  28  L.  ed. 
385,  4  Sup.  Ct.  345  (1884).  See  People's  Bank  v.  Kurtz,  99  Pa.  St.  344 ; 
Merchants'  Bank  v.  Livingston,  74  N.  Y.  223 ;  Western,  etc.  R.  R.  v, 
Franklin  Bank,  60  Md.  36. 

20  First  National  Bank  v.  Marshall  Bank,  83  Fed.  725. 

"  §  104.  Knowledge  of  the  agent  is  chargeable  upon  the  principal  only 
when  the  principal,  if  acting  for  himself,  would  have  received  notice  of 

232 


WHEN    THE    BANK    HAS   NOTICE  §  104 

(a)  First.  Presumed  communication.  Grounds  of  decision.  — 
It  is  the  duty  of  an  agent  to  give  the  l)ank  the  benefit  of  his  knowl- 
edge coneerning  the  business  in  which  he  is  engaged  by  B.,  and  in 
the  absence  of  adverse  interest  rebutting  the  inference,  he  is  pre- 
sumed to  do  his  duty.""  And  the  principal  is  chargeable  with  the 
information  acquired  by  his  agent,  whether  he  obtained  it  in  the 
course  of  the  transaction  of  his  principal's  business  or  otherwise, 
provided  the  knowledge  is  so  acquired  by  him  as  to  be  presump- 
tively within  his  recollection  when  he  is  acting  on  behalf  of  his 
principal.^ 

(b)  Second.  Identity.  Knowledge  of  bank.  —  B.  cannot  take 
any  advantage  of  a  third  person,  C,  by  employing  A.  to  negotiate 
the  business  instead  of  doing  it  himself.  Unless  C.  has  notice  to 
the  contrary,  he  has  a  right  to  regard  A.  and  B.  as  identical  in  re- 
spect to  all  notice  that  is  received  in  the  very  transaction ;  for 
that  B.  would  have  received  if  he  had  conducted  the  business  him- 
self, and  also  in  respect  to  information  concerning  the  matter 
which  C.  knows  A.  to  possess  by  previous  or  outside  acquirement, 
and  perhaps  for  that  very  reason  does  not  further  enforce  the 
subject  upon  A.'s  attention  during  the  transaction.  In  such  cases 
the  notice  enters  into  the  dealing,  is  within  the  contemplation  of 
both  parties.  And  further,  B.  cannot  escape  from  the  effect  of 
knowledge  he  himself  possesses  by  employing  A.,  and  if  there  is 
reasonable  time  for  B.  to  communicate  his  knowledge  to  A.  before 
the  event  which  raises  the  question,  the  transaction  is  affected  by 
B.'s  information.^ 

the  matters  known  to  the  agent.     Lanning  v.  Johnson,  75  N.  J.  L.  259,  69 
Atl.  490  (1908). 

»«  American  National  Bank  v.  Miller,  229  U.  S.  517,  57  L.  ed.  1310,  33 
Sup.  Ct.  883  (1913). 

1  Bank  v.  Shook,  100  Tenn.  436,  45  S.  W.  338  (1897) ;  Le  Due  v.  Moore, 
111  N.  C.  516,  15  S.  E.  888  (1892) ;  National  Bank  v.  Thomas,  30  R.  I.  294, 
74  Atl.  1092  (1910) ;  Lowndes  v.  City  National  Bank,  82  Conn.  8,  72  Atl. 
150,  22  L.  R.  A.  (n.  s.)  408  (1909) ;  J^IcCartv  v.  Kepreta,  24  N.  D.  395,  139 
N.  W.  992,  1915A  Ann.  Cas.  834,  n. 

2  Hummel  v.  First  National  Bank,  2  Col.  App.  571,  32  Pae.  72 ;  May- 
hew  II.  Eames,  3  B.  &  Cross.  601. 

The  acts  and  knowledge  of  a  manager  of  a  bank  who  acts  both  for  him- 
self as  an  individual  and  as  manager  of  the  bank  in  the  purchase  of  a  note 
from  himself  l:)y  the  bank  are  the  act  and  knowledge  of  the  bank.  The 
manager  is  the  alter  ego  of  the  bank.  First  National  Bank  v.  Burns,  88 
Ohio  St.  434,  103  N.  E.  93,  49  L.  R.  A.  (n.  s.)  764,  n.  (1913). 


233 


§  105  OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES 

Credibility 

§  105.  (1)  The  notice  must  be  credible.  It  must  be  of  a 
trustworthy  and  authentic  nature.  Rumor,  or  gossip,  or  state- 
ments proceeding  from  sources  which  might  naturally  be  supposed 
inaccurate,  are  neither  knowledge  nor  notice.  Hearsay  tales  and 
idle  talk  can  be  properly  disregarded,  but  information  of  so  credible 
a  nature  that  no  reasonable  man  would  dare  to  neglect  it  in  his 
own  private  affairs  cannot  be  neglected  by  a  bank  officer  in  the 
affairs  of  the  bank. 

Adverse  Interest 

§  106.  (2)  If  the  third  party,  C,  knows  that  A.  has  an  adverse 
interest  tending  to  cause  him  to  withhold  his  knowledge  from  the 
bank,  C.  has  no  right  to  regard  A.  and  B.  as  identical  in  the  trans- 
action, and  cannot  hold  B.''  So  one  who  persuades  a  cashier  not 
to  impart  his  knowledge  to  the  bank  cannot  hold  the  bank  affected 
by  such  notice.^  The  knowledge  of  an  officer  in  dealing  adversely 
to  the  interests  of  the  bank  does  not  bind  the  bank.^ 

0  §  103.  Quoted  in  American  National  Bank  v.  Ritz,  70  W.  Va.  409, 
74  S.  E.  679  (1912). 

1  First  National  Bank  of  Sturgis  v.  Reed,  36  Mich.  263. 

2  Bank  v.  Lovitt,  114  Mo.  519 ;  1  Morawetz  on  Corp.,  §  540  c. ;  Gra- 
ham V.  Orange  Co.  National  Bank,  35  Atl.  1053  (1896)  ;  Brandon  Bank  v. 
Briggs'  Assignees,  70  Vt.  .594,  41  Atl.  .580  (1898) ;  Holm  v.  Atlas  Na- 
tional Bank,  84  Fed.  119  (1898) ;  Findley  v.  Cowles,  93  Iowa  389,  61  N.  W. 
998  (1895) ;  Fort  Dearborn  National  Bank  v.  Seymour,  71  Minn.  81,  73 
N.  W.  724  (1898) ;  Benton  v.  German-American  National  Bank,  122  Mo. 
332,  26  S.  W.  975;  American  National  Bank  v.  Miller,  229  U.  S.  517, 
57  L.  ed.  1310,  33  Sup.  Ct.  883  (1913) ;  Libby  v.  Hamilton  Bank,  178 
Fed.  53,  29  L.  R.  A.  (n.  s.)  558,  n.  (1909) ;  Real  Estate  Trust  Co.  v. 
Washington  etc.  R.  Co.,  191  Fed.  .566  (1910) ;  Pueblo  Savings  Bank  v. 
Richardson,  39  Colo.  319,  89  Pac.  799  (1907) ;  Bank  of  Hartford  v.  Mc- 
Donald, 107  Ark.  2.32,  154  S.  W.  510  (1913) ;  American  National  Bank 
V.  Ritz,  70  W.  Va.  409,  74  S.  E.  679  (1912) ;  Dominion  Trust  Co.  v.  Hildner, 
243  Pa.  St.  253,  90  Atl.  69  (1914) ;  City  Bank  v.  Bryan,  72  W.  Va.  29,  78 
S.  E.  400  (1913) ;  Bank  of  Overton  v.  Thompson,  118  Fed.  798  (1902) ; 
Bank  of  Le  Roy  v.  Purdy,  100  App.  Div.  64  (1905),  91  N.  Y.  S.  310; 
German-American  State  Bank  v.  Soap  Lake  etc.  Co.,  77  Wash.  332,  1.37 
Pac.  461  (1913)  ;  Stanford  v.  Coram,  26  Mont.  285,  67  Pac.  1005  (1901) ; 
Corporation  Commission  v.  Bank  of  Jonesboro,  164  N.  C.  357,  79  S.  E. 
308  (1913).  The  bank  is  not  affected  with  the  notice  of  three  directors 
who  do  an  unauthorized  act  and  who  expressly  agree  to  conceal  it  from 
the  bank.    Traders  etc.  Bank  v.  Black,  108  Va.  59,  60  S.  E.  743  (1908). 

But  if  the  agent  is  in  fact  acting  for  his  principal  in  the  transaction, 
even  though  he  may  have  an  opposing  personal  interest,  the  law  will  pre- 
sume, in  favor  of  third  persons,  that  he  has  communicated  his  knowledge 
to  the  bank.  McKenney  v.  Ellsworth,  165  Cal.  326,  132  Pac.  75  (1913) ; 
Williams  v.  Hasshagen,  166  Cal.  386,  137  Pac.  9  (1913). 

234 


DID   THE    AGENT   ACT?  §  109 

§  107.    (3)   Subject  to  (1)  and  (2)  we  have  the  following  rules. 

Special  Appointment  or  Duty 

(.r)  Notice  to  one  whose  business  it  is  to  receive  such  notice 
binds  the  bank,  whether  such  agent  has  any  other  duty  to  perform 
in  regard  to  the  matter  to  which  the  notice  relates  or  not.  Any 
one  the  bank,  or  directors,  or  custom,  may  appoint  for  the  very 
purpose  of  receiving  notices  of  course  has  power  in  the  matter, 
resting  on  the  same  principles  as  the  authority  to  do  any  other  act. 
For  example,  it  is  part  of  the  president's  inherent  power  to  receive 
notice  of  suits  against  the  bank. 

Did  the  Agent  Adf 

§  108.  iy)  If  (.r)  does  not  apply,  the  next  question  is,  Did  A. 
act  for  the  bank  in  the  business  to  which  the  notice  relates?  ^ 

If  not,  the  bank  is  not  affected  by  his  knowledge. 

If  he  did  so  act,  then  the  question  is,  When  did  he  receive  the 
information,  and  in  what  capacity? 

If  it  came  to  him  officially,  while  acting  in  the  very  business 
which  it  concerns,  it  binds  the  bank,  if  it  came  in  sufficient  season 
to  be  acted  upon,^ 

§  109.  If  notice  comes  to  A.,  as  it  might  to  any  other  indi\i(lual, 
not  officially  nor  while  acting  for  the  bank  in  the  business  to  which 
it  relates,  as  if  it  is  previous  ^  to  his  employment  as  agent,  then  the 
bank  is  bound,  provided,  — 

1st.     That  the  information  is  not  privileged  in  law. 

1  §  108.  See  Hoover  v.  Wise,  91  U.  S.  308,  23  L.  ed.  392  ;  Commercial 
Bank  v.  Cunningham,  24  Pick.  (Mass.)  270. 

2  See  Fairfield  Sa\nngs  Bank  v.  Chase,  72  ]Me.  22G ;  Bank  of  United 
States  V.  Davis,  2  Hill  (N.Y.)  451 ;  Perry  Navel  Stores  v.  Caswell,  G3  Fla. 
552,  57  So.  G60  (1912). 

1  §  109.  See  tlie  Distillery  Spirits,  11  WaU.  35G,  20  L.  ed.  1G7 ;  Na- 
tional Bank  i'.  Cushman,  121  Mass.  490  ;  Fairfield  Sa\'ings  Bank  v.  Chase, 
72  Me.  22G;  Anketel  v.  Converse,  17  Ohio  St.  11 ;  Hart  v.  F.  &  M.  Bank, 
33  Vt.  252;  Blumenthal  v.  Brainard,  38  Vt.  410;  Ilayward  v.  National 
Ins.  Co.,  52  Mo.  181 ;  Dresser  v.  Norwood,  17  C.  B.  n.  s.  4G6;  Fuller  v. 
Benett,  2  Hare  402 ;  First  National  Bank  v.  Burns,  88  Ohio  St.  434.  103 
N.  E.  93,  49  L.  R.  A.  (n.  s.)  7G4,  n.  (1913).  But  Pennsylvania  holds  that 
notice  twenty-four  hours  before  the  agency  is  no  more  notice  to  the  prin- 
cipal than  if  received  twenty-four  hours  after  it  ceased.  Houseman  v. 
Girard  Mut.  Bldg.  and  Loan  Association,  81  Pa.  St.  250.  Notice  to  an 
agent  of  the  bank  is  notice  to  the  bank  in  transactions  conducted  by  such 
agent  acting  for  the  Inink,  within  the  scope  of  his  authority,  whether  his 
knowledge  was  acquired  in  the  coursi'  of  the  particular  dealing,  or  on  some 
prior  occasion.     Cragie  v.  Hadley,  99  N.  Y.  131. 

235 


§  109  OFFICERS   AND   AGENTS.  —  GENERAL  PRINCIPLES 

2d .  That  it  is  so  recent,  and  is  so  circumstanced  in  other  respects, 
as  to  render  it  reasonably  probable  that  it  was  still  present  in  the 
mind  of  A.  when  acting  for  B.  in  the  matter  to  which  it  relates. 
It  would.be  hardly  fair  to  hold  the  bank  responsible  for  A.'s  failure 
to  remember  a  remote  piece  of  information. 

3d.  That  A.  has  no  interest  adverse  to  communication  of  his 
knowledge  to  the  bank ;  or  if  he  has  such  interest,  that  C.  is  aware 
of  A.'s  possession  of  the  knowledge,  but  not  aware  of  the  adverse 
interest.  If  C.  knows  of  the  adverse  interest,  the  case  comes 
under  §  106.  If  C.  does  not  know  of  the  adverse  interest,  nor 
that  A.  has  the  knowledge,  the  knowledge  being  previous,  the  bank 
cannot  be  held  on  the  ground  of  identity  with  A.  at  the  time  of 
receiving  notice,  nor  upon  the  presumption  that  A.  communicates 
for  the  adverse  interest  rebuts  the  presumption. 

But  although  this  seems  to  be  the  rule  laid  down  by  the  cases 
cited,  it  seems  questionable  whether  in  any  case  B.  should  be 
allowed  to  take  advantage  of  A.'s  bad  faith.  Of  course  the  respon- 
sibility should  ultimately  fall  upon  A. ;  but  as  between  B.  and  C, 
C.  is  entirely  innocent,  while  B.  has  at  least  erred  in  judgment  by 
selecting  an  agent  whose  conduct  is  blameworthy.  If  the  loss  by 
reason  of  A.'s  bad  faith  must  rest  upon  either  B.  or  C,  it  seems 
clear  that  the  blot  is  on  B.'s  side  of  the  line ;  his  conduct  in  select- 
ing a  defective  instrument  has  caused  loss  to  C.  which  would  not 
have  resulted  if  the  instrument  employed  by  him  had  come  up  to 
the  standard  of  good  faith  w^iich  it  is  one  of  the  great  objects  of 
the  law  to  secure  in  commercial  dealings. 

If  the  third  party,  C,  does  not  know  of  the  adverse  interest 
of  the  agent.  A.,  but  does  know  that  A.  has  the  knowledge,  (which 
perhaps  C.  had  himself  imparted  to  A.  before  he  became  agent,  or 
while  not  acting  as  agent),  C.  certainly  has  a  right  to  consider  that 
notice  as  entering  into  the  dealing  between  them,  just  as  truly 
as  if  it  had  come  to  A.  in  the  course  of  that  very  transaction. 

§  110.  (4)  If  A.  assumes  to  act  as  agent  for  the  bank,  B.,  and 
B.  afterward  adopts  or  takes  the  benefit  of  the  act,  B.  takes  it 
subject  to  notice  of  all  such  matters  as  appear  to  have  been  at  the 
time  within  the  knowledge  and  recollection  of  A.^ 

JMien  Notice  to  Agent  does  not  Affect  Bank 

§111.     (5)  Notice  to  an  agent  in  regard  to  a  matter  in  which  he 
does  not  act  for  the  bank  is  not  notice  to  the  bank ;  nor  if  while  act- 
1  §  110.     Hovey  v.  Blanchard,  13  N.  H.  145. 
236 


WHEN    NOTICE    TO    AGENT   DOES   NOT   AFFECT    BANK  §   111 

ing  for  the  bank  lie  has  information  of  matters  \vhieh  do  not  afleet 
his  own  duties,  nor  relate  to  the  bank's  business  in  a  way  that 
comes  within  the  seope  of  his  employment." 

For  example,  if  one  is  engaged  in  mere  ministerial  duties,  as  a 
clerk  eopying  a  deed,  his  knowledge  of  a  former  deed  or  incum- 
brance on  the  land  is  not  notice  to  the  bank.^  Notice  to  a  bank 
messenger,  whose  only  duty  is  to  collect  paper  and  not  to  rei)ort 
responses  of  i)ersons  who  refuse  to  pay,  is  not  notice  to  the  bank.^" 
But  a  bank  is  charged  with  notice  of  letters  mailed  to  it,  but  wrong- 
fully suppressed  by  a  bookkeeper  whose  duty  it  is  to  open  and 
distribute  the  mail.^*  If  it  does  not  concern  a  matter  which  falls 
within  the  scope  of  his  real  or  presumable  agency  and  official  em- 
ployment, apparently  he  is  at  liberty  to  disregard  it,  and  the  bank 
cannot  be  injuriously  affected  by  his  so  doing.  For  the  bank, 
having  neither  made  him  its  agent  nor  held  him  out  as  such  in  these 
premises,  is  bound  by  nothing  which  he  does,  says,  or  hears  therein. 
If  the  cashier  knows  or  learns  something  concerning  a  matter 
exclusively  within  the  functions  of  the  president,  his  knowledge  is 
not  the  knowledge  of  the  bank.  In  the  language  of  the  court  in 
the  case  of  The  Fulton  Bank  v.  New  York  and  Sharon  Canal  Co., 
"  if  the  notice  be  to  one  who  has  no  duty  to  perform  relative  to  the 
subject  matter  of  the  notice,  it  will  not  be  enough."  ^  The  words 
were  used  in  discussing  notice  to  a  director,  but  they  state  a 
doctrine  of  general  application. 

In  the  case  of  knowledge  acquired  b>'  or  communicated  to  any 
other  officer  than  a  director,  little  difficulty  can  arise.  The  presi- 
dent, it  should  be  remembered,  is  a  director.  But  his  duty  of 
supervision  is  more  extensive  than  that  of  any  other  member  of  the 
board.  Wherefore  notice  to  him  on  any  subject  would  probably 
be  held  to  be  notice  to  the  bank.^  Generally  it  may  be  said  that 
if  the  notice  relates  to  any  matter  which  falls  within  the  scope  of 

0  §  HI.     Sturdee  v.  Cuba  Easton  R.  Co.,  196  Fed.  211  (1912). 

1  See  remarks  in  Fairfield  Savings  Bank  v.  Chase,  72  Me.  220. 
Casual  notice  acquired  by  an  employee  is  not  notice  to  the  bank,  in 

the  absence  of  evidence  of  his  duties.  Marsh  v.  Wheeler,  77  Conn.  440. 
59  Atl.  410  (1904). 

•<•  Camp  V.  Southern  Bank,  97  Ga.  .W2.  25  S.  E.  3(52  (1895).  When 
a  bookkeeper  knew  of  the  dissolution  of  a  firm  because  he  was  its  book- 
keeper his  knowledge  did  not  bind  the  bank  of  which  he  was  assistant 
cashier  and  bookkeeper.  Morris  v.  First  National  Bank,  162  Ala.  301, 
50  So.  137  (1909). 

«>  First  National  Bank  v.  Fourth  National  Bank,  .56  Fed.  967. 

2  4  Pai'-e  (N.  Y.)  127.  '  Porter  v.  Bank  of  Rutland,  19  Vt.  410. 

237 


§111  OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES 

the  agency  and  official  employment  of  the  officer  to  whom  the 
notice  is  given,  then  it  is  notice  to  the  bank. 

(a)  In  Fairfield  Savings  Bank  v.  Chase,'*  Brown,  an  attorney 
and  one  of  the  trustees,  was  engaged  to  draw  a  mortgage,  i.e.  to 
convey  title  to  the  bank,  and  he  knew  there  was  a  prior  deed  of  the 
property  which  failed  to  be  recorded  till  after  the  mortgage.  It 
w^as  held,  that,  if  Brown  was  acting /or  the  bank  in  the  matter  of 
drawing  the  mortgage,  his  knowledge  was  notice  to  the  bank,  but 
as  the  evidence  on  this  point  was  doubtful,  it  should  have  gone 
to  the  jury,  and  as  it  did  not,  the  verdict  was  set  aside. 

§  112.  (6)  Notice  to  a  single  Director.  —  It  has  been  held  that 
each  member  of  the  board  of  directors  is  the  agent  of  the  bank  to 
receive  notice,  and  if  he  acts  in  the  matter,  although  only  one  of  a 
large  majority,  the  others  all  acting  honestly  and  without  notice, 
actual  or  constructive,  yet  the  knowledge  of  the  one  director  binds 
the  bank  as  much  as  if  he  were  a  sole  agent,  doing  the  business 
alone.^ 

It  is  a  question  whether  it  is  just,  in  case  of  a  composite  agency 
like  the  board  of  directors,  to  hold  the  bank  bound  by  the  knowl- 
edge of  one,  any  more  than  by  the  other  individual  conduct  of  one. 
Since  the  power  and  agency  is  in  the  board,  and  is  not  intrusted  to 
individuals,  it  would  seem  proper  that,  to  affect  the  bank,  the  knowl- 
edge should  be  that  of  the  board,  or  of  so  many  that  its  action 
would  not  stand  after  taking  away  the  votes  of  those  having  notice. 
The  directorial  act  should  involve  the  notice,  the  knowledge  should 
enter  into  and  taiyit  the  cause  of  the  bank's  conduct,  in  order  to 
vitiate  it.     See  §  114. 

(a)  In  Louisiana  State  Bank  v.  Senecal,^  the  court  thought  it 
reasonable  that  there  should  be  formal  notice  to  the  board,  or  at 
least  that  the  majority  of  the  directors  should  be  affected.^"    This 

"  72  Me.  226  (1881). 

1  §  112.  North  River  Bank  v.  Aymar,  3  Hill  (N.  Y.)  262;  Bank  of 
United  States  v.  Davis,  2  id.,  451. 

2  13  La.  527. 

2°  The  mere  knowledge  of  one  or  more  directors,  less  than  a  majority 
of  the  hoard,  and  of  the  vice  president  of  the  bank  is  not  imputable  to  the 
bank  so  as  to  affect  the  liability  of  a  surety  on  an  indemnity  bond.  Fi- 
delity etc.  Co.  V.  Courtney,  186  U.  S.  342,  46  L.  ed.  1193,  22  Sup.  Ct. 
833  (1902). 

When  a  bank  employs  the  president  and  general  manager  of  a  bankrupt 
company  as  its  agent  in  collecting  accounts  which  the  company  has  as- 
signed to  the  bank  as  security  for  a  loan,  the  bank  is  chargeable  with  the 
knowledge  of  such  agent  that  the  company  was  insolvent.  In  re  Cotton 
Manufactures  Sales  Co.,  209  Fed.  629  (1913). 

238 


CONCLUSION  S  llo 

perhaps  is  going  as  far  the  other  way  in  statement,  though  the 
thought  of  the  court  was  prol)ably  really  directed  to  the  point  of 
causation  which  we  are  noticing. 

An  individual  director,  unless  specially  authorized,  is  not  the 
agent  of  the  bank  to  do  any  business  ;  he  is  simply  one  member  of 
a  composite  agency,  that  must  act  as  a  unit  to  bhid  the  bank. 

For  this  reason  the  argument  used  above  in  §  lOS  to  enforce  the 
liability  of  the  bank  where  A.  is  guilty  of  bad  faith,  though  in 
regard  to  previously  acquired  information,  does  not  apply  here ; 
the  instrument  used  by  the  bank  is  the  board  as  a  unit,  and  unless 
the  board  as  a  unit  is  affected  with  bad  faith  the  transaction  is  pure. 
If  an  officer  acts  with  due  care  and  in  good  faith,  it  cannot  make 
his  conduct  anything  but  morally  and  legally  good  and  proper 
because  some  one  who  is  acting  dishonestly  may  give  him  advice. 

Suppose  a  director  (D.)  has  knowledge  and  stays  away  from  the 
meeting,  and  the  board  votes  by  five  majority  to  do  a  certain  thing 
to  which  D.'s  notice  relates,  the  cases  are  clear,  the  bank  is  bound. 
Now  suppose  he  takes  his  seat,  and  there  is  a  majority  of  six,  an 
honest  majority  of  five,  how  is  the  bank's  action  vitiated?  Or 
suppose  he  goes  further,  and  argues  for  the  resolution ;  the  others 
have  a  right  to  hear  argument  from  any  source,  and  weigh  it 
candidly ;  if  they  are  really  honest,  the  vote  is  still  untainted.  If 
there  is  one  white  hair  in  a  beard,  it  is  hardly  correct  to  say  the 
beard  is  white,  and  fraud  in  the  vote  of  a  single  town  will  not 
vitiate  the  election  of  a  President  of  the  United  States. 

Conclusion 

(6)  Still,  the  law,  in  order  to  avoid  troublesome  inquiry  and 
prevent  the  possibility  of  fraud,  is  in  the  habit  of  drawing  broad 
lines  beyond  all  the  doubtful  territory,  and  so  it  may  continue  to 
be  law  that  knowledge  of  a  single  director  acting  in  the  business  for 
the  bank  while  possessing  such  notice  is  sufficient  to  bind  the  bank  ; 
although  strict  justice  would  require  no  more  than  that,  when  it  is 
shown  that  one  director  had  notice,  the  burden  of  proof  should 
be  on  the  bank  to  show  that  the  action  of  the  board  was  not  deter- 
mined by  that  director. 

Note   on   the   Competency   of  Bank   Officials   and   Shareholders 
AS  Witnesses  on  Bank's  Behalf 

§  113.     It  may  now  be  laid  down,  in  general  terms,  that  the  officer  or 
agent  of  the  bank  is  a  competent  witness  in  its  behalf,  even  concerning 

239 


§  113  OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES 

a  transaction  which  he  himself  conducted,  or  in  which  he  was  interested 
or  engaged.  In  such  cases  it  must  frequently  happen  that  the  officer  or 
agent  will  be  personally  and  closely  interested  in  the  determination  of  the 
litigation.  For  if  the  bank  should  fail  of  success  by  reason  of  any  inac- 
curacy, irregularity,  or  wrongfulness  in  his  proceedings,  it  must  be  antici- 
pated as  a  natural  result  that  he  will  himself  be  sued  by  the  bank,  either 
upon  his  official  bond  or  his  common  law  liability,  and  held  to  answer  for 
the  consequences  of  liis  default,  besides  suffering  aU  the  collateral  mis- 
chief of  a  loss  of  his  position  and  reputation.  The  latter  fact,  of  course, 
could  not  operate  to  render  him  incompetent,  but  must  be  confined  to 
affecting  liis  credibility.  The  former  fact,  however,  goes  directly  to  the 
question  of  his  competency.  It  is  not  to  be  supposed  that  the  extension 
of  the  exception  to  the  general  rule  to  cover  these  cases  has  been  allowed 
to  take  place  without  opposition.  But  the  several  decisions  have  been 
uniformly  in  favor  of  the  admission  of  the  testimony,  so  that  the  matter 
must  at  last  be  regarded  as  definitively  settled  according  to  the  above 
doctrine. 

(a)  The  simplest  class  of  cases,  those  in  which  the  objectors  to  the 
competency  certainly  had  but  very  little  ground  to  stand  upon,  were  those 
wherein  the  officer  or  agent  had  been  formally  and  sufficiently  released  by 
the  bank  from  all  manner  of  claim  which  it  might  have  against  him,  even 
if  he  should  appear  to  have  been  in  default.  No  difficulty  seems  to  have 
been  experienced  in  disposing  of  these  in  favor  of  the  admissibility.^ 
The  next  step  in  advance  was  taken  in  the  cases  in  which  some  possible 
question  might  arise  as  to  any  liability  of  the  officer  or  agent  to  the  bank. 
But  admitting  a  possibility  that  he  might  be  held  by  the  bank,  yet  this 
was  by  no  means  equivalent  to  the  established  fact  that  he  certainly 
could  be  so  held.  It  was  an  assumption,  which  might  so  obviously  prove 
erroneous,  that  the  court  could  not  be  expected  to  make  it.  The  contin- 
gent impropriety  of  receiving  the  testimony  could  not  be  allowed  to  have 
equal  effect  with  a  positive  impropriety.  So  again  in  these  cases  the  nar- 
row question  of  intrinsic  competency  was  evaded,  and  the  evidence  was 
admitted  as  it  were  through  a  side  door.^  But  it  was  not  of  course  always 
possible,  however  much  the  courts  might  have  wished  it  to  be  so,  thus 
satisfactorily  to  flank  the  main  position  of  the  objectors.  Sooner  or  later 
the  question  of  the  intrinsic  competency  of  such  persons  as  witnesses  must 
arise,  and  must  be  decided  fairly  upon  its  own  merits ;  and  it  having 
finally  arisen  in  various  States,  the  courts  of  each,  thus  far  without  an  ex- 
ception, have  decided  to  admit  the  testimony  offered.  The  Supreme  Court 
of  the  United  States  and  the  text-books  on  evidence  have  adopted  the 
same  rule.^     The  obvious  necessity  of  the  case  has  conquered  all  less 

1  §  113.  Farmers  &  Mechanics'  Bank  v.  Champlain  Transportation 
Co.,  18  Vt.  131;  23  id.,  186;  Johnson  v.  Farmers'  Bank,  1  Harr.  (Del.) 
117. 

2  Franklin  Bank  v.  Freeman,  16  Pick.  (ISIass.)  535 ;  Union  Bank  v. 
Knapp,  3  id.,  96. 

3  United  States  Bank  v.  Stearns,  15  Wend.  (N.  Y.)  314 ;  Farmers  & 
Mechanics'  Bank  v.  Champlain  Transportation  Co.,  18  Vt.  131 ;  Huntress 
V.  Patten,  20  Me.  28 ;  Jackson  v.  Bank  of  the  United  States,  10  Pa.  St. 
61 ;  2  Starkie  on  Evidence,  7.53,  767,  768,  n.  2 ;  1  Greenleaf  on  Evidence, 
416,  417;  Wigmore  on  Evidence  §  575,  et  seq.;  Cookendorfer  v.  Preston, 
4  How.  317,  11  L.  ed.  992;  Franklin  Bank  v.  Freeman,  16  Pick.  (Mass.) 
535.     See  also  Wiggin  v.  FreewiU  Baptist  Church,  8  Met.  (Mass.)  301. 

240 


COXCLUSIOX  §  113 

objections.  It  must  be  that  an  officer  should  be  allowed  under  oath  to 
state  what  he  had  done ;  since  otherwise  the  bank  was  so  utterly  tonfjjue- 
tied  that  it  must  fall  an  inevitable  sacrifice  to  the  most  unworthy  plain- 
tiff,  and  furnish  an  obvious  temptation  to  dishonest  suits. 


Shareholders  as  Witnesses 

(b)  A  shareholder  in  the  bank,  by  assigning  away  his  stock,  may  render 
himself  a  competent  witness  in  its  behalf.  Neither  is  it  too  late  for  him 
to  make  the  assignment  after  the  suit  has  been  begun.''  If  a  statute  of  the 
State  in  which  the  bank  is  incorporated  declares  stockholders  to  be  liable 
to  the  holders  of  notes  of  tlie  bank  in  case  of  the  insolvency  of  the  corpo- 
ration, the  contingent  liability  under  this  law  of  one  who  has  at  any  pre- 
vious time  been  a  stockholder  will  not  impair  his  competency  as  a  witness. 
His  interest  in  the  affairs  and  prosperity  of  the  bank  is  too  remote  to  be 
permitted  to  have  this  effect,  at  least  unless  there  is  some  evidence  of 
inability  on  the  part  of  the  bank  to  meet  its  liabilities.* 


Declarations  of  Officers 

(c)  W.  seeks  credit  at  a  bank  and  makes  certain  representations  to  the 
cashier  concerning  his  standing.  If  the  cashier  reports  the  conversation 
to  the  "discount  committee",  and  the  bank  subsequently  attempts  to  set 
aside  the  transaction  on  the  ground  of  fraudulent  representations,  the 
members  of  the  committee  may  testify  as  to  what  the  cashier  stated  to 
be  W.'s  conversation." 

Declarations  by  the  manager  of  a  bank  after  the  bank's  insolvency  as 
to  the  state  of  old  accounts  are  admissible  to  show  the  true  state  of  the 
accounts,  the  bank-book  having  been  surrendered.^ 

*  Meighen  v.  Bank,  25  Pa.  St.  288. 

*  Ibid.;  citing  also  Willings  v.  Consequa,  1  Pet.  301;  Curcier  v.  Pen- 
nock,  14  Serg.  &  R.  (Pa.)  51  ;  Irvine  r.  Lumbermen's  Bank,  2  Watts  & 
S.  (Pa.)  190. 

«  National  Bank  v.  Illinois  and  Wisconsin  Lumber  Co.,  101  Wis.  247, 
77  N.  W.  185  (1898). 

^  Dingley  v.  McDonald,  124  Cal.  90,  5G  Pac.  790  (1899). 


VOL.  1—16  241 


CHAPTER  IX 

DIRECTORS 

§  115.  Division  of  Management.     The  bank  may  divide  the  manage- 
ment among  several  boards  or  committees. 

Authority. 

§  116.  Management  and  superintendence.  They  are  the  brains,  judg- 
ment, discretion,  of  the  bank ;  they  can  delegate  the  execu- 
tion of  their  decisions  and  limited  discretion  in  small  matters, 
but  not  discretion  in  weighty  matters.      §§  143,  151. 

§  117.         Allowing  discounts  is  an  exclusive  power  of  the  board,  though 

the  execution  may  be  delegated,  as  by  giving  the  cashier 

authority  to  discount  for  a  certain  person  to  a  certain  amount. 

Allowing  overdrafts  is  also  an  exclusive  function.      §§  357,  358. 

§  118.         Execution  of  daily  routine  is  not  a  part  of  the  management. 

§  119.  They  may  release  a  debt  due  the  bank  if  they  think  it  best  for 
the  bank's  interest. 

§  120.  They  may  pledge  or  assign  property  of  the  bank  to  pay  or  secure 
creditors,  just  as  an  individual  may. 

§  121.  Issuing  bank  bills  when  the  bank  has  the  right  is  an  exclusive 
function  of  the  board. 

§  122.  Directors  may  arrange  with  other  banks  for  collection,  redemp- 
tion of  bills,  transfer  of  stock,  etc. 

§  123.         They  may  remove  the  president,  or  any  other  officer. 

§  124.  The  power  of  directors  rests  in  them  as  a  board,  not  as  indi- 
viduals. In  the  absence  of  express  provision,  a  majority  is  a 
quorum,  and  a  majority  of  a  quorum  at  a  legal  meeting  is 
necessary  to  bind  the  bank.  No  individual  director  has 
authority  to  bind  the  bank  by  his  representations  or  state- 
ments, but  he  may  make  himself  Uable  for  misrepresentation, 
or  slander,  or  Ubel. 

Duty.  §  163. 
§  125.  Directors  must  show  a  reasonable  capacity  for  their  position, 
must  exercise  discretion  and  industry  in  good  faith,  and  must 
obey  the  directions  of  the  charter  and  organic  law.  They  are 
trustees,  owing  their  first  duty  to  the  public,  so  far  as  concerns 
the  circulating  notes  of  the  bank  (if  it  has  any),  next  to  the 
depositors,  and  then  to  the  stockholders;  and,  in  common 
with  all  persons  acting  in  a  fiduciary  capacity,  it  is  their 
duty  not  to  acquire  any  interest  adverse  to  that  of  the  bank, 
nor  to  make  any  profit  from  their  employment. 

242 


DIVISION    OF   MANAGEMENT 

§  12G.         It  is  their  duty  to  repudiate  the  viTongful  acts  of  subordinate 

officers,  and  to  discharge  a  guilty  one. 
§  124.         They  should  see  that  their  fellow  directors  are  properly  notified 

of  meetings. 
No    POWKK. 

§  127.         They  have  no  power  to  increase  the  capital  or  to  work  any 
organic  change.      §  144. 
They  cannot  release  a  shareholder  fom  his  liability.      §071. 
§  125.         They  cannot  make  a  profit  for  themselves  from  their  trust, 
except  such  as  is  common  to  all  stockholders,  nor  make  a 
contract  in  which  they  have  an  adverse  interest. 
§  127.         They  cannot  give  away  the  bank's  property.     Their  discretion 
is  limited  to  conducting  the  affairs  of  the  bank  so  as  to  increase 
its  profits,  and  to  enhance  the  value  of  its  propeTty  intrusted 
to  them  in  the  pursuance  of  legitimate  banking  business. 
They  cannot  make  the  bank  an  accommodation  indorser  nor 
a  gi-atuitous  surety  in  any  way. 
§  116.         They  cannot  delegate  discretion  in  important  matters. 

Nor  acquire  adverse  interest  to  bank  ;   but  if  a  director  votes  in 
a  matter  improperly,  the  bank  will  still  be  bound  to  innocent 
third  parties.  §  127  c. 
Liability.     §§  79,  129,  147,  717  c ;   II.  §§  53,  253. 
To  the  bank  or  shareholders. 
§  128.  For  any  loss  by  reason  of  their  incompetence,  bad  faith,  or 

negligence  of  duty.  But  an  error  of  judgment,  such  as 
any  one  of  reasonable  capacity  might  make,  or  an  innocent 
mistake  of  fact,  is  an  excuse.  Ignorance,  however,  of  any 
fact  which  reasonable  diligence  in  the  discharge  of  duty 
would  have  brought  to  knowledge  is  not  innocent.  Ill 
health  is  held  no  excuse  for  such  ignorance. 
Only  the  directors  who  cause  the  damage  are  Uable,  though  in 

Georgia  it  is  held  otherwise.     §  130,  d,  e. 
In  some  States  the  law  provides  how  dissenting  directors 

may  avoid  Uability. 
For  incurring  debt  beyond  the  legal  limit. 
For  loan  beyond  limit. 
For  wTongful  issue  of  bills. 
§  129.  A  bank's  claim  against  a  director  for  dishonesty,  negligence, 

or  incompetency  is  assets  in  the  hands  of  a  receiver. 
To  thkd  parties.     II.  §§  53,  253. 
§  130.  In  absence  of  statute  provision,  directors  are  not  liable  to 

third  persons  dealing  with  the  bank  for  damage  caused  by 
their   mismanagement,    unless    their   conduct    is   grossly 
negligent,  or  malicious,  or  fraudulent.     Their  contract  is 
with  the  bank.     If  a  director  misrepresents  or  makes  a 
contract  binding  on  himself,  or  is  guilty  of  tort  in  any 
way,  he  is  of  course  liable,  as  is  any  other  individual  or 
agent.     Every  one  assisting  in  a  wrong,  as  in  making 
deceiving  statements  in  corporate  reports,  is  personally 
liable,  unless  a  mere  instrument. 
One  allowing  himself  to  be  held  out  as  a  Director.     §  148. 
§  131.         Is  liable  to  one  misled  by  his  conduct,  and  perhaps  to  all  who 
could  hold  him  if  lie  were  a  real  director,  even  though  not 
knowing  of  the  holding  out. 

243 


DIRECTORS 

When  a  Bank  is  made  liable  by  the  Conduct  of  Directors.   §  79. 
An  individual  director,  as  such,  has  no  power  to  make  the  bank 
liable  in  any  way. 

Contract. 
Director  Voting  in  Case  he  is  adversely  Interested.      §§  125  b,  127  c. 
(1)       Whenever  the  board  (as  such,  §  124)  undertakes  to  contract  for 
§  127.  the  bank  in  a  way  that,  so  far  as  may  be  ascertained  by  any 

facts  actually  or  constructively  known  to  C.  (the  party 
between  whom  and  the  bank  the  controversy  on  the  con- 
tract arises),  is  within  the  scope  of  their  powers  and  duty  as 
the  managing  body  in  the  bank's  business,  it  is  the  contract 
of  the  bank  as  to  C.  If  really  intra  vires,  the  bank  is  of 
course  bound ;  if  ultra  vires,  it  may  or  may  not  be  bound. 
See  Ultra  vires. 

(2)  If  the  board  undertakes  to  contract,  and  C,  whose  right  is  in 

question,  did  know  or  ought  to  have  known,  as  matter  of  law, 
upon  the  facts  of  which  he  had  notice,  that  they  were  going 
beyond  the  scope  of  their  agency,  their  act  is  not  that  of  the 
bank  as  to  C. 

(3)  Any  action  of  the  board  authorizing  or  ratifying  the  contract  of 

any  other  officer  is  governed  by  the  same  consideration. 
Their  action  is  that  of  the  bank  if  really  valid,  or  if  C.  has  a 
right  to  deem  it  so. 

(4)  Declarations  of  directors.     See  §  103  a. 
Tort.     §§  147,  172. 

§  132.  Under  the  principles  of  §  102,  the  bank  is  liable  for  the  tort  of 

the  board,  or  of  a  subordinate  officer  authorized  or  ratified 
by  the  board,  e.g.  Ubels  and  false  statements  in  corporate 
reports. 

§  126.  If  the  directors  knowingly  allow  the  bank  to  take  the  benefit  of 

the  wrong  of  an  officer,  or  retain  him  in  the  bank's  service,  or 
otherwise  adopt  his  act,  the  bank  will  be  Uable. 

Forfeiture.     §  722. 
§  126.  Any  act  of  the  board  which  upon  the  facts  known  to  them,  or 

which  ought  to  be  known  to  them  by  reasonable  diUgence,  is 
in  violation  of  the  law  governing  the  bank,  may  cause  for- 
feiture ;  and  if  they  authorize  such  breach  of  law  by  a  sub- 
ordinate officer,  or  if  they  knowingly  allow  the  bank  to  get  the 
benefit  of  such  an  act,  or  retain  the  wrongdoer  in  the  bank's 
service,  or  otherwise  adopt  or  ratify  his  conduct,  it  will  make 
the  bank  liable  to  forfeiture.     II.  §  35. 

Crime. 

Though  outside  our  subject,  we  may  note  that  the  board  may 
make  the  corporation  liable  to  indictment,  as  by  authorizing 
a  public  nuisance  or  publishing  a  libel. 

Notice.     §  9,  n.  9;    §  166. 

Knowledge  (such  as  a  man  of  ordinary  prudence  would  re- 
gard in  his  own  affairs) . 
§  133.  Of  the  Board,  by  open  mention  or  discussion  at  a  meeting, 

or  what  they  should  know  by  due  diligence  in  discharge 
of  their  trust,  binds  the  bank  as  to  third  parties  (except 
sureties  on  an  officer's  bond,  q.  v.). 
Of  a  single  Director. 

244 


DIVISION   OF   MANAGEMENT  §  Ho 

Constnictivo  knowledge  of   a  single  director  does  not 

bind  the  bank. 
As  to  actual  knowledge,  the  rules  are  as  follows. 
§§  134-136.     The  Bank  is  xot  bou.vd  by  notice  to  one  director. 

(o)  (1)  If  the  third  party  (C.)  knows  D.  has  adverse  interests. 
(2)  If  D.  is  not  specially  appointed  to  receive  such  notice, 
and  did  not  act  for  the  bank  in  the  matter  to  wliich  it 
relates,  or,  if  he  did  act,  but  the  knowledge  was  gained 
previous  to  or  outside  of  the  agency,  and  he  has  an 
adverse  interest,  or  the  information  is  not  fairly  to  be 
presumed  still  present  in  his  mind  at  the  time  of  the 
agency  in  the  matter  to  which  it  relates. 
(5)  The  bank  is  bound  when  (a)  (1)  does  not  applj',  in  four 
cases. 

(1)  If  D.  is  specially  authorized  to  receive  the  notice. 

(2)  If  he  is  acting  for  the  bank  in  the  matter  to  which  the 

notice  relates  at  the  time  of  receiving  it. 

(3)  If,  after  receiving  the  notice  in  any  manner,  he  acts  for 

the  bank  in   the  matter  \vdth   the  information  still 
presumably  in  his  mind  and  without  adverse  interest. 

(4)  If  he  acts  with  such  information  presumably  present, 

even  though  he  has  an  adverse  interest,  if  this  fact  is 
not  known  to  C.  and  the  fact  of  his  having  the  knowl- 
edge is  known  to  C. 
§  137.        (c)    A  director  is  as  an  individual  chargeable  with  his  own  knowl- 
edge, actual  or  constructive,  of  course,  liut  it  is  not  a  con- 
clusive presumption  that  he  knows  all  the  details  of  the 
bank  business. 
Rights, 

Unless  prohibited, 
§  125.  May  take  a  loan  from  the  bank,  but  must  not  act  at 

the  granting  of  it. 
§  124.  Each  has  by  his  office  a  right  to  scrutinize  all  the  affairs 

of  the  bank,  to  have  notice  of  meetings,  and  to  have 
access  to  the  bank  books,  etc. 
§  138.  Qualifications.     IT.  §§9,  10. 

Frequently  required   to   own   a   prescribed   number  of 
shares  in  the  bank  to  identify  its  interests  with  their 
own. 
Continuance  in  Office. 
§  139.  Bankruptcy  does  not  vacate  the  office,  but  circumstances 

may  show  abandonment. 
§  140.  Pay  of  Directors.     §  150. 

§  141.  Records. 

De  facto  Directors.     See  §  98  &. 

§115.  Division  of  Management.  —  It  has  been  held,  that  a 
banking  corporation  may  divide  the  total  of  its  business  into 
various  distinct  departments,  choosing  a  separate  board  of  direc- 
tors to  have  control  of  each  respectively.  Or  it  may  have  but 
one  board,  and  divide  it  into  committees,  conferring  upon  each 
committee  supreme  power  in  its  ai)propriatc  department.     Then 

245 


§  115  DIRECTORS 

the  resolutions  of  each  committee  within  the  scope  of  the  busi- 
ness allotted  to  it  will  be  equivalent  to  and  of  the  same  effect  as 
similar  resolutions  of  the  entire  board. ^  But  in  the  latter  case 
the  powers  intended  to  be  exercised  by  each  committee  should  be 
distinctly  conferred  upon  it,  as  in  any  other  case  of  delegation  of 
authority.  The  mere  nomination  of  two  or  three  among  the  di- 
rectors to  constitute  a  "  finance  committee",  may  impose  duties 
or  especial  watchfulness  and  supervision  upon  them,  but  without 
some  further  delegation  of  real  power  to  them  it  does  not  give 
them  the  supreme  control  and  management  of  all  the  financial 
transactions  and  business  of  the  bank.  Their  duties  rather  than 
their  powers  are  enlarged.  The  intent  to  increase  the  authority 
which  they  already  have,  if  individual  directors  can  be  properly 
said  to  have  any  authority  at  all,  must  be  expressed  in  some  more 
clear  and  precise  manner  than  by  the  simple  act  of  giving  the  name 
of  "  finance  committee  "  to  A.  B.  and  C.  D.  out  of  the  whole 
number  of  the  board.  So  it  was  held  in  New  York  that  the  pres- 
ident, cashier,  and  "  finance  committee  "  of  the  board  could  not 
mortgage  corporate  real  estate  without  the  concurrence  of  the 
board  of  directors  ;  although  practically  the  president  and  cashier 
had  been  wont  to  exercise  very  large  authority  and  discretion  in 
the  management  of  the  bank's  affairs.  The  finance  committee 
as  such  enjoyed  no  extraordinary  power.' 

§116.  Board  of  Directors.  —  General  Functions.*' —  The  gen- 
eral control  and  government  of  all  the  affairs  and  transactions  of 
the  bank  rest  with  the  board  of  directors."  For  such  purposes 
the  board  constitutes  the  corporation,  may  act  as  the  corporation, 

1  §  115.     Palmer  v.  Yates,  3  Sandf.  Super.  (N.  Y.)  137. 

2  Leggett  V.  New  Jersey  Banking  Co,  Saxt.  (N.  .J.)  541. 

0  §  116.  See  Cassidy  v.  Uhlmann,  170  N.  Y.  505,  63  N.  E.  554  (1902) ; 
Kavanaugh  v.  Gould,  147  App.  Div.  281  (1911),  131  N.  Y.  S.  1059 ;  Lyons 
V.  Corder,  253  Mo.  539,  162  S.  W.  606  (1913). 

"  Fed.  Res.  Act.  See.  4,  Part  II.  §  105  ;  Ellis «;.  Mercantile  Co.,  103  Miss. 
560,  60  So.  649,  1915B  Ann.  Cas.  526,  n.,  43  L.  R.  A.  (n.  s.)  982  ;  Daugherty 
V.  Poundstone,  120  Mo.  App.  300,  96  S.  W.  728  (1906). 

Directors  who  have  personal  indi\'idual  business  with  the  bank  cannot 
represent  the  bank  in  their  personal  transactions  with  it,  nor  participate 
in  such  representations.  Tecumseh  National  Bank  v.  Chamberlain  Bank- 
ing House,  63  Neb.  163,  88  N.  W.  186,  57  L.  R.  A.  811  (1901). 

Surplus  Funds.  The  power  of  directors  over  the  surplus  funds  is 
absolute,  in  the  absence  of  restraint  by  by-laws  or  charter,  as  long 
as  they  act  with  honest  motives  and  judgment ;  and  a  statute  which 
requires  them  to  reserve  at  least  $100,000  does  not  require  them  to  limit 
the  reserve  to  that  amount  and  distribute  the  surplus  as  dividends. 
Mulcahy  v.  Hibernia  Savings  etc.  Society,  144  Cal.  219,  77  Pac.  910  (1903). 

246 


BOARD    OF   DIRECTORS  §  116 

and  unless  specially  restricted  may  with  few  exceptions  (see  §  127) 
exercise  all  the  powers  which  the  corporation  is  authorized  at 
common  law,  or  under  the  charter  or  organic  law,  to  exercise. 
Organic  banking  laws  and  charters  customarily  confer  upon  the 
board  in  broad  phraseology  the  general  power  to  conduct  and 
manage  the  corporate  business.  But  this  language  is  practically 
only  a  recognition  of  the  functions  which  the  board  would  be 
entitled  and  called  upon  to  exercise  by  the  rules  of  common  law, 
and  does  not  operate  to  enlarge  those  functions,  or  to  designate 
them  with  any  greater  particularity.  Neither  can  the  duty 
thus  conferred  be  construed  as  a  requisition  upon  the  directors  to 
undertake  the  performance,  in  person,  of  all  the  acts  called  for 
by  the  daily  routine  of  the  business  of  the  bank.  It  extends  to 
such  matters  only  as  are  usually  and  conveniently  allotted  to  the 
charge  of  directors  in  the  banking  business.  Some  such  acts 
they  must  perform  ;  others  they  may  perform.  But  the  obli- 
gation is  measured  by  a  uniform  usage  prevailing  among  banks 
universally.  Their  personal  execution  may  be  restricted  to  the 
matters  thus  designated,  unless  others  be  specifically  named  or 
added  in  the  law.  Besides  a  variety  of  specific  acts  which  they 
must  initiate  or  wholly  do,  this  uniform  usage  imposes  upon  them 
the  "  general  superintendence  and  active  management  "  of  the 
corporate  concerns.  They  are  bound  to  know  all  that  is  done, 
beyond  the  merest  matter  of  daily  routine  ;  and  they  are  bound  to 
know  the  system  and  rules  arranged  for  its  doing.  So,  though 
it  has  been  said  that  powers  of  a  public  character  given  by  the 
legislature  to  any  body  of  individuals  can  never  be  sub-delegated 
by  the  recipients,^  yet  this  doctrine  has  never  been  allowed  to 
prohibit  bank  directors  from  appointing  agents  and  endowing 
them  with  sufficient  powers  for  executing  the  resolutions  of  the 
board,  and  carrying  on,  without  specific  authority  in  each  indi- 
vidual case,  the  ordinary  transactions  of  daily  business.^ 

*  The  board  of  directors  cannot  delegate  its  legislative  and  judicial 
functions  unless  expressly  so  authorized  either  bj^  the  general  law  or  by 
the  charter  or  by-laws  of  the  bank.  Smndell  v.  Bainbridge  State  Bank, 
3  Ga.  App.  364, "go  S.  E.  13  (1908). 

1  Kavanaugh  v.  Gould,  147  App.  Div.  281  (1911),  131  N.  Y.  S.  1059. 
See  ElHs  v.  thirst  National  Bank,  22  R.  I.  565,  48  Atl.  936  (1901).  While 
the  directors  of  a  national  bank  cannot  divest  themselves  of  the  duty  of 
general  supervision  and  control  by  committing  this  duty  to  the  cashier," 

"  See  Bailey  v.  O'Xeal,  92  Ark.  327,  122  S.  W.  503,  135  Am.  St.  Rep.  185 
(1909) ;  Fletcher  v.  Eagle,  74  Ark.  585,  86  S.  W.  810,  109  Am.  St.  Rep.  100 
(1905). 

247 


§  116  DIRECTORS 

The  board  may  authorize  the  president  or  cashier,  or  both,  to 
borrow  money,  indorse  the  notes  of  the  bank,  or  obtain  a  discount 
for  the  benefit  of  the  bank.^  Accordingly  they  may  delegate  to 
a  committee  of  their  own  number,  power  to  mortgage  real  estate 
of  the  corporation,  including  as  a  necessary  implication  power 
to  execute  and  deliver  the  ordinary  and  proper  instruments.^ 
Although  dealings  in  real  estate  are  of  the  most  dignified  and  for- 
mal character  of  any  dealings  in  the  eye  of  the  law,  yet  general 
supervision  even  of  these  satisfies  the  duty  of  the  board.  All 
beyond  this  may  be  delegated.  They  may  empower  the  president 
alone,  or  the  president  and  cashier  conjointly,  to  borrow  money 
on  behalf  of  the  bank,  to  indorse  its  promissory  notes,  to  obtain 
discounts  for  its  use ;  these  powers  also  including  the  power  to 
make  delivery  of  the  paper  thus  negotiated.  It  seems  also  that 
these  powers  may  be  conferred  not  only  by  a  special  vote  passed 
with  a  view  to  a  single  occasion,  but  also  by  a  general  resolution 
looking  to  their  frequent  exercise  on  various  occasions.*  But 
votes  of  this  broad  nature,  unless  very  cautiously  indulged  in, 
are  likely  often  to  be  improper  and  in  some  degree  unsafe.  For 
if  they  appear  to  go  too  far  in  throwing  within  the  discretion  of 
others  the  decision  of  weighty  matters  covering  a  wide  ground 
of  responsibility,  they  would  amount  to  an  effort  in  a  measure  to 
delegate  the  "  management  "  of  the  business  of  the  bank.  To 
this  extent  the  board  of  directors  cannot  go.  Within  reasonable 
and  moderate  limits,  so  narrow  that  their  general  supervision 
must  practically  cover  all  which  their  delegates  can  do  within 
these  limits,  they  may  confer  powers  by  a  general  resolution, 
which  may  be  valid  for  an  indefinite  period  and  for  any  number 

they  may  properly  intrust  to  him  all  the  discretionary  powers  which 
usually  appertain  to  the  immediate  management  of  the  bank's  business. 
Warner  v.  Penoyer,  91  Fed.  587  (1898);  Burrill  v.  Nahant  Bank,  2 
Met.  (Mass.)  163 ;  Ridgway  v.  Farmers'  Bank,  12  Serg.  &  R.  (Pa.)  256. 
Where  directors  have  acted  with  good  faith  and  ordinary  diligence 
they  are  not  liable  for  losses  resulting  tlirough  secret  peculations  and  secret 
false  entries  of  the  cashier.  Mason  v.  Moore,  73  Ohio  St.  275,  76  N.  E. 
932,  4  L.  R.  A.  (n.  s.)  .597  (1906)  ;  nor  for  the  negligence  of  officers  in  pay- 
ing out  money  on  unauthorized  checks.  Daugherty  v.  Poundstone,  120 
Mo.  App.  300,  96  S.  W.  728  (1906). 

2  Fleckner  t).  Bank  of  the  United  States,  8  Wheat.  355,  5  L.  ed.  635 ; 
Stone  V.  Rottman,  183  Mo.  552,  82  S.  W.  76  (1904). 

3  Burrill  v.  Nahant  Bank,  2  Met.  (Mass.)  163. 

«  Ridgway  v.  Farmers'  Bank,  12  Serg.  &  R.  (Pa.)  256 ;  Merrick  v. 
Bank  of  the  Metropohs,  8  Gill  (Md.)  59 ;  Fleckner  v.  Bank  of  the  United 
States,  8  Wheat.  338,  5  L.  ed.  631. 

248 


ALLOWING    DISCOUNTS   EXCLUSIVE  §  117 

of  separate  transactions.  But  authority  so  large  as  to  transfer 
in  an  important  degree  the  control  of  the  corporate  afi'airs  they 
cannot  confer. 

Allowing  Discounts  Exclusive.     Execution  may  he  Delegated 

§  117.   Thus  the  making  of  discounts  is  an  inalienable  function 
of  the  directors.     They  cannot  part  with  it,  or  invest  any  officer 
or  officers  with  it.     It  rests  in  them  alone  and  exclusively.     It  is 
a  power  of  that  degree  of  vital  imjxjrtance  that  it  cannot  be  taken 
out  of  the  policy  of  the  general  principle  that  powers  of  a  public 
nature,  given  by  the  legislature,  cannot  be  sub-delegated. ^     The 
legislature  imposes  upon  the  board  the  duty  of  taking  charge  of 
all  those  matters  of  business  upon  the  wise  and  skilful  conduct  of 
which  the  prosperity  of  the  institution  and  the  safety  of  persons 
dealing  with  it  (lei)end.     This  duty  they  cannot  shift  in  whole 
or  in  part  upon  others,  and  it  covers  no  department  of  banking 
business  more  unquestionably  than  the  making  of  loans  and  dis- 
counts.    The  case  cited  below,  Bank  Commissioners  v.  Bank  of 
Buffalo,  if  carelessly  read,  might  seem  to  give  the  directors  power 
to  confer  upon  the  financial  ofiicer  of  the  bank  a  general  authority 
to  discount.     But  a  more  careful  examination  serves  to  show  that 
quite  the  contrary  was  intended,  and  that  the  case  really  illustrates 
the  doctrine  of  the  last  preceding  paragraph.     The  board  may 
give  the  financial  officer  by  a  single  resolution  power  to  make  a 
considerable  number  of  discounts  or  loans,  provided  they  be  re- 
quested.    But  this  single  resolution  must  name  the  person  or  per- 
sons to  whom  the  loans  may  be  made,  the  aggregate  sum  which 
they  must  never  exceed,  the  time,  and  such  other  particulars  as 
the    directors    may    deem    of    moment.     Thus    in    fact    though 
many  separate  acts  may  be  authorized  by  this  one  vote,  yet  noth- 
ing is  really  done  beyond  the  supervision  of  the  directors,  or 
without  the  active  exercise  of  their  discretion.     They  may  order 
the  cashier  to  let  A.  have  such  loans  as  he  shall  wish,  in  such  sums 
and  at  such  times  as  he  shall  ask,  within  a  certain  j^eriod,  up  to 
the  amount  of  a  designated  sum,  to  rini  for  specified   times,  at 
rates  of  interest  named,  and  upon  designated  conditions  concern- 
ing indorsers  or  collateral  security.     This  does  not  leave  each 
individual  discount  made  to  A.  to  be  passed  upon  by  the  directors  ; 

1  §  117.     Lyon  v.  Jerome,  26  Wend.  (N.  Y.)  485 ;   Mutual  Trust  Co.  i-. 
Stern,  235  Pa.'  St.  202,  83  Atl.  614  (1912). 

249 


§117  DIRECTORS 

yet  in  fact  no  discount  is  made  to  him  by  any  official  authority 
other  than  that  of  the  board,  or  at  the  substantial  discretion  of 
any  person  save  the  directors.  Such  is  unquestionably  the  real 
thread  of  legal  principle  which  runs  through  the  cases  cited  in  this 
and  the  next  preceding  paragraph.  It  alone  can  make  them  in- 
telligible and  consistent  with  established  rules.^ 

Executive  Functions  not  Management 

§  118.  The  ordinary  executory  functions  of  the  various  oflScers 
of  the  bank  are  not  necessarily  affected  by  the  statutory  delega- 
tion of  the  management  of  all  corporate  affairs  to  the  board. 
Management  is  not  identical  with  execution,  and  does  not  intend 
execution.  Checks  are  drawn,  notes  and  bills  indorsed,  deposits 
received,  drafts  paid,  and  the  like  transactions  conducted,  as  mat- 
ter of  course,  by  the  appropriate  customary  officers  without  any 
authorizing  vote  of  the  directorial  board.  These  matters  do  not 
constitute  the  "  management  "  of  the  bank,  nor  interfere  with  the 
"  control  "  of  its  affairs.  They  are  properly  the  medium  through 
which  that  management  and  control  are  introduced  into  the  prac- 
tical transactions.^ 

May  Sometimes  Release  Debt  or  Make  a  Compromise 

§  119.  As  a  rule,  they  cannot  voluntarily  release  a  debt  owing 
to  the  company ;  ^  but  where  the  emergencies  of  business  require 
it,  they  may  make  a  nominal  or  merely  apparent  sacrifice  of  bank 
property,  if  it  seems  reasonably  likely  to  redound  to  the  sub- 
stantial benefit  of  the  institution.  In  the  bona  fide  pursuit  of  this 
end,  their  power  is  not  limited  by  technical  restrictions  which, 
under  other  circumstances,  would  forbid  their  cancelling  debts 
owing  to  the  bank.  The  case  of  Baird  v.  Bank  of  Washington  ^ 
shows  that  they  may  commute  a  debt  if  it  seems  to  them  practi- 
cally more  advantageous  to  do  so  than  it  would  probably  be  to 
push  it  at  law,  or  to  retain  the  naked  legal  claim  for  the  full 
amount.     In  like  manner,  if  any  officer  of  the  bank  is  in  arrear  or 

2  Bank  of  the  United  States  v.  Dunn,  6  Pet.  51,  8  L.  ed.  316;  Bank 
Commissioners  v.  Bank  of  Buffalo,  6  Paige  (N.  Y.)  497 ;  Percy  v.  Millau- 
don,  3  La.  .568. 

1  §  118.  Daugherty  v.  Poundstone,  120  Mo.  App.  300,  96  S.  W.  728 
(1906). 

1  §  119.     Stanhope's  Case,  3  De  G.  &  Sm.  198. 

2  11  Serg.  &  R.  (Pa.)  411. 

250 


MAY    SOMETIMES    RELEASE    DEBT   OR    MAKE    A    COMPROMISE      §  119 

default,  it  is  perfectly  in  their  power  to  compouiul  and  settle 
with  him  in  any  manner  and  upon  any  terms  which  seem  to  them 
likely  to  secure  the  most  complete  reimbursement  to  the  bank.-" 
Their  contract  of  this  nature  can  l)e  subsec[uently  avoided  by  the 
bank,  solely  on  the  ground  of  further  fraud  or  dishonesty  of  the 
compounding  officer  occurring  in  the  negotiation  itself.^ 

Again  it  not  unfrequently  occurs  that  the  wrongful  or  erroneous 
act  of  an  officer  causes  a  loss  to  the  bank  which  he  can  be  held 
liable  to  reimburse,  but  which  there  is  reason  to  believe  can  only 
be  recovered  by  a  suit  against  some  other  third  party.  But 
if  recourse  is  had  to  the  suit  against  the  third  party,  then  the  tes- 
timony of  the  officer  in  fault  may  be  absolutely  essential,  or  at 
least  very  desirable,  to  secure  the  success  of  the  bank ;  whereas 
on  the  ground  that  he  is  a  party  immediately  interested  in  the 
result  of  the  litigation,  he  must  in  all  probable  expectation  be 
rejected  at  the  trial  as  an  incompetent  witness,  unless  he  is  first 
legally  and  fully  released  from  his  liability  to  the  corporation. 
In  this  dilemma  it  is  the  duty  of  the  directors  to  consult  solely 
the  comparative  ultimate  probability  of  securing  reimbursement 
to  the  bank  from  the  defendant  or  from  the  officer.  It  may  be 
that  the  amount  of  the  loss  is  greater  than  can  possibly  be  re- 
covered from  the  officer  or  from  his  bondsmen,  while  the  other 
defendant  would  be  amply  able  to  pay  it.  It  may  be  that  the 
result  of  the  suit  is  doubtful ;  or  it  may  be  that  only  a  successful 
result  can  in  reason  be  anticipated.  Upon  the  consideration  of 
such  facts,  the  directors  must  conclude  whether  or  not  worldly 
wisdom  would  lead  them  to  release  the  claim  of  the  bank  against 
the  officer,  or  to  abandon  the  notion  of  the  other  suit,  or  to  sacri- 
fice in  its  prosecution  the  advantage  of  his  evidence.  If  they 
choose  the  first  course,  then  it  is  not  only  in  their  power,  but  it 
becomes  their  duty,  to  execute  to  him  a  full,  valid,  and  sufficient 
release  from  his  liability.  We  say  they  must  be  guided  solely  by 
their  notion  of  worldly  wisdom  in  the  case ;  unless  by  direct  sanc- 
tion from  the  stockholders,  their  feeling  towards  the  officer,  and 
their  opinion  of  his  conduct  and  character,  cannot  be  allowed 
any  weight  whatsoever;    and  this  equally  whctluT  this  feeling 

^  The  directors  of  a  liank  have  a  right,  in  their  discretion,  to  allow' 
an  officer  who  has  ])oen  removed,  compensation  to  which  he  is  not  entitled 
in  order  to  obtain  a  settU'ment  and  secure  what  ho  owes  the  hank  on 
account  of  overdrafts.     .Jones  r.  Johnson,  SO  Ky.  530,  G  S.  W.  oS2. 

*  lYankfort  Bank  v.  Johnson,  24  Me.  490. 

251 


§119  DIRECTORS 

and  opinion  would  lead  them  to  punish  him  to  the  utmost  extent 
of  their  power,  or  to  pity  and  relieve  him.  The  question  is  purely 
of  dollars  and  cents,  not  of  moral  desert,  of  vindictiveness,  or  of 
commiseration.*  Neither  have  they  any  power  to  release  an  orig- 
inal subscriber  to  the  capital  stock  nor  to  make  any  arrangement 
with  him  by  which  the  corporation,  its  creditors,  or  the  State, 
shall  lose  any  of  the  benefits  of  his  subscription.^ 

Pledge.     Assignment,  etc.  of  Bank's  Property 

§  120.  The  board  of  course  has  power  to  part  with  or  to  pledge 
the  property  of  the  bank  in  the  ordinary  and  due  course  of  busi- 
ness, and  for  proper  purposes.  So  it  may  assign  or  transfer  any 
part  or  the  whole  of  the  corporate  assets,  of  whatever  description 
of  property  they  may  consist,  in  order  to  pay  corporate  debts,  or 
to  secure  creditors  having  preferred  claims.  Its  rights  and  powers 
in  this  respect  are  co-ordinate  with  the  rights  and  powers  enjoyed 
by  individuals  in  the  same  situation.  Whatever  a  merchant  or  a 
mercantile  firm,  owing  largely  or  more  than  they  can  pay,  could 
legally  do  with  their  property  to  pay  or  secure  their  creditors, 
all  or  any  of  them,  the  board  of  directors  can  legally  do  with  the 
funds  of  the  bank.^  This  is  the  rule  of  common  law.  Of  course 
it  may  be  modified  by  legislative  enactments  imposing  peculiar 
duties  or  restrictions  upon  institutions  seriously  indebted,  in  fail- 
ing circumstances,  or  fully  insolvent. 

The  directors  of  an  insolvent  savings  bank  may  in  good  faith 
assign  the  assets  of  the  bank  for  the  benefit  of  creditors,  without 
first  obtaining  the  consent  of  the  stockliolders.^  But  they  cannot 
without  the  consent  of  the  stockliolders  pledge  the  future  divi- 
dends of  the  bank  to  meet  a  deficit  in  capital.^ 

§  121.  Issue  of  Bank  Notes  or  Bills  a  Function  of  the  Directors. 
—  If  the  bank  has  the  legal  authority  to  issue  its  bills  or  notes 
for  circulation  as  a  currency,  the  power  to  make  the  issue  is  one 

^  Lewis  V.  Eastern  Bank,  32  Me.  90. 

5  McNulta  V.  Corn  Belt  Bank,  164  111.  427,  45  N.  E.  954. 

1  §  120.  Stevens  v.  Hill,  29  Me.  1.3.3 ;  Dana  v.  Bank  of  United  States, 
5  Watts  &  S.  (Pa.)  223  ;  Sargent  v.  Webster,  13  Met.  (Mass.)  497 ;  Mer- 
rick V.  Bank  of  the  Metropolis,  8  Gill  (Md.)  59;  Bank  Commissioners  v. 
Bank  of  Brest,  Harr.  Ch.  (Mich.)  106  ;  Parker  v.  Carolina  Savings  Bank, 
53  S.  C.  583,  31  S.  E.  673  (1898). 

2  Descombes  v.  Wood,  91  Mo.  196  (1886).  See  Winston  v.  Gordon,  115 
Va.899,  80  S.  E.  7.56  (1914). 

3  Brown  v.  Bradford,  103  Iowa  378,  72  N.  W.  648  (1898). 

252 


DIRECTORS   MAY    FOR    CAUSE    DISCH.\.RGE    ANY   EMPLOYEE      §  123 

of  the  ordinary  and  inherent  functions  of  the  board,  which  the  pub- 
lic has  a  right  to  presume  is  vested  in,  and  will  be  honestly  exer- 
cised by,  the  directors.  The  bank  is  held  to  warrant  their  fidelity. 
If  the  issue  is  attended  with  any  error,  neglect,  or  fraud,  the  result- 
ing loss  is  that  of  the  bank.  For  example,  if  there  be,  from  any 
of  these  cause's,  an  over-issue,  the  bank  must  yet  redeem  all  the 
notes  in  the  hands  of  innocent  holders.^  The  transaction,  falling 
within  the  ordinary  scope  of  directorial  authority,  is  one  wherein 
the  bank  guarantees  ])oth  the  integrity  and  the  accuracy  of  its 
agents. 

§  122.  They  may  make  arrangements  with  other  banks  to 
collect  notes  and  dividends,  to  redeem  their  bills,  transfer  stocks, 
or  for  any  other  business  usual  or  proper  for  one  bank  to  transact 
with  another.^ 

§  123.  Directors  may  for  Cause  discharge  any  Employee  at 
any  Time.  ^  —  But  the  power  of  the  directors  over  the  president, 
at  least  under  our  present  National  Banking  Act,  is  greater.  Him, 
it  has  been  declared,  they  may  remove  absolutely  and  at  any  time 
by  their  own  sole  action.^  A  clause  in  the  articles  of  association, 
giving  them  this  power,  is  valid,  and  will  sufficiently  authorize 
them  to  exercise  it.  But  such  a  clause  is,  in  fact,  surplusage, 
for  the  act  of  Congress,  sect.  11,  itself  directly  and  fully  bestows 
the  power.  The  construction  of  this  section,  as  referring  to 
directors  and  not  to  stockholders,  the  court  say,  is  quite  clear. 
In  the  case  cited,  it  was  urged  that  no  by-laws  had  ever  been 
adopted  by  the  stockholders  or  accepted  by  the  comptroller  of 
the  currency ;  and  that,  until  this  had  been  done,  the  directors 
could  not  properly  perform  the  act  of  removal.  The  objection, 
however,  was  overruled.  It  was  not  considered  at  all  necessary 
that  by-laws  should  have  been  adopted  before  a  president  could 
be  chosen,  be  removed,  and  a  successor  be  appointed.  The  by- 
laws, in  fact,  could  have  nothing  to  say  about  the  matter  at  all ; 
save,  perhaps,  that  they  might  be  permitted  to  prescribe  unes- 

>  §  121.     McDougald  v.  Bellamy,  18  Ga.  411. 

•  §  122.  Bank  of  Kentucky  v.  Schuylkill  Bank,  1  Pars.  Sel.  Cas.  (Pa.) 
236. 

1  §123.  Harrington  v.  First  National  Bank,  1  Thomp.  &  C.  (N.  Y.) 
361. 

2  Taylor  v.  Hutton,  43  Barb.  (N.  Y.)  195. 

In  Missouri  the  board  of  directors  have  the  sole  power  to  appoint  or 
remove  a  cashier.  Citizens'  Bank  t'.  Douglas,  178  Mo.  App.  664,  161 
S.  W.  601  (1913).  citing  R.  S.  1909,  §  1112;  Lyons  v.  Corder,  253  Mo. 
539,  162  S.  W.  606  (1913). 

253 


§  123  DIRECTORS 

sential  formalities  to  accompany  its  exercise.  What  the  act  of 
Congress  expHcitly  gives,  not  even  the  articles  of  associatioa 
could  take  away ;  much  less  could  the  by-laws  interfere  with  it. 
Their  formal  adoption,  even  their  existence,  are  not  necessary 
preliminaries  to  the  exercise  of  a  power  which  springs  from  a 
source  wholly  independent  of  them,  and  infinitely  above  them  in. 
weight  and  authority. 

§  124.  Quorum.  —  A  majority  of  the  directors  make  a  quo- 
rum," and  a  majority  of  a  quorum  may  act.^ 

Majority  of  a  Quorum  at  Legal  Meeting  Rules 

The  bank  is  bound  by  the  action  of  the  majority  of  the  board, 
taken  in  the  manner  usually  adopted  by  the  board,  no  matter 
how  informal  or  peculiar  that  manner  may  be.  An  expression  of 
the  will  of  the  majority  is  what  the  law  looks  for  and  recognizes.'' 
It  seems,  however,  that  it  is  indispensable  to  the  validity  of  any 
action  that  it  should  be  taken  by  the  board  ;  that  is,  that  it  should 
be  the  vote  of  a  majority  of  a  quorum  at  a  regular  and  legal  meeting 
of  the  hoard.""'  Thus,  it  has  been  held  that  the  assent  of  a  majority 
of  the  directors,  expressed  by  them  individually,  and  not  at  a 
regular  stated  meeting  of  the  board,  is  not  sufficient  to  confer 
upon  the  cashier  authority  to  do  any  act  which  he  would  not  have 
authority  to  do  unless  it  were  conferred  upon  him  by  the  directors.* 

"  §  124.  But  only  half  of  the  directors  do  not  make  a  quorum.  Leary 
V.  Interstate  National  Bank,  63  S.  W.  149  (Tex.  Civ.  App.)  (1901). 

1  Lockwood  V.  American  National  Bank,  9  R.  I.  308. 

2  Bank  of  Middlebury  v.  Rutland  &  Washington  R.  R.  Co.,  30  Vt.  159. 
2"  Lyons  v.  Corder,  253  Mo.  539,  162  S.  W.  606  (1913). 

But  under  Kentucky  law  a  majority  of  the  directors  acting  indepen- 
dently may  place  an  insolvent  bank  in  the  hands  of  the  banking  commis- 
sioner. Cartmell  v.  Commercial  Bank  etc.  Co.,  153  Ky.  798,  156  S.  W. 
1048  (1913). 

When  a  bank  holding  a  life  insurance  policy  as  security  for  a  note  went 
out  of  existence  and  the  policy  passed  to  a  director  and  trustee  who  assigned 
it  to  a  third  person  in  consideration  of  an  indebtedness  of  the  director  and 
trustee  to  the  third  person,  the  assignment  was  invalid  for  want  of  author- 
ity of  the  director  and  trustee  to  pledge  the  assets  of  the  bank.  New  York 
Life  Ins.  Co.  v.  City  National  Bank,  121  Mo.  App.  479,  97  S.  W.  195  (1906). 

But  an  act  of  a  single  director  may  be  ratified.  West  Branch  State 
Bank  v.  Haines,  135  Iowa  313,  112  N.  W.  552  (1907). 

3  Elliot  V.  Abbot,  12  N.  H.  549 ;  First  National  Bank  v.  Lowther- 
Kaufman  Oil  Co.,  66  W.  Va.  505,  66  S.  E.  713  (1910). 

The  action  of  three  directors  in  dealing  with  a  note  is  not  binding  upon 
the  bank,  especially  when  they  keep  the  other  fifteen  directors  ignorant  of 
their  doings.    Traders  etc.  Bank  v.  Black,  108  Va.  59,  60  S.  E.  743  (1908). 

254 


QUORUM  §  124 

"  The  only  powers  conferred  by  statute  upon  the  directors  of 
a  national  bank  are  vested  in  them  as  a  board,  and  when  acting 
as  a  unit,  and  therefore  the  assent  of  a  majority  of  the  individual 
members  of  the  board,  acting  separately  and  singly,  is  not  the  as- 
sent of  the  bank,  and  is  not  binding  upon  it."  * 

Duty  to   Notify  Members  of  a  Meeting.     Rights  of  a  Director 

It  appears  that,  when  a  quorum  of  the  directors  is  assembled 
at  a  legal  meeting,  the  action  of  those  present  will  bind  the  bank, 
even  though  the  remainder  of  the  directors  have  had  no  notifica- 
tion of  the  meeting.^  Though  the  action  of  the  quorum  may  be 
valid  as  the  action  of  the  corporation  under  such  circumstances, 
yet  it  by  no  means  follows  that  the  members  may  not  themselves 
be  in  fault  if  the  failure  to  notify  all  the  members  of  the  board 
was  not  absolutely  unavoidable.  It  is  the  duty  of  every  director 
to  be  present  at  every  meeting  of  the  board.  Clearly  the  re- 
sponsibility which  rests  upon  him  as  a  part  of  the  government 
of  the  corporation  gives  him  the  absolute  right  to  demand 
that  due  notice  be  given  him  of  all  meetings  of  the  government 
for  deliberation  or  action.  But  where  it  is  a  regular  custom  j)ur- 
sucd  for  a  number  of  years  for  the  directors,  whenever  a  sufficient 
number  are  present,  to  hold  a  meeting  and  transact  business  at 
the  banking  house  during  business  hours,  such  custom  carries 
with  it  notice  to  all  the  members  of  the  board,  unless  the  by-law 
or  the  law  prescribes  the  kind  of  notice.^"  The  directors  have 
no  power  or  discretion,  directly  or  indirectly,  to  debar  any  one  of 
their  number  from  the  exercise  of  all  his  rights,  a  fortiori  from  the 
performance  of  all  his  duties.  Not  even  the  conviction,  honestly 
entertained  by  all  the  rest,  that  one  of  the  members  is  secretly 
hostile  to  the  real  interests  of  the  bank,  will  authorize  them  to 
refuse  him  any  of  those  means  of  scrutinizing  its  afiairs  which 
ordinarily  pertain  to  his  incumbency  in  office.  Even  the  formality 
of  a  by-law  is  impotent  to  deny  him  access  to  the  books  and 
accounts,   A  by-law  assuming  to  do  so  is  simply  invalid.   The  clVort 

••  National  Bank  v.  Drake,  35  Kans.  5G4 ;  Corbett  v.  Woodward,  5  Saw. 
403. 

5  National  Bank  v.  Shumway,  49  Kans.  224,  30  Pac.  411  (1892); 
Edgorlv  r.  Emerson,  3  Fost.  (N.  H.)  555.  See  State  National  Bank  v. 
Merchants'  Bank,  S3  Miss.  610,  35  So.  569  (1903). 

^  American  Exchange  National  Bank  v.  First  National  Bank,  82  Fed. 
961  (1897). 

255 


§  124  DIRECTORS 

to  exclude  by  such  a  by-law  constitutes,  by  itself,  sufficient  and 
proper  ground  for  the  granting  a  writ  of  mandamus  in  favor  of 
the  excluded  official ;  and  the  writ  may  be  directed  not  alone  to 
the  other  directors,  but  also  to  any  subordinate  oflBcer  who  has 
assisted  in  the  attempt  to  prevent  the  ousted  petitioner  from 
exercising  any  of  his  legal  functions.  The  supposed  hostility  on  the 
part  of  the  petitioner  towards  the  corporation,  even  if  it  should 
be  proved,  would  furnish  no  valid  cause  for  withholding  the  writ.^ 
§  125.  Duties  of  Directors.^  —  They  must  carefully  obey  the 
law  under  which  the  bank  is  organized,  must  act  with  entire  good 
faith,  and,  like  all  other  agents,  they  contract  for  reasonable 
capacity,  skill,  and  care  in  the  discharge  of  their  duties.""  See 
§  128. 

Trustees  for  P^iblic  Depositors  and  Stockholders 

The  high  degree  of  confidence  and  responsibility  resting  upon 
directors  of  corporations  has  often  led  the  courts  to  regard  them 
as  trustees,  and  to  declare  the  relationship  existing  between  them 
and  the  stockholders  to  be  that  of  trustees  and  cestuis  que  trustent, 
respectively.  If  this  can  be  asserted  with  regard  to  the  gener- 
ality of  corporations,  it  is  peculiarly  and  exceptionally  true  with 
regard  to  banking  corporations,  in  whose  solvency  the  whole 
neighboring  community  must  be  at  least  indirectly  interested.  A 
bank  of  issue  may  properly  be  regarded  as  a  quasi  public  cor- 
poration. The  directors  of  a  bank  are  not  trustees  for  the  stock- 
holders alone,  but  they  owe  an  even  earlier  duty  to  the  depositors,"* 
and,  if  the  bank  exercises  the  privilege  of  circulation,  still  a  prior 
duty  to  the  public  at  large.  The  law  is,  as  it  ought  to  be,  very 
jealous  in  exacting  the  strict  and  thorough  performance  of  these 
duties,  and  it  is  in  the  scrutiny  of  possible  breaches  of  them  that 

6  People  V.  Throop,  12  Wend.  (N.  Y.)  183. 

0  §  125.     See  Fed.  Res.  Act.     See.  4,  Part  II.  §  105. 

o"  Camden  v.  Virginia  Safe  etc.  Corp.  115  Va.  20,  78  So.  596  (1913) ; 
EUis  V.  Mercantile  Co.,  103  Miss.  560,  60  So.  649,  1915B  Ann.  Cas.  526, 
n.,  43  L.  R.  A.  (n.  s.)  982.  See  Rankin  v.  Cooper,  149  Fed.  1010  at  page 
1013  (1907);  Kavanaugh  v.  Gould,  147  App.  Div.  281  (1911),  131  N.  Y. 
S.  1059.  Directors  are  not  required  to  possess  expert  knowledge  of  book- 
keeping. Mason  v.  Moore,  73  Ohio  St.  275,  76  N.  E.  932,  4  L.  R.  A.  (n.  s.) 
597,  n.  (1906). 

0''  Benedum  v.  Citizens'  Bank,  72  W.  Va.  124,  78  S.  E.  656  (1913). 

A  depositor  may,  on  behalf  of  himself  and  other  depositors,  maintain 
an  action  against  a  director  (president)  to  enforce  a  trust  in  bonds  which 
he  has  purchased,  for  constructive  fraud.  Dundon  v.  McDonald,  146  Cal. 
585,  80  Pac.  1034  (1905). 

256 


DUTIES   OF   DIRECTORS  §  125 

the  rigid  rules  which  govern  trustees  have  been  applied.  It  is 
not  enough  to  exculpate  a  director,  that  no  actual  dishonesty 
can  be  shown,  that  he  cannot  be  positively  proved  to  have  been 
influenced  by  interested  motives.  Like  a  trustee,  he  is  absolutely 
prohibited  from  the  performance  of  those  questionable  acts  wherein 
his  conduct  may  be  wholly  free  from  blame,  but  where  the  bias 
of  self-interest  is  strong,  and  may  influence  him  even  without  his 
own  recognition  of  the  fact.  A  director,  who  wishes  to  keep 
completely  within  the  protection  of  the  law,  must  look  to  some- 
thing more  than  the  mere  integrity  of  his  own  intentions. 

Directors  Must  not  he  Interested  adversely  to  Bank 

(a)  The  law  is  obliged  to  forbid  a  certain  general  class  of  actions 
in  which  the  temptation  is  so  great  that  it  is  wisely  regarded  as 
better  wholly  to  remove  human  frailty  from  the  possi})ility  of 
yielding  than  to  be  continually  plunging  into  darkling  inquiries 
as  to  the  probable  purity  and  uprightness  of  sundry  isolated 
transactions.  It  is  possible  that  any  person,  being  a  director, 
might,  at  a  meeting  of  the  board,  vote  honestly  and  with  a  single 
eye  to  the  bank's  welfare,  upon  a  question  in  which  he  had  an 
individual  interest  to  that  of  the  corporation.  It  is  also  possible 
that  he  might  intend  so  to  vote,  and  yet  not  succeed  in  doing  so, 
by  reason  of  the  unconscious  obliquity  of  mental  vision  which 
such  circumstances  may  often  produce.  But  a  sound  precaution 
prefers  to  exchange  these  possibilities  for  a  certainty.  The  law 
therefore  has,  with  wholesome  care,  declared  that  it  is  a  duty  of 
a  director,  resulting  from  the  employment  itself,  not  to  acquire 
any  interest  in  any  matter  adverse  to  that  of  the  bank  so  long  as 
he  remains  in  office.^"    See  §  127  d. 

The  directors  of  a  bank  who  are  indorsers  on  a  note  in  which 
their  interest  is  adverse  to  that  of  the  bank  cannot  release  them- 
selves from  liability  by  obtaining  a  renewal  note  without  their 
indorsement  thereon."'^ 

"  A  trustee  may  not,  as  such,  purchase  property  in  which  he 
has  an  individual  interest.  The  law,  in  such  case,  does  not  stop 
to  inquire  whether  the  transaction  was  fair  or  unfair,  but,  when 

"^  Winchester  r.  Howard,  136  Cal.  432,  64  Pac.  692  (1902) ;  Elliott  v. 
Farmers'  Bank,  61  W.  Va.  287,  57  S.  E.  242. 

«''  First  National  Bank  r.  Doherty,  156  Ky.  386,  161  S.  W.  211  (1913); 
Doherty  v.  First  National  Bank,  161  Ky.  202,  170  S.  W.  615  (1914). 
VOL.  I  — 17  257 


§  125  DIRECTORS 

the  relation  is  disclosed,  sets  aside  the  transaction,  or  refuses  to 
enforce  it  at  the  instance  of  cestui  que  trust."  ^ 

"  A  corporation  in  order  to  defeat  a  contract  entered  into  by 
its  directors  on  its  behalf,  in  which  one  or  more  of  them  had  a  private 
interest,  is  not  bound  to  show  that  the  influence  of  the  director  or  di- 
rectors having  the  private  interest  determined  the  action  of  the  board. '* 

"  The  plaintiffs,  therefore,  are  compelled  to  meet  the  question, 
whether,  upon  principles  of  equity,  they  are  entitled  to  the  aid 
of  the  court  to  enforce  an  executory  contract  between  themselves 
on  one  side,  and  the  defendant  corporation  on  the  other,  for  the 
sale  of  the  property  of  the  former,  and  in  a  case  where  one  of  the 
plaintiffs  at  the  time  the  contract  was  made,  was  a  director  of 
the  purchasing  corporation,  and  took  part  in  making  the  contract 
upon  which  the  action  is  brought." 

"  We  are  of  opinion  that  the  contract  of  September  14, 
1875,  is  repugnant  to  the  great  rule  of  law  which  invalidates  all 
contracts  made  by  a  trustee  or  fiduciary,  in  which  he  is  personally 
interested,  at  the  election  of  the  party  he  represents." 

"  The  law  stops  the  inquiry  when  the  relation  is  disclosed,  and 
sets  aside  the  transaction,  or  refuses  to  enforce  it  at  the  instance 
of  the  party  whom  the  fiduciary  undertook  to  represent,  without 
undertaking  to  deal  with  the  question  of  abstract  justice  in  the 
particular  case.  It  prevents  frauds  by  making  them,  as  far  as 
may  be,  impossible,  knowing  that  real  motives  often  elude  the  most 
searching  inquiry,  and  it  leaves  neither  to  judge  nor  jury  the  right 
to  determine,  upon  a  consideration  of  its  advantages  or  disad- 
vantages, whether  a  contract  made  under  such  circumstances 
shall  stand  or  fall.  It  will  make  no  difference  in  the  application 
of  the  rule  in  this  case,  that  M.'s  associates  were  not  themselves 
disabled  from  contracting  with  the  corporation,  or  that  M.  was 
only  one  of  ten  directors." 

Cannot  Make  a  Profit  from   Trusteeship 

(b)  It  is  fraud  for  directors  to  secure  by  means  of  their  trust, 
any  advantage  not  common  to  the  other  stocldiolders.     The  law 

1  Munson  et  al.  v.  Syracuse,  etc.  R.  R.  Co.,  103  N.  Y.  58,  71-74,  8  N.  E. 
355. 

Directors  of  a  bank  who  are  interested  in  a  manufacturing  company- 
are  incompetent  to  ratify  a  transaction  in  behalf  of  the  bank  so  far  as  the 
bank  thereby  impairs  the  securities  held  by  it.  Shaw  v.  Crandon  Street 
Bank,  145  Wis.  639,  129  N.  W.  794  (1911). 

258 


DUTIES   OF   DIRECTORS  §  125 

will  not  allow  private  profit  from  a  trust,  and  will  not  listen  to 
any  proof  of  honest  intent.  It  is  useless  for  a  trustee  to  exert 
his  wits  to  contrive  evasions  of  this  prohibition.-  Not  only 
must  he  refrain  from  voting  on  questions  in  which  he  is  directly 
interested,  but  he  must  not  use  his  influence,  resulting  from  his 
official  position,  to  secure  his  own  ends  or  his  private  advantage. 
Neither,  of  course,  can  he  directly  or  indirectly  barter  this  influence 
to  any  outside  person  upon  any  species  of  consideration  moving 
from  that  person  to  himself.  It  is  not  enough  in  the  eye  of  the  law 
to  protect  him,  that  he  did  not  mean  to  prejudice  the  bank.  If 
his  act  is  open  to  suspicion,  he  will,  like  a  trustee,  be  held  to  have 
violated  his  duty,  which  is,  not  to  strive  to  do  questionable  things 
conscientiously,  but  wholly  to  refrain  from  all  action  or  inter- 
meddling in  them  of  what  nature  soever.^ 

Attempts  have  often  been  made  to  prevent,  by  statutory  en- 
actment, or  by  provisions  in  charters,  some  of  the  more  definite 
and  openly  dangerous  acts  which  directors  may  sometimes  be 
tempted  to  do  for  their  own  use  and  advantage.  But  this  method 
is  necessarily  insufiicient.  The  language,  if  specific,  will  cover 
too  little ;  if  general,  will  cover  too  much ;  and  so  in  either  case 
the  phraseology  will  be  easily  perverted,  and  the  intent  evaded, 
on  the  plea  of  reasonable  construction  or  necessity.  The  National 
Banking  Act  wisely  refrains  from  any  enactment  on  the  subject 
of  loans  or  discounts  made  to  directors.  It  leaves  their  conduct 
in  all  particulars  to  the  supervision  of  the  common  law,  which, 
as  it  has  been  above  laid  down,  must  be  regarded  as  requiring 
only  proper  and  efficient  enforcement  to  render  it  fully  equal  to 
the  task  thus  imposed  upon  it,  of  securing  perfect  purity  in  the 
administration  of  the  bank's  affairs. 


*  Farmers  &  Merchants'  Bank  v.  Downey,  53  Cal.  466 ;  Koehler  v. 
Black  River  Falls  Iron  Co.,  2  Black  715,  17  L.  ed.  339;  Bain  v.  Brown,  56 
N.  Y.  285.  But  see  Tenison  ;•.  Patton,  95  Tex.  284,  67  S.  W.  92  (1902), 
holding  that  a  director  who  sells  property  as  a  trustee  for  the  bank  is  not, 
as  a  matter  of  law,  liable  to  the  bank  for  the  profits  gained  by  him  througli 
his  services  in  its  resale,  but  the  question  is  one  of  fact,  he  ha\ing  the  bur- 
den to  show  the  fairness  of  the  transaction. 

3  Butts  V.  Wood,  38  Barb.  (N.  Y.)  181 ;  Ex  parte  Bennett,  18  Beav. 
(N.  Y.)  339  ;  Benson  v.  Heathorn,  1  You.  &  C.  Ch.  326  ;  York  Railway  Co. 
V.  Hudson,  19  Eng.  L.  &  Eq.361,  16  Beav.  (N.  Y.)  485;  Richards  c.'Xew 
Hampshire  Ins.  Co.,  43  N.  1 1.  263  ;  Baird  v.  Bank  of  Washington,  1 1  Serg.  & 
R.  (Pa.)  411 ;  In  re  Grant,  7  Moore,  P.  C.  141 ;  Ex  parte  Robinson,  2  De 
G.  M.  &  G.,  517. 

259 


§  125  DIRECTORS 

May  Take  a  Loan  from  Bank 

(c)  In  the  absence  of  legislative  prohibition,^"  there  is  no  rule 
of  the  common  law  which  prevents  the  making  a  loan  or  discount 
to  a  director  any  more  than  to  any  other  person.^*  Only,  a  di- 
rector applying  for  such  a  loan  must  not  vote  or  officially  aid  in 
the  discussion  concerning  its  allowance.  The  same  principles 
of  law  will  be  applied  to  this  as  to  other  loans ;  but  they  will  be 
rigidly  enforced,  and  the  proceedings  will  be  severely  scrutinized.* 
He  must  behave  himself  strictly  like  any  other  outside  customer 
of  the  corporation.  He  must  cause  his  request  to  be  acted  upon 
by  the  majority  of  his  co-directors,  strictly  exclusive  of  himself. 
It  is  probable  that  any  circumstance  of  impropriety  or  suspicion 
attendant  upon  the  fact  of  his  making  the  application  at  all,  or 
upon  the  manner  of  making  it  or  procuring  its  acceptance,  would 
be  construed  with  a  degree  of  stringency,  as  against  him,  greater 
than  would  be  exercised  towards  an  ordinary  outside  borrower. 
Under  any  circumstances,  favoritism  and  fear  of  offending  are  too 
likely  to  have  some  influence  in  such  a  transaction,  and  even  the 
suspicion  of  them  cannot  be  too  carefully  guarded  against.  Pru- 
dence no  less  than  right  feeling  should  prevent  the  applicant 
from  even  being  present  at  the  discussion  and  vote. 

When  Loan  to  Director  is  Prohibited,  Loan  to  Another  for  Use  of  a 
Director  is  not  Unlawful 

(f/)  If  a  statute  prohibits  loans  to  directors,  a  loan  to  a  firm 
in  which  a  director  is  one  of  the  co-partners  is  illegal.^  But  the 
mere  fact  that  the  director  is  to  be  ultimately  benefited  by  a  loan 
is  not  jper  se  enough  to  make  the  loan  improper  or  invalid,  even 
when  loans  to  directors  are  prohibited  by  law.  If  the  board  is 
satisfied  with  the  credit  or  securities  offered  by  A.,  they  may 
discount  his  note,  although  the  amount  received  by  him  is  to  go 
to  the  use  and  into  the  possession  of  one  of  themselves.     The 

3"  In  New  York,  by  statute,  a  director  or  officer  (teller)  of  a  bank  cannot 
borrow  without  the  consent  of  a  majority  of  the  board  of  directors.  But 
if  he  does  so  the  transaction  is  not  void  and  he  and  the  indorsers  on  his  note 
may  be  compelled  to  repay.  People's  Trust  Co.  v.  Pabst,  113  App.  Div. 
375  (1906),  98  N.  Y.  S.  1045. 

3''  Elliott  V.  Farmers'  Bank,  61  W.  Va.  641,  57  S.  E.  242  (1906).  See 
Linderman  v.  Rusk,  125  Wis.  210,  104  N.  W.  119  (1905). 

^  See  Conyngham's  Appeal,  57  Pa.  St.  474. 

6  Bank  Commissioners  v.  Bank  of  Buffalo,  6  Paige  (N.  Y.)  497. 

260 


DUTY    IN    CASE    OF   DEFAULTING    OFFICERS  §   126 

question  is,  Who  is  the  real  debtor  to  the  bank?  not,  What  use 
will  the  debtor  make  of  the  borrowed  funds?  Accordingly, 
where  a  statute  forbade  any  director  to  "become  indebted  or  liable  " 
to  the  bank  for  a  sum  exceeding  fifty  per  cent  of  the  amount  of 
the  capital  stock  of  the  bank  owned  by  him,  and  a  note  was  given 
to  the  bank  by  other  parties,  though  in  fact  the  debt  was  for  the 
benefit  of  a  director,  it  was  held  that  this  was  not  an  illegal  evasion 
of  the  statute,  inasmuch  as  the  note  and  the  claim  thereon  of  the 
bank  were  good  against  the  signers.  The  case  is  very  poorly 
reported,  but  this  point  seems  to  be  deducible  from  it.^ 

Illegal  Loan  not   Necessarily  Void 

(e)  A  prohibition  in  a  bank  charter  forbidding  a  loan  to 
be  made  to  an  officer  of  the  bank  does  not  render  the  contract 
whereby  such  loan  is  made  null  and  void.^"  The  charter  of  a 
bank  in  Maryland  contained  such  a  prohibition,  and  further  pro- 
vided a  penalty,  as  for  a  crime,  to  be  inflicted  on  any  officer  who 
should  be  convicted  of  breaking  this  law.  A  loan  was  made  to  a 
director,  and  he  sought  to  defend  in  a  suit  brought  to  recover  the 
amount,  on  the  ground  that  the  whole  transaction,  being  illegal, 
was  null  and  void,  and  that  he  could  not  be  holden.  But  the  court 
ruled  this  defence  to  be  absurd  and  inadmissable.^  Yet  it  seems 
that,  if  by  reason  of  tliis  illegal  act  an  innocent  third  party  be 
prejudiced,  such  third  party  may  be  recouped  at  the  cost  of  the 
bank.^  If  the  amount  of  the  loan,  or  any  part  of  it,  be  lost  to  the 
bank,  it  is  obvious  that  the  loss  falls  on  the  shareholders,  who 
should  be  permitted  to  have  their  remedy  in  some  practicable 
shape. 

§  120.  Duty  of  Directors  concerning  Unauthorized  Illegal  Acts 
of  Officers.  —  It  will  often  happen  that  a  subordinate  ofiicer 
will  do  an  act  either  illegal  or  fraudulent,  which  is  of  such  a  nature, 
or  done  in  such  a  manner,  that  it  does  not  necessarily  bind  or 
affect  the  bank.  Thus  the  conduct  of  a  single  officer  may  be  such 
that,  if  it  could  be  construed  as  the  action  of  the  corporation,  it 
would  cause  a  forfeiture  of  the  charter ;  but  if  it  be  without  the 
direction  or  privity,  a  fortiori  if  it  be  contrary  to  the  actual  orders, 

« Pemigewassett  Bank  v.  Rogers,  18  N.  H.  255. 
^  See  Ultra  vires,  §  722. 

^  Lester  v.  Howard  Bank.  3.3  Md.  558 ;    Brittan  v.  Oakland  Bank  of 
Savings,  124  Cal.  282,  57  Pac.  84  (1899). 
8  Albert  v.  Savings  Bank,  2  Md.  IGO. 

261 


§  126  DIRECTORS 

of  the  board  of  directors,  the  punishment  will  be  meted  solely  to 
the  wrong-doer,  and  it  will  be  considered  that  the  nature  of  the 
case  furnishes  no  ground  for  a  proceeding  for  forfeiture  or  penalty 
against  the  bank  itself.  But  whenever  knowledge  of  the  commis- 
sion of  an  act  of  this  description,  any  or  all  the  possible  results  of 
which  might  be  averted  from  the  bank,  is  brought  home  to  the  di- 
rectors, it  is  incumbent  upon  them  at  once  to  disavow  the  doings 
of  their  officer  on  behalf  of  the  body  corporate,  to  decline  to  allow 
the  corporation  to  receive  any  benefit  from  them,  and,  so  far  as 
can  be  done  reasonably  and  without  injury,  to  seek  to  undo  the 
transaction  if  it  be  still  inchoate  or  imperfect. 

Must  not  Retain  the  Benefit  or  the  Wrong-doer 

(a)  If  the  whole  affair  is  completed,  and  can  no  longer  be 
repudiated  or  undone,  or  if  no  good  or  just  end  could  be  attained 
by  the  repudiating  or  undoing  when  knowledge  of  it  first  reaches 
the  board,  still  it  is  their  duty  promptly  to  remove  the  official 
who  was  guilty  of  the  misdemeanor.  If  they  neglect  these  steps, 
if  they  knowingly  suffer  the  bank  to  reap  advantage  from  the 
wrongful  conduct,  or  if  they  continue  to  retain  the  wrong-doer  in 
service  of  the  bank,  they  will  be  regarded  as  sanctioning  and 
adopting  his  acts  on  behalf  of  the  bank,  and  it  will  be  affected  by 
these  precisely  as  if  they  had  been  originally  done  under  direction, 
or  with  the  cognizance,  approval,  or  collusion  of  the  corporate 
government.-^ 

Constructive   Knowledge 

(b)  The  cited  cases  also  perhaps  suffice  to  sustain  a  doctrine 
similar  to  that  which  we  laid  down  in  discussing  the  possible  al- 
legation of  directors  that  they  were  ignorant  of  the  existence  of 
a  custom  and  usage  prevalent  in  their  bank.  Such  an  excuse, 
it  is  intimated,  would  be  utterly  insufficient  to  shield  the  bank 
from  the  natural  consequences  of  its  officer's  wrongful  act.  If 
the  ignorance  of  the  directors  that  a  breach  of  law  or  of  the  charter 
has  been  committed  is  due  only  to  their  own  neglect  of  their  ob- 
vious duty  in  the  premises,  they,  i.e.  the  bank,  will  not  be  per- 
mitted to  benefit  by  their  own  laches.  If  they  ought  to  have 
known,  and  have  no  sufficient  excuse  for  not  knowing,  the  law 
will  deal  with  the  corporation  precisely  as  if  they  had  actually 

1  §  126.     Bank  Commissioners  v.  Bank  of  Buffalo,  6  Paige  (N.  Y.) 
497 ;   Robinson  v.  Bealle,  20  Ga.  275. 
262 


WIL\T   THE    BOARD    CANNOT    DO  §  127 

known.  Thus  if  it  be  illegal  for  a  loan  or  discount  to  be  made  to 
a  director  beyond  a  certain  amount,  and  such  a  loan  or  discount 
is  actually  made,  the  fact  that  the  board  had  neglected  to  examine 
the  books,  and  so  did  not  know  that  the  accounts  of  the  bank 
with  this  director  showed  so  large  a  loan  already  outstanding  to 
him,  is  no  defence  whatsoever  in  a  proceeding  by  the  bank  commis- 
sioners for  the  dissolution  of  the  corporation.^ 

Cannot  Increase  Capital  or  Make  Other  Radical  Change 

§127.  What  the  Board  cannot  do. — The  board  of  directors 
is  limited  in  its  authority  to  the  management  and  transaction  of 
the  ordinary  business  for  which  the  company  was  created,  and 
which  it  is  wont  to  transact ;  including,  of  course,  such  matters 
as  may  be  necessarily  incidental  thereto."  It  cannot  eflfect  great 
or  radical  changes  in  the  organization  of  the  company,  although 
such  changes  are  lawful  under  the  charter  or  organic  law,  unless 
the  same  be  consented  to  by  the  shareholders.  For  example, 
where  a  bank  is  chartered  with  a  certain  capital,  but  with  power 
to  increase  this  capital,  and  nothing  is  said  as  to  the  manner  in  which 
this  power  may  be  exercised,  the  directors  have  not  authority 
to  determine  upon  and  make  such  increase ;  it  must  be  done  by 
action  of  the  shareholders.^  And  an  assessment  on  stockliolders, 
required  by  a  notice  from  the  comptroller,  under  Rev.  St.  U.  S. 
§  5205,  is  invalid  if  made  by  the  directors  of  a  bank.  Such  assess- 
ment must  be  made  by  the  stockholders  themselves.^" 

Cannot  Give  Away  the  Bank's  Property 

(a)  Directors  can  use  the  funds  and  property  of  the  bank  only 
for  proper  banking  purposes,  and  for  the  strict  furtherance  of  the 
business   objects   and   financial  prosperity  of  the  corporation.^* 

2  Ibid. 

«  §  127.  Bank  of  Commerce  v.  Hart,  37  Neb.  197,  55  X.  W.  631  (1893) ; 
Merchants'  Bank  v.  Rudolf,  5  Neb.  527. 

1  Eidman  v.  Bowman,  58  111.  444 ;  and  see  Gray  v.  Portland  Bank, 
3  Mass.  304. 

'«  Hulett  V.  Bell,  85  Fed.  98  (1898). 

The  directors  of  a  state  bank  have  no  inherent  authority  to  make  an 
assessment  upon  the  capital  stock  to  make  up  a  deficiency  arising  from 
the  impairment  of  the  capital.  Slette  v.  Larson,  125  Minn.  271,  146  N.  W. 
1093  (1914). 

">  Where  directors  spend  money  of  the  bank  in  prospecting  for  ore  in 
a  mine  owned  by  the  bank,  in  which  mine  no  ore  of  value  has  ever  been 

263 


§  127  DIRECTORS 

Their  discretion  and  power  to  manage  its  affairs  extend  only  to 
the  conducting  those  affairs  in  the  best  manner  that  their  knowl- 
edge, foresight,  and  observation  can  suggest,  to  the  end  of  increas- 
ing the  profits  and  enhancing  the  value  of  the  investments  which 
have  been  intrusted  to  their  charge  by  others.  They  cannot 
use  any  portion  of  the  money  for  such  objects  of  usefulness  or 
charity,  or  the  like,  as  they  may  consider  worthy  of  encourage- 
ment and  aid.  All  their  transactions  must  be  strict  matters  of 
business.  They  cannot  make  gifts  from  the  corporate  property.^  "^ 
They  cannot,  without  authority  from  the  stocl-diolders,  subscribe 
money  to  any  objects,  however  meritorious,  unless  with  the  im- 
mediate view  and  expectation  of  thereby  furthering  the  actual 
worldly  and  material  well-being  of  the  bank.  They  are  trustees 
of  the  property  of  others  for  this  sole  and  only  purpose,  and  if 
they  appropriate  any  portion  of  the  property  for  any  other  pur- 
pose whatsoever,  however  intrinsically  deserving,  it  is  yet  a  de- 
viation from  their  obvious  duty,  both  legal  and  moral,  for  it  is 
nothing  else  than  a  clear  breach  of  a  plain  and  simple  trust  .^ 

Also  a  case  of  misappropriation  of  the  funds  of  the  corporation 
has  been  held  to  be  where  the  directors,  apprehensive  that  a  suit 
was  to  be  instituted  against  them  by  the  stockholders,  used  cor- 
porate funds  to  retain  counsel  for  their  own  defence.^  A  clearer 
case  of  a  wrongful  misapplication  and  deflection  of  trust  money 
from  the  purposes  of  the  trust  is  not  likely  to  occur. 


Cannot  Make  Bank  a  Gratuitous  Surety 

(b)  A  cognate  rule  forbids  the  directors  needlessly  or  gratui- 
tously to  assume  either  actual  or  contingent  liabilities  on  behalf 
of  others.  If  they  could  ever  have  the  right  to  do  so,  it  could  be 
only  under  circumstances  of  urgent  necessity,  and  where  interests 
of  the  bank  seemed  to  be  in  some  degree  involved,  so  that  a  jury 
would  be  willing  to  regard  the  exceptional  excuse  as  sufficient.^ 

found,  they  are  personally  liable  for  the  money  to  the  bank  or  its  receiver. 
Cooper  V.  HiU,  94  Fed.  582  (1899). 

i<^  Directors  cannot  legally  make  a  contribution  for  the  purpose  of 
inducing  the  construction  of  a  railroad.  Arkansas  etc.  Railroad  v.  Farmers' 
etc.  Bank,  21  Okla.  322,  96  Pac.  765,  129  Am.  St.  Rep.  782  (1908). 

2  Frankfort  Bank  v.  Johnson,  24  Me.  490 ;  Bedford  R.  R.  Co.  v.  Bow- 
ser, 48  Pa.  St.  29. 

'  Percy  v.  Millaudon,  3  La.  568. 

«  Stark  Bank  v.  U.  S.  Pottery  Co.,  34  Vt.  144. 

264 


WHAT    THE    BOARD    CANNOT    DO  §   127 

Effect  of  Wrongful  Ad  as  between  Bank  and  Third  Parties 

(c)  If  a  director  or  the  board  act  beyond  their  power  or  con- 
trary to  their  duty,  third  parties  may  still  hold  the  bank  on  the 
transaction,  if  on  the  facts  as  actually  or  constructively  known 
to  such  third  parties  there  was  nothing  to  notify  them  of  the 
wrongfulness  of  the  transaction.  Where  the  directors  i)ermit 
an  officer  to  hold  himself  out  to  the  public  as  being  invested  with 
absolute  power  to  manage  and  control  its  affairs,  in  such  a  manner 
and  for  such  a  length  of  time,  as  to  lead  innocent  ])ersons  to  make 
contracts  with  such  officer,  the  bank  cannot  repudiate  the  con- 
tra'cts  by  invoking  any  by-law  of  the  corporation  which  the  di- 
rectors themselves  have  negligently  allowed  to  fall  into  disuse/" 

(d)  If  a  director  commits  a  breach  of  duty  in  advocating,  or 
voting  upon,  a  measure  in  which  he  is  so  interested  that  he  ought 
to  have  regarded  himself  as  wholly  excluded  from  the  deliberation 
and  decision  upon  it,  yet  the  action  of  the  board  thereon  will  be 
valid  and  binding  upon  the  corporation  in  favor  of  any  innocent 
third  person,  not  cognizant  of  or  a  party  to  the  wrongfulness  of 
the  proceeding.  Thus,  in  a  case  where  a  director  was  jointly  re- 
sponsible with  a  debtor  upon  a  debt  owing  to  the  bank,  he  was 
present  and  voted  at  the  meeting  when  the  board  settled  the  debt 
by  taking  a  conveyance  of  the  debtor's  real  estate.  It  was  held 
that  the  fact  of  his  voting,  however  wrongful  in  him,  nevertheless 
did  not  avoid  the  contract  as  towards  the  debtor,  unless  fraudulent 
collusion  on  the  part  of  the  debtor  should  be  shown.  The  debtor 
had  nothing  to  do  with  the  correctness  of  the  dealings  taking  place 
between  the  bank  and  its  own  agents  and  officers.  He  had  only 
to  satisfy  himself  that  the  board  was  acting  within  its  powers.^ 

Ultra  Vires  by  Circumstances   Unknown 

(e)  If  the  directors  give  away  the  bank's  property,  or  make 
the  bank  an  accommodation  indorser,  or  make  an  illegal  loan  or 
purchase,  or  otherwise  exceed  their  authority  in  such  a  way  that 
the  transaction  is  on  its  face  regular,  and  apparently  within  the 
scope  of  the  directorial  authority,  and  no  circumstances  affect 
third  parties  with  notice  of  its  wrongfulness,  the  transaction  as 
to  such  parties  would  bind  the  bank.^" 

^  Cox  V.  Robinson,  82  Fed.  277,  280  (1897). 

^Baird  v.  Bank  of  WashinK'ton,  11  Serg.  &  R.  (Pa.)  411. 

^  Seeberger  v.  McCormiek,  178  111.  404,  53  N.  E.  340  (1899). 

265 


§127 


DIRECTORS 


Ultra  J'ires  by  Circumstances  Known 


(/)  But  if  the  real  nature  of  the  act  were  known  to  the  outsider, 
he  would  be  held  to  a  knowledge  of  its  illegality  arising  from  its 
not  being  within  the  ordinary  agency  conferred  by  the  corporate 
principle  upon  its  official  agents.  For  directors,  though  they  are 
the  government  of  the  corporation,  are  yet,  no  less  than  any  sub- 
ordinate officers,  its  agents,  with  a  definite  scope  to  their  agency, 
and  can  only  act  legally  within  the  scope. ^  If  their  act  is  such 
that  it  is  the  duty  of  the  party  dealing  with  them  to  know  that 
it  falls  without  the  ordinary  limits  of  directorial  power,  he  will 
be  affected  by  its  invalidity.  If  the  facts  are  known  to  him 
which  show  that  as  matter  of  law  the  directors  are  undertaking 
an  act  of  this  description,  he  deals  with  them  at  his  own  peril  if 
he  neglects  to  satisfy  himself  that  they  have  received  a  special 
and  extraordinary  authority  in  the  particular  case.  If  they  have 
not,  any  loss  he  may  incur  is  only  the  natural  result  of  his  own 
laches.  Thus  it  is  a  principle  of  law  that  the  directors  can  only 
use  funds  of  the  bank  for  legitimate  banking  purposes.  If  they 
borrow  money  intending  to  use  it  for  other  purposes,  and  the 
lender  is  aware  of  this  intent,  then  their  use  of  it  accordingly  will 
relieve  the  bank  from  indebtedness  upon  the  loan.^  See  on  this 
topic.    Ultra  vires,  §  722. 

§  128.  Liability  of  Directors."  —  If  bank  directors  do  not 
manage  the  affairs  and  business  of  the  bank  according  to  the 
directions  of  the  charter  and  in  good  faith,  they  will  be  liable  to 
make  good  all  losses  which  their  misconduct  may  inflict  upon 
either  stockholders  or  creditors,  or  both.^     But  they  are  not  liable 

6  Salem  Bank  v.  Gloucester  Bank,  17  Mass.  1 ;  Bank  of  Kentucky  v. 
Schuylkill  Bank,  1  Pars.  Sel.  Cas.  (Pa.)  180;  Ridley  v.  Plymouth  Grind- 
ing &  Baking  Co.,  2  Exeh.  711. 

^  Bank  of  Australasia  v.  Breillat,  6  Moore  P.  C.  197. 

"  §  128.  For  the  liability  of  directors  when  a  national  bank  violates 
the  Federal  Reserve  Act  see  Fed.  Res.  Act,  Sec.  2,   Part  II.  §  92. 

1  Hodges  V.  New  England  Screw  Co.,  1  R.  I.  312;  3  id.,  9;  Bank  of 
St.  Mary's  v.  St.  John,  25  Ala.  566 ;  Attorney-General  v.  Wilson,  1  Craig 
&  Ph.  1;  10  L.  J.  N.  s.  53,  4  Jur.  1174;  Solomon  v.  Bates,  118  N.  C. 
311,  24  S.  E.  4G8  (1896) ;  McDonald  v.  Rankin,  7  Montreal  L.  R.  (S.  C.) 
44 ;  Marshall  v.  Farmer's  Bank,  85  Va.  676,  8  S.  E.  586,  17  Am.  St.  Rep. 
84,  n.  (1889)  ;  Elliott  v.  Farmers'  Bank,  61  W.  Va.  641,  57  S.  E.  242  (1906) ; 
Ellis  V.  Mercantile  Co.,  103  Miss.  560,  60  So.  649,  1915B  Ann.  Cas. 
526,  n. ;  Bank  of  Des  Are  v.  Moody,  110  Ark.  39,  161  S.  W.  134  (1913) ; 
Daugherty  v.  Poundstone,  120  Mo.  App.  300,  96  S.  W.  728  (1906) ;  Emer- 
son V.  Gaither,  103  Md.  564,  64  Atl.  26,  8  L.  R.  A.  (n.  s.)  738  (1906) ;  Cun- 

266 


LIABILITY    OF    DIRECTORS  §   12S 

for  frauds  of  an  officer  unless  they  have  been  guilty  of  gross  neg- 
lect.'" Neither  are  they  liable  if  no  loss  results  to  the  bank 
from  their  negligence.'* 

ningham  v.  Shellman,  104  Ky.  5cS4,  17')  S.  W.  1045  (1915);  Lippilt  v. 
Ashley,  —  Conn.  — ,  94  All.  995  (1915) ;  Gund  l'.  Ballard,  80  Neb.  385,  114 
N.  W.  420  (1907) ;  Holmes  v.  McDonald,  220  lU.  109,  80  N.  E.  714  (1907; ; 
Wiekliife  v.  Turner,  154  Ky.  571,  157  S.  W.  1125  (1913);  Coddington 
V.  Canaday,  157  Ind.  243,  01  N.  E.  .507  (1901). 

The  maldng  of  a  loan  in  good  faith  to  a  corporation  financially  un- 
sound upon  property,  security  or  reliable  individual  indorsement  is  not 
negligence.     Warren  v.  Robison,  25  Utah  205,  70  Pac.  989  (1902). 

Directors  are  required  to  e.xereise  reasonalile  care  and  business  judg- 
ment, but  nothing  further  than  this.  Braswell  v.  Pamlico  Banking  Co., 
159  N.  C.  028,  75  S.  E.  813,  42  L.  R.  A.  (n.  s.)  101  (1912)  ;  they  are  not 
liable  to  creditors  for  mere  non-feasance.  Stone  v.  Rottman,  183  ]Mo. 
552,  82  S.  W.  70  (1904). 

In  Arkansas,  by  statute,  it  is  the  duty  of  directors  to  manage  the 
affairs  of  the  bank,  and  they  cannot  discharge  that  duty  by  delegating  it 
to  others.  Bailey  v.  O'Neal,  92  Ark.  327,  122  S.  W.  503,  135  Am.  St.  Rep. 
185  (1909). 

If  the  directors  wilfully  use  the  property  which  is  the  subject  of  trust 
for  an  unauthorized  purpose  and  a  loss  ensues  they  are  liable  for  the 
loss  to  the  depositor,  or  his  assignee,  and  it  is  immaterial  that  the  de- 
positor became  such  after  the  misaj)propriation ;  nor  wiU  a  consent  of 
the  stockholders  to  the  misappropriaticm  bar  the  right  of  creditors. 
Winchester  v.  Howard,  130  Cal.  432,  04  Pac.  092,  89  Am.  St.  Rep.  1.53 
(1902). 

The  liability  of  the  directors  is  an  asset  of  the  insolvent  bank  en- 
forceable by  a  trustee  for  the  benefit  of  its  creditors ;  and  if  the  trustee 
does  not  enforce  it  the  stockholders  may  do  so  by  an  answer  in  the  nature 
of  a  cross  bill.  Clark  v.  Bank  of  Union,  72  W.  Va.  491,  78  S.  E.  785 
(1913).  But  in  such  a  case  the  statute  of  limitations  is  well  pleaded. 
Stone  V.  Rottman,  183  Mo.  5.52,  82  S.  W.  70  (1904). 

The  creditors  have  no  right  to  sue  the  directors  of  an  insolvent  cor- 
poration which  has  passed  into  the  hands  of  a  receiver,  unless  the  re- 
ceiver, upon  proper  request,  refuses  to  sue,  or  unless  such  request  would 
be  unavailing.  Saunders  v.  Bank  of  ^Mecklenburg,  113  Va.  050,  75  S.  E. 
94  (1912) ;  INIurred  v.  Traders'  etc.  Bank,  113  Va.  005,  75  S.  E.  97  (1912). 

In  a  suit  against  the  directors  of  a  bank  for  negligence  in  conducting 
the  business  of  the  bank  it  is  not  necessary  to  allege  what  particular 
loss  was  by  the  negligence  of  a  particular  officer  or  who  was  on  the 
managing  board  at  the  time  of  the  loss,  or  to  allege  all  tlie  losses  com- 
plained of.     Sigwald  V.  City  Bank,  74  S.  C.  473,  55  S.  E.  109  (1900). 

'«  Savings  Bank  v.  Caperton,  87  Ky.  300,  8  S.  W.  885  (1888) ;  Robin- 
son V.  Hall,  59  Fed.  048;  Swentzel  v.  Penn  Bank,  147  Pa.  St.  140,  23  Atl. 
405,  415. 

Directors  cannot  fairly  be  said  to  be  guilty  of  gross  neglect  if  they  per- 
form their  duty  in  the  same  manner  as  such  duties  are  ordinarih^  per- 
formed by  all  other  directors  of  other  banks  of  the  same  citv.  Delvin 
V.  Moore,  04  Or.  433,  130  Pac.  35  (1913). 

"■Wallace  r.  Lincoln  Savings  Bank,  89  Tenn.  630-648,  15  S.  W.  448 
(1890). 

267 


§  128  DIRECTORS 

Careless  Supervision 

If  the  directors  do  not  use  ordinary  diligence  to  know  ^^  the 
conduct  of  officers  and  what  the  bank  books  show/<^  and  to  con- 
trol their  subordinates,  and  loss  results,  they  are  liable.^  The 
degree  of  care  required  of  directors  depends  upon  the  subject  to 
which  it  is  to  be  applied,  and  each  case  is  to  be  determined  in  view 
of  all  the  circumstances.2<^ 

1"=  If  the  directors  know  that  the  president  and  vice  president  of  the 
bank  are  engaged  in  a  stock  speculation  with  the  funds  of  the  bank  they 
are  liable  for  losses  thus  occasioned.  McKinnon  v.  Morse,  177  Fed. 
576  (1910). 

1"^  Knowledge  of  aU  the  affairs  of  the  bank  or  what  its  books  and  papers 
would  show  cannot  be  imputed  to  a  director  for  the  purpose  of  charging 
him  with  liability.  Mason  v.  Moore,  73  Ohio  St.  275,  76  N.  E.  932, 
4  L.  R.  A.  (n.  s.)  597,  n.  (1906).  But  it  is  the  duty  of  the  directors  to 
examine  the  papers  and  effects  of  the  bank  and  to  famiUarize  themselves 
with  its  business  and  affairs.  Spongberg  v.  First  National  Bank,  18 
Idaho  524,  110  Pac.  716,  1912A  Ann.  Cas.  95,  n. 

-  United  Society  v.  Underwood,  9  Bush  (Ky.)  609;  Gibbons  v.  Ander- 
son, 80  Fed.  345;  Wheeler  v.  Aiken  Co.  Bank,  75  Fed.  781;  Empire 
State  Savings  Bank  v.  Beard,  81  Hun  (N.  Y.)  184;  Ellis  v.  Mercantile 
Co.,  103  Miss.  560,  60  So.  649,  1915B  Ann.  Cas.  526,  n. ;  Lyons  v.  Corder, 
253  Mo.  539,  162  S.  W.  606  (1913) ;  Franklin  v.  Caldwell,  123  Ky.  528, 
96  S.  W.  605,  5  L.  R.  A.  (n.  s.)  458,  n.  (1906) ;  Stone  v.  Rottman, 
183  Mo.  552,  82  S.  W.  76  (1904) ;  Rankin  v.  Cooper,  149  Fed.  lOlQ 
(1907). 

One  who  has  been  elected  a  director  but  has  never  received  notice  of 
the  fact  and  has  never  -acted  in  the  capacity  of  a  director  is  not  liable 
for  such  losses.     Bank  of  Des  Arc  v.  Moody,  110  Ark.  39  (1913). 

When  a  deposit  is  made  there  is  a  direct  privity  of  relation  between 
the  directors  and  the  depositors,  and  the  latter  may  sue  the  former  for 
negligently  permitting  the  officers  to  loan  money  contrary  to  law  result- 
ing in  loss.     Boyd  v.  Schneider,  131  Fed.  223  (1904). 

'--^  Briggs  V.  Spaulding,  141  U.  S.  132,  35  L.  ed.  662,  11  Sup.  Ct.  924 
(1891) ;  Mason  v.  Moore,  73  Ohio  St.  275,  76  N.  E.  932,  4  L.  R.  A.  (n. 
s.)  597,  n.  (1906) ;  Delvin  v.  Moore,  64  Or.  433,  130  Pac.  35  (1913) ; 
Rankin  v.  Cooper,  149  Fed.  1010  (1907);  Kavanaugh  v.  Gould,  147 
App.  Div.  281  (1911),  131  N.  Y.  S.  1059. 

If  a  director  knows  of  the  insolvency  of  a  bank  and  takes  no  steps 
to  forbid  a  continuance  of  the  business  it  seems  that  he  is  liable  for  loss 
to  one  who  thereafter  deposits  in  ignorance  of  the  situation.  Cassidy  v. 
Uhlmann,  170  N.  Y.  505,  63  N.  E.  554  (1902). 

Dii-ectors  must  cause  an  examination  of  the  condition  and  resources 
of  the  bank  to  be  made  with  reasonable  frequency.  Delvin  v.  Moore, 
64  Or.  433,  130  Pac.  35  (1913) ;  Campbell  v.  Watson,  62  N.  J.  Eq.  396, 
50  Atl.  120  (1901) ;   Rankin  v.  Cooper,  149  Fed.  1010  (1907). 

They  are  bound  to  exercise  that  degree  of  care  in  the  business  affairs 
of  the  bank  that  ordinarily  prudent  and  careful  men  would  exercise  in 
affairs  of  like  importance.  Smalley  v.  McGraw,  148  Mich.  384,  111  N.  W. 
1093  (1907) ;   Kavanaugh  v.  Gould,  147  App.  Div.  281  (1911),  131  N.  Y. 

268 


LIABILITY   OF   DIRECTORS  §  128 

They  may  be  held  to  account  to  an  injured  party  in  a  court 
of  chancery,^  or  they,  or  any  one  of  their  number  who  shared  in 
the  wrongdoing,  may  be  sued  at  law  for  damages.^  But  for 
excusable  mistakes  concerning  the  law,  and  for  many  errors 
strictly  of  discretion,  they  are  not  liable/"  Though  in  cases  in 
which  their  action  has  been  so  grossly  ill  advised  as  to  warrant 
the  imputation  of  fraud,  or  to  show  a  want  of  the  knowledge 
absolutely  necessary  for  the  performance  of  their  duties,  so  great 
that  they  were  not  justified  in  assuming  the  office,  they  may  be 
held  responsible.^  They  are  required  simply  to  show  a  reasonable 
capacity  for  the  position  they  accept ;  to  use  in  it  their  best  dis- 
cretion ^^  and  industry ;  to  show  the  scrupulous  bona  fides  and 
conscientiousness  in  every  matter,  however  minute,  which  is 
exacted  rigorously  from  all  trustees  of  the  property  of  others ; 
and  to  obey  accurately  the  requisitions  of  the  charter,  or  of  the 
general  law  under  which  they  are  organized. 

S.  1059.  They  are  not,  however,  bound  to  exercise  the  same  care  that  a 
man  of  prudence  would  exercise  in  his  own  business.  Stone  v.  Rottman, 
183  ]Mo.  552,  82  S.  W.  76  (1904).  But  the  failure  to  comply  with  statutory 
requirements  is  actionable  negligence.  Lyons  v.  Corder,  253  Mo.  539, 
162  S.  W.  606  (1913). 

And  in  Arkansas,  by  statute,  directors  arc  liable  for  a  series  of  connected 
acts  of  negligence  from  which  it  may  be  inferred  that  the  negligence  was 
intentional.  Bailey  v.  O'Neal,  92  Ark.  327,  122  S.  W.  503,  135  Am.  St. 
Rep.  185  (1909). 

Whether  or  not  the  president  of  a  bank  is  negligent  in  failing  to  see 
securities  listed  in  a  false  report  to  the  superintendent  of  banking  is  a 
question  for  the  jury.  Davenport  v.  Prentice,  126  App.  Div.  451  (1908), 
HON.  Y.  S.  1056. 

3  Hodges  I'.  New  England  Screw  Co.,  supra;  Bank  of  St.  Mary's  v. 
St.  John,  supra;  Bank  of  Des  Arc  v.  Moody,  110  xVrk.  39,  161  S.  W. 
134  (1913)  ;  Rank-in  v.  Cooper,  149  Fed.  1010  (1907). 

The  statute  of  limitations  will  be  no  defence  where  the  negligence  of 
a  majority  of  directors  continued  until  the  appointment  of  a  receiver 
and  was  unknown  to  the  creditors.     Rankin  v.  Cooper,  supra. 

If  the  bank  and  receiver  refuse  to  bring  action  the  depositors  and 
stockholders  may  do  so.  Ellis  v.  Mercantile  Co.,  103  Miss.  560,  60  So. 
649.  1915B  Ann.  Cas.  526,  n. 

^  Conant  v.  Seneca  County  Bank,  1  Ohio  St.  298;  Warren  v.  Robi- 
son,  25  Utah  205,  70  Pac.  989  (1902). 

•^  Witters  v.  Sowles,  31  Fed.  1 ;  Wallace  v.  Lincoln  Savings  Bank, 
89  Tenn.  630,  15  S.  W.  448  (1890) ;  Williams  r.  McDonald,  42  N.  J. 
Eq.  392,  7  Atl.  866. 

*  Godbold  r.  Branch  Bank,  11  Ala.  191 ;  Smith  v.  Prattville  Manufac- 
turing Co.,  29  id.,  503. 

^^  There  is  a  strong  presumption  that  directors  exercise  their  best 
judgment  in  conducting  the  affairs  of  the  bank.  Delvin  v.  Moore,  64  Or, 
433,  130  Pac.  35  (1913). 

269 


§  128  DIKECTORS 

Wrongful  Dividend 

(a)  For  example,  if  directors  declare  a  dividend  at  a  time  when 
the  bank  is  so  far  embarrassed  that  such  a  needless  disbursement 
of  money  must  be  regarded  as  an  act  of  either  fraud  or  folly,  and 
which  could  have  been  advocated  by  no  man  who  was  not  either 
dishonest  or  grossly  incapable,  they  may  be  held  liable  for  the 
consequent  loss  to  the  corporation,^  and  to  the  depositors.^"  The 
act  is  not  to  be  excused,®"  for  it  must  be  either  fraudulent  or  the 
result  of  such  excessive  unfitness  as  to  become  the  legal  equivalent 
of  fraud.  But  where  the  directors  declare  a  dividend  because 
of  bad  judgment,  and  not  bad  faith,  as  to  the  condition  of  the 
assets,  they  are  not  liable.®* 

(6)  Collateral  to  this  right  of  action  for  the  improper  dec- 
laration of  a  dividend  is  the  right  of  the  shareholder  to  protection 
for  the  future  in  a  court  of  equity.  It  is  one  of  the  very  few  cases 
in  which  he  can  interfere  to  control  the  judgment  of  the  board. 
If  he  makes  out  a  proper  case,  he  may  have  an  injunction  against 
the  directors,  prohibiting  the  declaring  of  other  dividends  there- 
after. The  proceeding  for  this  purpose  is  an  independent  one, 
and  does  not  operate  as  a  waiver  of  his  right  of  action  at  law  to 

•5  Gunkle's  Appeal,  48  Pa.  St.  13 ;  Dykman  v.  Keeney,  10  N.  Y.  App. 
Div.  610. 

In  Wisconsin  directors  are  liable  for  payment  of  dividends  out  of  the 
corporate  property  before  the  capital  stock  has  been  fully  paid  in.  Wil- 
liams V.  Brewster,  117  Wis.  370,  93  N.  W.  479  (1903). 

In  Georgia  it  is  criminal  for  the  president  and  directors  to  declare  a 
dividend  from  funds  other  than  profits.  Cabaniss  v.  State,  8  Ga.  App. 
129,  68  S.  E.  849  (1910). 

6°  Boyd  V.  Schneider,  131  Fed.  223  (1904). 

^''  If  directors  declare  dividends  in  violation  of  statute  they  will  not 
be  permitted  to  shield  themselves  from  liability  upon  the  ground  that 
they  did  not  knowingly  violate  its  provisions.  Franklin  v.  Caldwell, 
123  Ky.  528,  96  S.  W.  605  (1906). 

e*"  Witters  v.  Sowles,  31  Fed.  1. 

^'^  A  note  of  the  stockholders  to  pay  the  taxes  on  stock  is  equivalent 
to  the  declaration  of  a  dividend.  Dividends  are  held  in  trust  for  the 
stockholders,  and  a  demand  is  doubtless  essential  as  a  condition  pre- 
cedent to  bringing  suit,  unless  there  has  been  a  refusal  to  pay.  A  stock- 
holder may  sue  for  liis  dividends  at  any  time  within  the  period  of  the 
statute  of  limitations  unless  he  has  misled  others  to  their  prejudice. 
Redhead  v.  Iowa  National  Bank,  127  Iowa  572,  103  N.  W.  796  (1905). 

^'^  The  debt  does  not  pass  with  the  assignment  of  the  shares  of  stock. 
Redhead  v.  Iowa  National  Bank,  127  Iowa  572,  103  N.  W.  796  (1905). 

If  the  bank  gives  time  checks  payable  at  certain  dates,  for  the  divi- 
dends, the  dividends  belong  to  the  bank  and  may  be  taxed  to  it.  Greneda 
Bank  v.  Adams,  87  Miss.  669,  40  So.  4  (1905). 

270 


LIABILITY    OF   DIRFXTORS  §  12S 

recover  damages  for  the  injury  sustained  from  the  payment  of 
the  dividend  already  dechxred.  For  apparently  this  act,  however 
wrongful,  cannot  be  undone  after  the  measure  has  passed  the  cor- 
porate government.  The  right  of  each  shareholder  to  receive 
his  dividend,  is  perfect  so  soon  as  there  has  been  a  formal  vote  to 
pay  it.^""  It  is  rendered  a  debt  owing  from  the  bank  to  him.^'' 
After  this  stage  it  is  too  late  for  a  court  of  equity  to  enjoin  the 
disbursement  of  the  dividend,  certainly  where  only  one  shareholder 
is  before  the  court  7 


Wrongful  Issue  of  Bills 

(c)  So  again  if  the  charter  forbids  the  issue  of  bills  for  circula- 
tion before  a  certain  portion  of  the  capital  stock  has  been  sub- 
scribed and  paid  in,  in  specie,  an  issue  before  that  time  will  make 
the  directors  personally  liable  to  redeem  any  of  the  bills  which 
the  bank  is  unable  to  pay  in  the  due  and  ordinary  course  of  its 
business.  A  statutory  requisition  of  a  nature  so  plain  and  simple 
as  this  cannot  be  excusably  broken.  If  broken,  the  breach  cannot 
be  regarded  as  a  mistake  of  law.^ 

It  has  been  declared  in  a  Georgia  case,  that  with  the  expiration 
of  the  charter  of  the  bank  the  liability  of  the  directors  for  over- 
issues ceases  also.^  One  judge  dissented  from  this  opinion,  and 
it  must  be  confessed  that  it  is  difficult  to  believe  that  it  is  sound 
law.  An  over-issue  of  circulating  bills  is  a  very  grave  offence. 
It  can  hardly  be  made  honestly,  and  even  if  it  is,  the  gross  neglect 
of  duty,  which  must  open  the  door  to  it,  deserves  a  scarcely  lighter 
responsibility  than  actual  fraud.  But  if  there  is  to  be  any  limi- 
tation to  a  liability  thus  created,  surely  it  cannot  accrue  until 
such  time  as  no  person  on  behalf  of  the  institution  has  the  duty 
of  redeeming  its  notes,  so  that  those  still  remaining  out  may 
properly  be  supposed  by  the  community  to  be  utterly  worthless. 
Statutory  or  charter  provisions,  or  judicial  decrees,  often  place 
this  time  at  a  date  much  later  than  that  of  the  expiration  of  the 
charter.  So  long  as  the  community  have  a  right  to  look  to  any 
one  to  redeem  the  bills  of  the  bank,  surely  they  should  have  the 
right  to  look  to  a  director  who  has  taken  part  in  an  over-issue. 

7  Fawcett  v.  Laurie,  1  Drew.  &  S.  192. 

8  Schlov  r.  Dixon.  24  Ga.  273. 

«  Moultrie  v.  Hoge,  21  Ga.  513. 

271 


§128 


DIRECTORS 


Mistakes  of  Law 


(d)  Mistakes  as  to  what  is  the  law  serve  to  excuse  in  cases 
where  correct  knowledge  could  be  reasonably  expected  only  from 
a  professional  man,  and  even  in  such  cases,  if  the  directors  feel 
any  doubts,  they  may  be  guilty  of  neglect  if  they  fail  to  seek  and 
be  guided  by  competent  legal  advice.  Thus  the  board  of  a  bank 
voted  to  pay  a  director  for  services ;  the  court  held  that  he  could 
not  be  legally  paid.  But  the  point  was  purely  legal ;  the  directors 
had  acted  honestly  and  without  negligence  in  the  matter,  and  they 
were  accordingly  exculpated  from  blame  or  responsibility.i°  But 
ignorance  of  any  fact  in  the  bank's  affairs  which  it  is  their  duty 
to  know,  can  never  be  set  up  by  them  in  defence  or  exculpation 
for  any  act  which  the  existence  of  that  fact  should  have  prohibited." 
And  while  they  are  not  responsible  for  their  failure  to  collect  a 
debt  because  of  usury  included  therein,  they  are  Hable  for  their 
own  infringement  of  a  statute  against  usury 


llo 


Not  Negligence 

(e)  If  the  cashier  is  properly  selected,  there  is  no  negligence 
in  letting  him  select,  and  hire,  and  pay  fom  his  salary,  the  clerks 
and  servants  of  the  bank.^^  Directors  are  not  insurers  of  the 
fidelity  of  the  agents  whom  they  appoint,  nor  can  they  be  held 
responsible  for  losses  resulting  from  the  wrongful  acts  and  omis- 
sions of  other  directors  or  agents,  unless  the  loss  is  a  consequence 
of  their  own  neglect  of  duty.^^o 

III  Health  of  a  Director 

(/)  A  director  cannot  escape  liability  for  the  results  of  his 
ignorance  of  the  affairs  of  the  bank,  on  the  ground  that  he  has 

10  Godbold  V.  Branch  Bank,  11  Ala.  191. 

"  Bank  Commissioners  v.  Bank  of  Buffalo,  6  Paige  (N.  Y.)  497. 

11"  Wallace  v.  Lincoln  Savings  Bank,  89  Tenn.  630,  648,  15  S.  W.  448 
(1890) ;    Drake  v.  Bank,  9  Grant  Ch.  (U.  C.)  116. 

12  Smith  V.  First  National  Bank,  99  Mass.  605 ;  Wallace  v.  Lincoln 
Savings  Bank,  89  Tenn.  630,  652-654,  15  S.  W.  448  (1890). 

12a  Briggs  V.  Spaulding,  141  U.  S.  133,  35  L.  ed.  662,  11  Sup.  Ct.  924 
(1891) ;  Warner  v.  Penoyer,  82  Fed.  181  (1897) ;  Clews  v.  Bardon,  36 
Fed.  617 ;  McDonald  v.  Rankin,  7  Montreal  L.  R.  (S.  C.)  44 ;  Stone  v. 
Rottman,  183  Mo.  .552,  82  S.  W.  76  (1904) ;  Warren  v.  Robison,  25  Utah 
205,  70  Pac.  989  (1902) ;  Delvin  v.  Moore,  64  Or.  433,  130  Pac.  35  (1913) ; 
Mason  v.  Moore,  73  Ohio  St.  275,  76  N.  E.  932,  4  L.  R.  A.  (n.  s.)  597,  n. 
(1906). 

272    ■ 


LIABILITY    OF   DIRECTORS  §  128 

been  in  ill  health.^^  But  where  the  other  directors  gave  him 
leave  of  absence  and  frauds  are  committed  durinf]^  his  absence, 
and  without  his  knowledge,  he  is  not  responsible  for  them.'^" 

Non-residence 

(g)  Neither  non-residence  ^^<^  of  directors  making  it  imprac- 
ticable for  them  to  give  proper  attention  to  the  bank's  afiairs 
nor  private  arrangements  between  them  and  other  directors  or 
stockholders  whereby  they  are  relieved  from  such  duties,  excuses 
them  from  liability  incurred  by  permitting  false  statements  to 
be  made  of  the  bank's  condition. ^^^ 

Solicitation  of  President  no  Excuse 

(h)  A  director  of  a  savings  bank,  also  manager  and  member 
of  the  finance  committee,  who  makes  a  loan  prohibited  by  statute, 
is  not  excused  on  the  ground  that  he  acted  at  the  solicitation  of 
the  president  and  for  the  alleged  benefit  of  the  bank.^^" 

Going  Beyond  Limit  of  Bank's  Indehtedness 

(i)  A  very  common  pro\'ision  in  banking  acts  and  bank  char- 
ters names  a  certain  sum  or  ratio  which  the  indebtedness  of  the 
bank  shall  never  be  allowed  to  exceed,!^'*  ^nd  for  any  excess  makes 

13  German  Savings  Bank  v.  Wulfekuliler,  19  Kans.  60. 

A  passing  illness  temporary  in  character  is  an  excuse  for  the  period 
while  it  lasts,  but  if  a  person  becomes  a  confirmed  invalid  and  remains 
a  director  he  cannot  escape  liability.  Rankin  v.  Cooper,  149  Fed.  1010 
(1907). 

But  see  Warren  v.  Robison,  25  Utah  205,  70  Pae.  989  (1902),  holding 
that  where  directors  after  recovery  of  health  learned  of  an  unauthorized 
loan  and  made  all  reasonable  efforts  to  collect  it  for  the  bank  they  were 
not  liable. 

""  Briggs  V.  Spaulding,  141  U.  S.  133,  35  L.  ed.  GG2,  11  Sup.  Ct.  924 
(1891). 

1300  A  director  who  spends  much  of  his  time  in  trips  to  the  East  has  no 
excuse  from  liability.  Rankin  v.  Cooper,  149  Fed.  1010  (1907).  But 
see  Warren  v.  Robison,  25  Utah  205,  70  Pac.  989  (1902),  holding  that 
where  two  directors  were  necessarily  absent  from  the  state  and  made 
all  reasonable  efforts  to  collect  for  the  bank  on  an  unauthorized  loan 
they  are  not  liable. 

'36  Houston  V.  Thornton,  122  N.  C.  305,  29  S.  E.  827  (1898). 

'3^  WiUiams  v.  McDonald,  42  N.  J.  Eq.  392,  7  Atl.  SGO  (ISSG). 

1-^  One  who  obtains  a  loan  from  a  bank  is  charged  with  knowledge  of 
the  limitations  of  the  amount  which  the  bank  may  loan  to  one  person ; 
and  when  the  bank  contracts  to  loan  one  person  more  than  the  amount 

VOL.  I— 18  273 


§  128  DIRECTORS 

the  directors  under  whose  administration  it  was  allowed  liable.^'^ 
Apparently  directors  have  a  salutary  fear  of  exposing  themselves 
to  the  risks  of  this  enactment,  for  few  suits  are  reported  in  the 
books.  Neither  are  those  few  which  are  found  very  valuable 
authorities.  The  chief  lesson  that  they  teach  is  the  necessity  of 
a  minute  accuracy  of  detail  in  any  legislation  which  may  be  under- 
taken for  the  accomplishment  of  an  end,  like  this,  of  personal 
responsibility  in  an  unremunerative  employment.  They  are  not 
very  consistent  inter  se,  nor  do  they  easily  arrange  themselves 
under  any  distinct  principle. 

Not  Relieved  hy  Expiration  of  Charter  or  Judgment  of  Forfeiture 

(j)  In  Neal  v.  Moultrie  ^^  it  was  declared  that  the  liability, 
being  statutory,  was  not  barred  for  twenty  years ;  and  that  the 
limitations  which  might  run  against  a  fine,  a  forfeiture,  or  a  pen- 
alty had  no  force  in  this  matter.  Hargroves  v.  Chambers -^^ 
decided  that,  in  a  suit  against  surviving  directors,  on  the  ground 
that  all  the  directors  had  become  individually  liable,  it  was  not 
necessary  to  join  the  representatives  of  deceased  directors ;  also 
that  certificates  of  deposit  payable  on  order  with  interest  from 
date  formed  a  part  of  the  corporate  indebtedness  ;  also  that  neither 
waste  of  the  assets  of  the  bank  in  the  hands  of  the  assignee,  nor  a 
judgment  of  forfeiture  of  franchise  pronounced  against  the  bank, 
nor  the  expiration  of  the  bank  charter,  could  operate  to  relieve 
the  directors  from  their  liability.  It  was  added  as  a  semhle,  that 
they  would  not  be  relieved  by  these  events,  even  if  the  dissolution 
of  the  corporation  discharged  its  indebtedness. 

permitted  by  statute  it  is  ultra  vires  and  cannot  be  enforced  against  the 
bank  nor  can  damages  be  recovered  for  its  breach.  Weld  v.  Wheelon,  27 
N.  D.  624,  147  N.  W.  402  (1914). 

If  a  note  is  given  by  a  person  for  the  purpose  of  deceiving  the  bank 
examiner  as  to  the  amount  of  the  indebtedness  of  the  bank  the  maker 
of  the  note  may  show  that  there  was  no  consideration  therefor,  when 
sued  by  the  bank,  provided  there  are  no  creditors  unsatisfied.  First 
State  Bank  v.  Morton,  146  Ky.  287,  142  S.  W.  694  (1912). 

^^^  It  is  not  material  whether  the  bank  lends  the  money  to  a  person  and 
takes  his  note  for  it,  or  buys  his  paper  from  another.  Wickliffe  v.  Turner, 
154  Ky.  571,  157  S.  W.  1125  (1913). 

In  South  Dakota  officers,  directors  or  employees  who  knowingly  per- 
mit shareholders  to,  at  one  time,  become  indebted  to  a  banking  corpora- 
tion in  a  total  sum  of  fifty  per  cent  of  the  paid  up  capital  of  said  bank 
are  guilty  of  a  felony.  State  v.  McPherson,  30  S.  D.  547,  139  N.  W. 
368  (1913). 

^*  12  Ga.  104.  15  30  Qa.  580. 

274 


LIABILITTJ    OF   DIRECTORS  §  128 

Director  Liable  though  Objecting 

(k)  Next  we  have  the  case  of  Banks  v.  Darden/^  also  decided 
in  Georgia,  but  hardly  destined  to  add  much  to  the  reputation 
of  the  learned  bench  of  that  State.  The  charter  of  the  bank 
fixed  the  limit  of  indebtedness,  and  provided  that  "  in  case  of  ex- 
cess the  directors  .  .  .  shall  be  liable  for  the  same  in  their  private 
and  individual  capacity."  The  court  held  that  the  provision 
was  remedial,  and  not  penal ;  that  the  liability  of  the  directors 
was  joint,  and  not  several ;  and  that  no  single  member  of  the 
board  could  escape  his  responsibility  by  proving  either  his  absence 
from  the  meetings  at  which  the  excess  was  suffered  to  be  incurred, 
or  his  dissent  from  the  action  of  his  co-directors.  In  discussing 
the  last  point,  the  judge  waxes  eloquent  and  picturesque  in  his 
language.  He  imagines  a  director  not  only  absolutely  innocent 
of  collusion  in  the  wrongdoing,  but  even  laboring  strenuously 
though  in  vain  to  obtain  respect  and  obedience  for  the  law.  But, 
he  says,  even  for  this  ill-starred  individual  there  is  no  flight  from 
the  rigid  vengeance  of  the  statute.  It  is  indeed  "  a  bloody  legal 
picture,"  yet  the  law  is  inexorable ;  the  "  pound  of  flesh  must  be 
had."  In  Michigan  the  judges  were  less  Draconic  in  their  inter- 
pretation of  their  similar  legislation,  and  ventured  to  hold  that  a 
director  was  not  liable  for  an  excess  created  by  a  loan,  to  the 
making  of  which  he  had  objected  at  the  time  when  it  was  agreed 
upon  by  the  board.^^ 

(/)  In  Ohio  the  lawgivers  wisely  took  this  matter  into  their 
own  hands,  and  laid  down  specifically  by  what  means,  such  as 
publication  of  his  dissent  and  the  like,  a  director  might  save  him- 
self from  liability  for  any  action  of  the  remainder  of  the  board. 
The  opinion  in  the  cited  case  was  the  result  of  a  very  careful  con- 
sideration of  the  subject,  and  deserves  to  be  noticed.  The  statute 
provided  that  for  any  excess  the  "  directors  under  whose  admin- 
istration it  should  happen  should  be  liable  for  the  same  in  their 
natural  and  individual  capacity,  in  an  action  of  debt  against 
them  or  any  of  them."  The  court  held  that  the  remedy  of  the 
creditors  was  a  penal  action,  and  not  one  of  contract ;  and  tliat 
the  measure  of  damages  would  be  the  amount  of  the  excess  of 
liability  created  by  the  board  of  which  the  defendant  or  defendants 
were  members.  The  grounds  on  which  this  conclusion  was  based 
were  as  follows:  1.  The  language  of  the  act  does  not  declare 
"  18  Ga.  318.        .  "  White  v.  How,  3  McLean,  111. 

275 


§  128  DIRECTORS 

that  the  directors  shall  be  personally  liable  on  the  contract  of 
indebtedness  itself  which  was  created  in  excess  of  the  legal  limit, 
but  solely  for  the  excess  itself.  2.  The  liability  does  not  run  to 
the  persons  holding  the  particular  contract  made  in  excess  of  the 
limit,  but  to  the  creditors  generally ;  wherefore  the  ground  of 
action  is  clearly  not  the  original  contract.  3.  The  amount 
which  any  creditor  can  recover  is  not  the  amount  of  his  own 
debt,  but  the  amount  of  the  excess  of  the  total  liability  beyond 
the  legal  limit ;  and  this  even  though  his  own  debt  forms  no  part 
of  the  excess.  4.  The  liability  is  provided  for  in  the  manner 
customary  in  penal  statutes  to  vindicate  a  violation  of  law.  5.  The 
action  provided  is  the  usual  action  prescribed  by  penal  statutes 
to  recover  a  penalty.  6.  The  action  of  the  creditor  must  be 
debt,  whether  his  contract  with  the  bank  be  such  as  to  authorize 
this  form  or  not.  The  court  then  add,  that  they  consider  that  the 
right  to  bring  this  penal  action  is  given  to  any  one  among  the 
creditors  who  may  choose  singly  to  institute  it,  but  for  the  benefit 
of  the  whole  body  of  creditors,  and  to  create  a  fund  for  the  in- 
demnity of  all.^^  How  that  fund  is  to  be  saved  and  applied  for  the 
benefit  of  all,  is  a  matter  not  discussed. 

(m)  In  Massachusetts,  a  dissenting  director  avoids  liability 
by  notice  to  the  bank  commissioners.^^ 

(n)  In  Pennsylvania,  where  a  loan  is  made  in  excess  of  the 
legal  limit,  every  director  who  participates  in  or  assents  to  the 
wrong  is  personally  responsible  for  the  damage  directly  consequent 
to  the  bank,  the  shareholders,  or  any  one  else.^" 

(o)  A  recent  Kentucky  case,^^  Louisville  National  Bank  v. 
Brannin,  contains  an  excellent  discussion  of  the  liability  of  di- 
rectors. 

The  charter  of  the  "  Exchange  Bank  and  Tobacco  Warehouse 
Co.  of  Louisville  "  provides  that  "  the  indebtedness  of  the  cor- 
poration over  and  above  that  incurred  for  deposits  of  money  shall 
at  no  time  exceed  their  paid-up  capital  stock." 

During  the  time  that  the  bank  was  indebted  beyond  the 
amount  of  its  paid-up  capital  stock,  the  president,  Harvey,  indorsed 
the  name  of  the  bank  upon  three  bills  of  exchange,  and  they  were 
sold  to  appellants,  and  suits  were  instituted  by  appellants  against 

15  Sturges  V.  Burton,  8  Ohio  St.  215.  "  R.  L.  c.  115,  §  36. 

2°  Stephens  v.  Monongahela  National  Bank,  88  Pa.  St.  157. 
21  Louisville  National  Bank  v.  Brannin,  Loving,  &  Harvey,  82  Ky. 
370-375  (1884). 

276 


LUBILITY    OF   DIRECTORS  §  128 

appellees  to  hold  them  personally  bound  for  the  bills.  Appellees 
Loving  and  Bronner,  who  were  directors,  had  no  knowledge  of 
the  making  or  negotiation  of  the  bills. 

"  By  reason  of  the  trustee  character  of  the  bank,  the  great  fa- 
cilities its  officers  have  for  committing  frauds,  the  inability  of  the 
public  to  know  its  condition,  and  the  supreme  control  the  direc- 
tors have  over  its  afi'airs,  it  becomes  the  duty  of  the  latter  to  so 
conduct  the  business  that  any  misconduct  cannot  long  contiime. 
The  banks  conduct  the  business  of  this  country  so  largely,  and  those 
dealing  with  them  are  compelled  to  rely  on  their  officers  so  implic- 
itly, that  the  extraordinary  privileges  accorded  to  them  should 
be  properly  exercised. 

"  The  services  of  directors  are,  however,  usually  gratuitous ; 
they  are  entitled  to  no  compensation  in  the  absence  of  a  contract 
for  it,  and  are  only  required  to  exercise  the  same  care  that  an 
ordinarily  prudent  man  would  in  his  own  business  of  a  like  char- 
acter,-^" 

"  The  appellees  Loving  and  Bronner  had  no  knowledge  what- 
ever of  the  making  or  negotiation  of  the  bills  sold  the  appellants, 
and  never  approved  the  same. 

"  The  transactions  w^ere  isolated,  and  the  exercise  of  ordinary 
care  upon  their  part  did  not  afford  them  notice,  or  enable  them 
to  stop  them ;  and,  being  isolated,  it  must  not  be  presumed  that 
they  had  notice  of  them  simply  because  they  were  directors.^i"" 

"The  appellee  Harvey,  however,  stands  in  a  different  atti- 
tude. As  to  him  it  is  not  a  question  of  neglect,  but  the  violation 
of  a  known  duty,  and  therefore  a  breach  of  trust  amounting  to  a 
tort. 

"  If  he  did  know  its  condition  and  the  provision  in  its  char- 
ter, and  created  the  indebtedness,  then  he  is  certainly  liable ;  and 
if  he  did  not  have  such  knowledge,  then  there  was  such  a  want 
of  information  as  was  absolutely  necessary  to  the  proper  per- 
formance of  his  duty,  and  he  is  responsible  for  assuming  to  act 
without  it. 

"  He  assumed  to  act  under  a  charter  containing  a  provision  so 
plain  that  it  could  not  excusably  be  broken  by  him,  and  when  it 

21°  In  Missouri  directors  are  not  hold  to  so  high  degree  of  care.  Stono 
V.  Rottman,  183  Mo.  552,  82  S.  W.  70  (1904). 

2100  Want  of  knowledge  of  the  wrong  doing  of  oflBcers  at  the  bank  will 
not  excuse  the  directors  if  it  is  the  result  of  tlieir  gross  inattention.  Stone 
V.  Rottman,  183  Mo.  552,  82  S.  W.  70  (1904). 

277 


§  128  DIRECTORS 

was  his  duty  to  know  the  condition  of  his  company ;  and  under 
such  circumstances  he  is  equally  as  responsible  as  if  he  had  been 
guilty  of  fraud.  Although  acting  bona  fide,  he  had  no  right  to 
create  the  debt ;  it  was  not  merely  an  omission,  but  a  positive 
violation  of  his  duty,  by  which  an  innocent  outside  party  is  made 
to  suffer,  and  one  who  had  placed  confidence  in  the  implied  as- 
sertion of  authority  arising  from  the  making  of  the  paper." 

(p)  In  Missouri,  the  directors  of  a  savings  bank  who  have 
loaned  to  one  person  a  sum  greater  than  one-fourth  of  the  bank's 
capital  stock,  contrary  to  Revised  Statutes,  §  916  (1879),  are 
liable  to  the  bank  or  its  receiver  for  any  loss  that  may  accrue 
from  such  loan,  although  the  statute  itself  does  not  provide  any 
penalty  for  its  violation.^^" 

The  directors  of  a  savings  bank  that  has  purchased  the  stock 
of  a  company  which  it  held  as  security,  who  allow  its  officers  to 
run  the  company,  which  traded  in  coal,  for  four  years  at  a  contin- 
ual loss  are  liable  for  the  loss  in  a  suit  by  the  receiver.  They  are 
also  liable  for  sums  loaned  to  borrowers  who  were  at  the  time 
insolvent  to  the  knowledge  of  the  directors. 2^°" 

The  failure  of  directors  to  comply  with  the  statutory  duties  of 
examining  accounts  is  negligence  as  a  matter  of  law  and  renders 
them  liable  for  all  losses  occasioned  thereby  .^i"" 

(g)  In  South  Carolina  the  loaning  of  over  two-thirds  of  the 
capital  of  a  bank  to  a  single  merchant  is  not  sufficient  to  render 
the  directors  personally  liable  for  resulting  loss,  provided  the  loan 
was  made  in  entire  good  faith  and  honesty  of  purpose.^^* 

(f)  The  directors  of  a  bank  are  not  personally  responsible  to 
one  (H.)  from  whom  they  have  in  good  faith  made  an  unauthorized 
purchase  of  stock,  which  the  bank  repudiated.  The  sale  was 
illegal  for  lack  of  consent  of  the  shareholders,  and  the  contract 
being  therefore  ultra  vires,  the  bank,  having  received  no  benefit 
from  it,  could  not  be  held. 

H.  sued  the  directors,  claiming  that,  as  they  had  failed  to  bind 
the  bank,  they  were  themselves  bound,  on  the  rule  that  an  agent 
who  goes  beyond  his  authority  binds  himself.  The  court  said, 
that  this  is  by  no  means  a  universal  rule  ;  the  first  question  is  always, 
between  what  parties  was  the  contract,  for  the  law  will  not  make 

21"  Thompson  v.  Greelev,  107  Mo.  577,  17  S.  W.  962. 
2i«»  Stone  V.  Rottman,  isS  Mo.  552,  82  S.  W.  76  (1904). 
21-  Lyons  v.  Corder,  253  Mo.  539,  162  S.  W.  606  (1913). 
216  Wheeler  v.  Aiker  Co.  Bank,  75  Fed.  781  (1896). 

278 


CLAIMS   AGAINST    DIRECTORS  §  129 

a  new  contract.  In  this  case  the  agreement  was  clearly  understood 
to  be  between  the  bank  and  H.,  and  therefore  the  directors  could 
not  be  held  on  the  contract;  but  if  any  wrong  could  be  imputed 
to  the  agents  they  would  be  liable.  In  the  case  at  bar,  however, 
the  directors  (D.)  were  not  guilty  of  any  misrepresentation  ;  both 
H.  and  D.  thought  the  contract  good,  and  the  sources  of  D.'s  au- 
thority 2vere  as  open  to  II.  as  to  I).  If  an  agent  covenants  ])er- 
sonally,  adding  his  representative  character  which  he  fails  to 
sustain,  he  is  bound  on  the  contract ;  but  if  the  language  does 
not  contain  a  personal  undertaking  it  is  not  his  contract."^  If 
he  carelessly  or  knowingly  assumes  authority  he  does  not  possess, 
he  is  liable  in  tort ;  "  but  in  no  case  where  the  power  of  judging  * 
of  the  agency  was  equal  has  the  agent  been  held  liable  as  the 
principal."^'-  Directors  are  not  liable  in  any  event  for  over-checks 
permitted  to  customers  without  their  authority  or  knowledge,^* 
neither  can  they  be  hekl  to  the  common  law  liability  for  hazardous, 
imprudent,  and  disastrous  loans  if  such  loans  were  made  by  their 
associates  without  their  knowledge,  connivance,  or  participation .^-^ 

When  a  bank  director  is  not  acting  as  a  director  but  as  the  agent 
of  another  in  obtaining  discounts  of  a  note  he  cannot  be  liable 
because  he  induced  or  permitted  the  bank  to  extend  credit  in  ex- 
cess of  the  legal  limit  fixed  by  statute,^^  and  where  one  has  never 
been  notified  of  his  election  as  a  director  and  has  never  acted  as 
such  he  cannot  be  held  liable  for  failure  to  prevent  the  cashier 
from  making  bad  loans.-'' 

§  129.  Claims  against  Directors.  —  If  liability  of  a  director 
once  accrues  for  any  of  the  above  described  species  of  malfeasance 
in  office,  whether  his  acts  have  been  the  result  of  dishonesty, 
negligence,  or  incompetence,  the  claim  of  the  bank  against  him 
becomes  a  part  of  the  assets  of  the  institution.     An  assignee, 

22  Abeles  v.  Cochran,  22  Kans.  405  (1879).  See  (c)  Story  on  Agency, 
§§  264  a,  265  a.  (a)  Odgen  v.  Raymond,  22  Conn.  384.  When  the 
directors  of  an  insolvent  bank  receive  a  deposit,  in  violation  of  statute, 
their  liability  is  in  tort.  Baxter  v.  Nash,  70  Minn.  20,  72  N.  W.  799 
(1897) ;  Soloman  v.  Bates,  118  N.  C.  311,  316,  24  S.  E.  478  (1896).  (6)  As- 
pinwall  V.  Torrance,  1  Lans.  (N.  Y.)  381 ;  Sandford  v.  McAuthur,  18  B. 
Mon.  (Ky.)  411. 

23  Wallace  v.  Lincoln  Savings  Bank,  89  Tenn.  630,  655,  15  S.  W.  448 
(1890). 

2^  Witters  t-.  Sowles.  31  Fed.  1. 

25  Hicks  V.  Steel.  142  Mich.  292,  105  N.  W.  767,  4  L.  R.  A.  (n.  s.) 
279,  n.  (1905). 

2«  Bank  of  Des  Arc  v.  Moody,  110  Ark.  39,  161  S.  W.  134  (1913). 

279 


§  129  DIRECTORS 

receiver,  commissioner,  or  other  party  whomsoever,  who  may 
come  into  possession  of  the  corporate  property  for  the  purpose  of 
collecting  it  and  distributing  it  among  the  creditors  and  share- 
holders, is  obliged  to  regard  the  rights  of  action  against  such 
delinquent  directors  as  a  part  of  the  available  assets.  It  is  his 
duty  to  push  the  claims,  to  make  what  he  can  out  of  them,  and  to 
apply  the  proceeds  together  with  the  other  funds  of  the  corporation 
to  the  discharge  of  its  indebtedness  and  the  reimbursement  of  its 
creditors  and  shareholders.  The  suit  may  be  instituted  in  the  cor- 
porate name,  provided  it  is  stated  that  it  is  instituted  by  order 
of  the  receiver.^  Neither  a  stockliolder  nor  a  creditor  can  sue  the 
directors  of  an  insolvent  bank  to  make  them  personally  liable 
for  mismanagement.  The  receiver  alone  can  maintain  the  action.^" 
But  where  a  cause  of  action  exists  and  the  bank  refuses  to  sue, 
the  depositors  may  do  so.'''  The  liability  is  at  common  law, 
and  though  a  statute  or  charter  may  declare  what  acts  of  a  direc- 
tor, and  under  what  circumstances  committed,  shall  render  him 
liable,  yet  these  enactments  will  not  operate  to  alter  the  nature 
of  the  liability,  once  accrued,  or  to  render  it  statutory.  They 
must  be  construed  as  simply  relating  to  evidence,  and  as  declaring 
that  testimony  establishing  the  acts  and  circumstances  described, 
shall  suffice  to  fix  the  liability ;  which,  however,  after  it  has  been 
thus  fixed,  will  still  retain  its  original  and  inherent  common  law 
character.  For  this  same  reason  dexterous  and  subtle  evasions 
of  the  language  of  the  statute  will  not  enable  the  directors  to  frus- 
trate its  intent,  or  to  shun  a  responsibility  which  is  fastened  upon 
them  by  extrinsic  principles  of  law,  wholly  outside  the  statute  or 
the  charter,  and  existing  quite  independently  of  either.  Thus, 
if  the  statute  declares  that,  in  case  an  insolvent  or  embarrassed 
bank  shall  be  "  compelled  "  to  make  an  assignment,  then  the  as- 
signee shall  pursue  his  rights  of  action  against  the  directors,  and 
their  liability  shall  be  maintained  upon  proof  of  certain  facts  in 
their  conduct,  the  directors  cannot  escape  either  the  obvious 
purport  of  this  legislation,  or  their  common  law  liability,  by  making 
a  voluntary  assignment  before  they  have  been  actually  "  com- 
pelled "  to  do  S0.2    And  under  Revised  Statutes  of  U.  S.  the  right 

1  §  129.     Bank  of  Niagara  v.  Johnson,  8  Wend.  (N.  Y.)  645. 

'"  Howe  V.  Barney,  45  Fed.  668 ;    National  Exchange  Bank  v.  Peters, 
44  Fed.  13 ;   Bailey  v.  Mosher,  63  Fed.  488. 

If-  Savings  Bank  v.  Caperton,  87  Ky.  306,  311,  8  S.  W.  885  (1888). 

2  Gunkle's  Appeal,  48  Pa.  St.  13 ;   Schley  v.  Dixon,  24  Ga.  273. 

280 


LIABILITY    OF    DIRECTORS   TO    THIRD    PARTIES  §   130 

to  recover  from  a  director  the  damages  sustained  in  consequence 
of  excessive  loans  made  by  him  is  not  afi'ected  by  the  fact  that 
the  comptroller  has  or  has  not  procured  a  forfeiture  of  the  bank's 
charter.2"  ^j^  action  by  the  receiver  of  a  bank  against  a  director 
for  losses  caused  by  negligent  conduct  survives,  and  does  not  abate 
by  the  director's  death.^**  But  whatever  liability  may  have  been 
incurred  by  all  or  any  of  the  members  of  a  board  of  direction,  it 
will  not  descend  to  their  successors  in  office,  who  are  blameless 
upon  their  own  account.  Neither  will  it  pass  to  any  third  party 
to  whom  they  have  assigned  corporate  property,  if  he  took  it  in 
good  faith,  without  collusion,  and  for  value.'' 

§  130.  Liability  of  Directors  to  Third  Parties.  —  It  has  been 
said,  that  aside  from  statute  °  no  bank  officer  is  individually 
liable  to  a  creditor  or  depositor  for  mismanagement,  unless  his 
action  is  malicious  or  fraudulent.^  But  in  the  case  of  savings 
banks,  of  course,  the  officers  are  liable  to  the  dejiositors  for  lack 
of  ordinary  care,  and  in  commercial  banks  the  better  opinion  is, 
that,  though  the  officers  are  liable  only  to  the  bank  for  ordinary 
negligence,!"  ^]^(,y  ^re  liable  to  third  parties  for  gross  neglect. ^^ 
The  burden  for  exoneration  is  not  on  the  directors,  and  they 
cannot  be  charged  for  losses  unless  it  is  shown  that  such  losses 
resulted  from  their  negligence.^'' 

(a)    The  directors  of  a  bank  are  trustees  ^'^  for  depositors,  and 

2"  Stephens  v.  Overstolz,  43  Fed.  771 ;  Gerner  v.  Thompson,  74  Fed. 
125;   Cockrill  v.  Cooper,  8G  Fed.  7  (1898). 

s*  O'Brien  v.  Blaut,  17  App.  Div.  (Hun,  N.  Y.)  288  (1897) ;  Stephens 
V.  Overstolz,  43  Fed.  4G5. 

3  Schley  v.  Di.xon,  supra. 

°  §  130.  In  Kansas  a  statute  has  imposed  upon  directors  the  duty  of 
examining  into  the  affairs  of  their  banks  with  reasonable  frequency  and 
thoroughness,  and  faiUire  thereof  renders  them  liable  to  depositors  in  case 
of  insolvency  of  the  bank  ;  and  it  is  no  defence  to  show  tliat  the  insolvent 
condition  of  the  bank  was  caused  by  the  false,  fraudulent  and  corrupt 
practices  of  the  cashier,  so  concealed  that  they  could  not  have  been  dis- 
covered upon  examination.  Forbes  v.  Mohr,  69  Kan.  342,  70  Pac.  827 
(1904). 

1  Fusz  V.  Spaunhorst,  07  Mo.  257  ;  Howe  v.  Barney,  45  Fed.  068.  See 
Hartr).  Hanson,  14  N.  D.  570,  105  N.  W.  942,  3  L.  R.  A.  (n.  s.)  438,  n. 
(1905). 

i«  Williams  v.  McDonald,  42  N.  J.  Eq.  392,  7  Atl.  866  (1886). 

ifc  Union  National  liank  r.  Hill,  148  Mo.  380.  49  S.  W.  1012  (1898) ; 
Deaderick  v.  Bank,  100  Tenn.  457,  45  S.  W.  786  (1899) ;  Elliott  v.  Farmers' 
Bank,  01  W.  Va.  041,  57  S.  E.  242  (1907). 

^'  Warner  v.  Penoyer,  91  Fed.  587  (1898). 

i**  The  directors  of  a  bank  are  not  trustees  of  an  express  trust  but  of  an 
implied  or  resulting  trust  and  when  sued  for  its  breach  may  plead,  as  a 

281 


I  130  DIRECTORS 

can  be  held  for  injuries  resulting  from  gross  negligence  on  their 
part  in  allowing  the  bank  to  be  held  out  to  the  public  as  solvent, 
when  it  was  in  fact  insolvent.  Sheldon,  C.  J.,  and  Craig,  J.,  dis- 
senting.2 

Directors  Liable  to  Depositors  for  Gross  Negligence.     For  Ordinary 
Negligence,  only  Liable  to  Bank 

"  Ordinarily  the  character  of  the  directory  for  integrity  and 
business  capacity  increases  the  degree  of  confidence  reposed  in 
the  corporation  by  the  public.  Were  depositors,  when  intrusting 
to  a  bank  their  entire  fortune,  to  be  informed  that  the  directors, 
upon  whose  honor  and  careful  watchfulness  they  were  relying, 
owed  them  no  duty,  were  under  no  obligations  to  take  at  least 
reasonable  precautions  to  guard  their  money  from  the  itching 
fingers  of  dishonorable  officials,  they  would  certainly  hesitate 
long  before  surrendering  it  upon  such  terms.  There  are  many 
risks  and  uncertainties  against  which  a  prudent  business  man 
never  expects  the  directors  or  managers  of  banks  to  insure  him. 

(b)  "  He  knoics  that  for  the  usual  hazards  of  business  he  must  look 
to  the  bank  alone,  that  for  the  ordinary  negligence  of  directors  they  are 
responsible  alone  to  their  principal ;  but  for  such  gross  negligence 
or  incompetency  as  shows  a  reckless  disregard  of  their  duty  to 
care  for  and  protect  the  funds  committed  to  their  charge,  we  think 
they  are  directly  responsible  to  the  depositor." 

The  directors  in  this  case  were  notified  by  the  president,  ten 
months  before  the  failure,  of  his  suspicions  that  Compton  was 
stealing  from  the  bank,  when  the  slightest  examination  would 

defense,  the  statute  of  limitations  which  begin  to  run  upon  the  commission 
of  the  breach  of  duty.  Winston  v.  Gordon,  115  Va.  899,  80  S.  E.  756 
(1914). 

2  Delano  v.  Case,  12  N.  E.  676,  17  Brad.  531  (III.,  1887) ;  Foster  v. 
Bank  of  Abingdon,  88  Fed.  604  (1898) ;  Holmes  v.  McDonald,  226  111.  169, 
80  N.  E.  714  (1907) ;  Lippitt  v.  Ashley,  89  Conn.  451,  94  Atl.  995  (1915). 

See  Hart  v.  Hanson,  14  N.  D.  570,  105  N.  W.  942,  3  L.  R.  A.  (n.  s.) 
438,  n.  (1905),  where  the  bank  was  kept  open  for  at  least  a  year  after  its 
insolvency.  The  court  said  :  "  The  defendant  cannot  be  held  liable  on 
the  theory  that  the  continuation  of  the  bank  in  business  after  insolvency 
was  a  false  representation  that  it  was  solvent.  Whatever  may  have  been 
the  appellant's  duty  under  such  circumstances  it  was  a  duty  which,  in 
a  legal  sense,  he  owed  only  to  the  corporation.  For  his  acts  or  omissions 
as  a  director  he  is  answerable  only  as  agent  or  trustee  to  his  principal, 
not  to  third  parties.  As  an  individual  he  owed  no  legal  duty  to  the  public 
or  to  the  bank's  creditors  different  from  that  which  every  person  owes  to 
all  others  to  refrain  from  infringing  on  their  rights." 

282 


LIABILITY    OF    DIRECTORS   TO    THIRD    PARTIES  §   130 

have  exposed  the  true  state  of  affairs  and  protected  subsequent 
depositors.  No  examination  whatever  was  made.  Under  such 
circumstances  there  was  clearly  another  duty  which  the  directors 
owed  to  the  community.  If  they  knew  that  the  bank  was  in- 
solvent, or  if  their  suspicions  were  aroused,  and  they  recklessly 
closed  their  eyes  and  made  no  effort  to  discover  the  truth,  it  was 
their  duty  not  to  receive  the  money  of  depositors  ignorant  of  the  true 
state  of  affairs.  To  do  so  when  they  had  but  a  suspicion  of  the 
danger  would  be  a  great  wrong,  and,  if  with  full  knowledge,  would 
now  be  a  felony.  If  we  are  correct  in  these  views,  it  follows  that 
appellants  owed  a  duty  to  appellee  which  they  have  not  performed, 
in  consequence  of  which  he  has  been  injured,  and  for  which  he 
ought  to  have  a  remedy ;  for  it  is  a  maxim  of  the  common  law, 
that  a  man  specially  injured  by  a  breach  of  duty  in  another  should 
have  his  remedy  by  action .^ 

(c)  So  in  Kentucky,  the  directors  were  held  liable  for  special 
deposits  stolen  and  sold  by  the  officers,  since  ordinary  diligence  on 
the  part  of  the  directors  would  have  disclosed  the  wrongful  sales.' 

(d)  And,  in  Massachusetts,  if  the  directors,  through  inattention 
or  otherwise,  suffer  the  cashier  to  pursue  and  practise  a  certain 
line  of  conduct  for  a  considerable  period  of  time  without  objection, 
the  bank  will  be  bound  by  his  acts  within  that  line  of  conduct.'" 

(e)  The  directors  of  an  insolvent  national  bank  cannot  be 
held  for  failure  to  discover  and  prevent  a  series  of  discounts  of 
im])roperly  secured  ]xij)er,  indorsed  by  a  wealthy  director  who  was 
the  largest  stockholder  in  the  bank. 

The  president  of  a  bank  wished  to  resign  on  account  of  health, 
but  was  persuaded  to  retain  his  office  and  take  a  trip  abroad ; 
while  away,  and  without  his  fault,  losses  were  sustained  by  the 
bank.  In  a  suit  by  the  receiver  to  charge  the  directors,  held, 
that  the  president  was  not  liable,  nor  a  director  who  had  sold  his 
stock  and  orally  resigned  his  office  to  the  president  before  the 
losses."* 

(/)  Directors  of  a  national  bank  cannot  be  held  to  a  common 
law  liability  for  inattention  to  duty  in  not  preventing  a  hazardous 
loan,  made  without  their  connivance  or  knowledge.     Nor  can  the 

'United  Society  v.  Underwood,  9  Bush  (Ky.)  609;  Miller  v.  Howard, 
95   Tenn.  407,  411,  32  S.  W.  305  (1895). 

^  L'Herbette  v.  Pittsfield  National  Bank,  162  Mass.  137,  38  N.  E.  368 
(1894). 

*  Movius  V.  Lee,  30  Fed.  298  (1887). 

283 


§  130  DIRECTORS 

officers  of  an  insolvent  national  bank  be  held  liable  to  creditors 
for  losses  on  loans  made  by  them  in  good  faith,  merely  because 
such  loans  seem  unwise  and  perilous  when  looked  back  upon.^ 

In  Arkansas  the  directors  are  by  statute  liable  for  trusting  the 
management  of  the  bank  to  its  president,  if  injury  to  creditors 
results,  and  good  faith  of  directors  is  no  defence.^" 

Directors  are  liable  for  losses  resulting  from  their  fraud  or 
negligence,  and  they  may  be  sued  by  a  creditor  or  stockholder 
without  first  having  applied  to  the  corporation  to  bring  suit.^^ 

Savings  Bank  Managers 

(g)  Managers  of  a  savings  bank  may  be  liable  if  they  partic- 
ipate in  or  promote  prohibited  acts  causing  loss,  or  if  they  neglect 
to  bestow  due  care,  whereby  their  associates  are  not  restrained, 
or  are  enabled  to  do  those  acts  which  prove  disastrous  to  the  in- 
stitution.^ 

It  is  competent  to  consider  the  course  of  conduct  when  certain 
managers  were  present  in  order  to  decide  if  they  are  liable  for 
similar  conduct  of  their  associates  in  their  absence. 

§  131.  Personal  Liability  of  one  held  out  as  a  Director.  —  The 
owners  of  a  State  bank  for  more  than  four  years  published  an 
advertisement  of  the  bank,  containing  the  names  of  persons  (A., 
B.,  etc.)  as  directors  who  had  never  accepted  the  office,  or  acted 
as  directors,  or  done  or  said  anything  to  lead  creditors  to  believe 
that  they  were  directors.  The  bank  failed,  and  it  was  decided 
that  the  creditors  could  not  hold  such  persons  as  directors.^ 

(a)  Freeman,  J.,  dissented,  thinking  A.,  B.,  etc.  had  estopped 
themselves  by  allowing  an  official  notice  by  the  bank  of  its  organ- 
izing with  them  for  directors.      It  was  notice  of  a  business  organi- 

6  Witters  v.  Sowles,  31  Fed.  1  (1887). 

6"  Fletcher  v.  Eagle,  74  Ark.  585,  86  S.  W.  810,  109  Am.  St.  Rep.  100 
(1905). 

56  Braswell  v.  Pamlico  Banking  Co.,  159  N.  C.  628,  75  S.  E.  813  (1912). 
See  Bailey  v.  O'Neal,  92  Ark.  327,  122  S.  W.  503,  135  Am.  St.  Rep.  185 
(1909). 

e  Dodd  V.  Wilkinson,  42  N.  J.  Eq.  647,  9  Atl.  685  (1887) ;  Toledo 
Savings  Bank  v.  Johnston,  94  Iowa  212,  62  N.  W.  748  (1895). 

1  §  131.  Hume  v.  Commercial  Bank  of  Knoxville,  9  Lea  (Tenn.)  728. 

The  investment  committee  are  liable  to  the  bank  and  its  depositors 
for  loss  resulting  from  loans  largely  in  excess  of  the  limit  imposed  by  statute 
of  which  they  might  have  known  by  the  exercise  of  due  care.  Greenfield 
Savings  Bank  v.  Abercrombie,  211  Mass.  252,  87  N.  E.  897,  1913B  Ann. 
Cas.  420,  n.,  39  L.  R.  A.  (n.  s)  173,  n. 

284 


FALSE    STATEMENTS   OF   THE    CONDITION    OF   THE    BANK      §  132 

zation,  inviting  public  patronage  on  the  basis  of  confidence  in  those 
parties,  and  when  parties  stand  by  and  permit  the  pubhc  to  be 
notified  for  years  that  they  are  managers  of  such  an  institution 
until  it  is  insolvent,  they  should  not  escape  the  responsibility 
justly  attaching  to  such  a  position  aiuiounced  to  the  world.  They 
assented  to  the  advertisement  as  fullv  as  if  thev  had  authorized  it. 


Discussion 

(b)  There  is  an  immense  confusion  in  the  cases  upon  this  sub- 
ject of  the  personal  responsil)ility  of  one  held  out  as  being  in  a 
position  of  responsibility,  resulting,  I  think,  from  the  alternate 
or  mingled  application  of  two  principles.  To  put  a  penalty  on 
conduct  likely  to  lead  to  unsound  credit,  and  to  hold  A.  responsible 
for  loss  resulting  from  unsound  credit  actually  given  by  his  fault, 
—  that  is,  to  hold  that  A.  shall  make  good  to  B.  and  C.  the  credit 
A.'s  conduct  has  led  them  really  to  give  him,  —  are  two  very  dif- 
ferent matters.  If  the  judge  follows  the  first  line  of  thought  he 
will  hold  A.,  whether  the  plaintiff  knew  that  A.  had  allowed 
himself  to  be  held  out  or  not.-  If  he  acts  on  the  second  ground, 
the  defendant  will  only  be  liable  when  the  plaintiff  knew  that  A. 
was  so  held  out,  or  the  holding  out  w^as  under  such  circumstances 
of  publicity  as  to  satisfy  the  jury  that  the  plaintiff  knew  of  it,  and 
believed  A.  to  be  really  a  partner  or  director,  or  in  such  other 
position  as  the  holding  out  would  indicate.^ 

It  would  seem  that  the  only  proper  ground  in  a  civil  suit  would 
be  the  second,  for  no  person  should  recover  for  injury  to  others, 
but  only  to  himself,  and  must  show  that  the  defendant's  conduct 
has  really  caused  him  loss.  The  repression  of  conduct  injurious 
to  the  public  is  a  matter  for  the  State,  although  until  the  State 
wakes  up  to  the  matter  it  may  be  very  well  for  the  judges  to  apply 
the  just  penalty  in  the  best  way  they  can  ;  as  giving  to  some  in- 
nocent person  a  little  more  than  his  just  due,  or  relieving  one  from 
the  consequence  of  his  own  error  of  judgment  in  trusting  a  firm, 
is  probably  a  less  evil  to  the  community  than  allowing  conduct 
subversive  of  sound  credit  and  good  faith. 

§  132.  False  Statements  of  the  Condition  of  the  Bank.  —  It 
often  happens  that  the  officers  of  cor])orations  put  forth  deceptive 

'  Young  V.  Axtell,  24  Black  242. 

3  Dickinson  v.  Valpy,  10  B.  &  C.  128 ;  Carter  v.  Whalley,  1  B.  &  Ad. 
11 ;   Alderson  v.  Pope,  1  Camp.  404. 

285 


§  132  DIRECTORS 

and  fraudulent  reports,  and  make  false  statements  concerning  its 
affairs,  in  order  to  keep  up  its  good  repute  with  the  public,  and  to 
sustain  or  raise  the  price  of  shares  by  attracting  purchasers.  As 
our  banking  corporations  are  conducted  at  present  under  the  Na- 
tional Banking  Act,  deception  cannot  be  easily  effected  by  such 
artifices.  Indeed,  misconduct  of  this  kind  seems  always  to  have 
been  rare  in  the  banking  institutions  of  our  own  country,  and  most 
of  the  cases  are  English.  The  bank  in  its  corporate  capacity  can 
never  be  held  to  answer  for  any  species  of  fraud  or  deception  of 
this  nature  practised  by  any  of  its  directors  or  other  officers  in- 
dividually, though  at  the  banking-house  and  in  banking  hours. 
No  single  director,  neither  any  other  official,  has  it  within  the 
scope  of  his  customary  authority  to  bind  the  bank  by  any  rep- 
resentations whatsoever  made  concerning  its  condition  or  affairs. 
The  bank  does  not  hold  them  out  as  competent  to  give  information 
of  this  character,  and  any  person  who  relies  on  statements  thus 
received  puts  his  confidence  in  the  individual  from  whom  the 
statements  proceed ;  and  though  he  may  have  a  good  cause  of 
action  against  him,  it  is  against  him  as  a  private  individual,  and 
not  as  an  officer  °  of  the  bank,  and  can  by  no  means  be  against 
the  bank  itself.  And  especially  is  this  so  when  the  officer  gives  the 
information  as  an  individual  and  not  as  an  officer  of  the  bank."* 
And  so  the  fact  that  a  depositor  in  a  bank  lost  money  deposited 
therein  in  reliance  upon  the  statement  by  its  president  that  it  was 
sound  is  not  a  defence  when  sued  upon  an  overdraft  in  another 
bank  whose  president  was  the  president  of  the  first  bank.''^ 

When  Bank  is  Liable 

(a)  The  corporation  can  only  be  held  liable  if  it  publishes 
corporate  reports,  as  such,  falsely  and  with  criminal  intent.  Such 
would  be  a  statement  adopted  at  a  general  meeting  of  the  direc- 
tors and  intentionally  put  forth  to  the  public,  or  left  to  reach  the 
community  in  the  ordinary  course  of  business. 

0  §  132.  Wolfe  V.  Simmons,  75  Miss.  539,  23  So.  586  (1897) ;  Tate 
V.  Bates,  118  N.  C.  287,  24  S.  E.  482  (1896) ;  Seale  v.  Baker,  70  Tex.  283, 
7  S.  W.  742  (1888). 

A  recovery  against  a  director  of  a  national  bank  must  rest  exclusively 
upon  the  United  States  Statute  and  not  upon  common  law  principles. 
Taylor  v.  Thomas,  124  App.  Div.  53  (1908),  105  N.  Y.  S.  454,  aff'd  in 
195  N.  Y.  590,  89  N.  E.  1113. 

"«  Simons  v.  Cissna,  .52  Wash.  115,  100  Pac.  200  (1909). 

t"-  Earle  v.  Munce,  133  Fed.  1008  (1904). 

286 


FALSE    STATEMENTS   OF   THE    CONDITION    OF   THE    BANK      §   132 

Officers'  Personal  Liability 

(b)  \Miere  the  directors  have  been  assisted  in  the  preparation 
of  their  deceptive  or  fictitious  statements  by  any  subordinate 
officers,  these  officers  will  be  under  the  same  personal  lial)ility  as 
the  individual  directors,  though  the  directors  alone  have  signed 
the  document.^  The  tendency  in  England  seems  to  be  generally 
to  hold  the  directors  liable  if  possible,  and  statutory  enactments 
come  to  the  aid  of  this  tendency  with  thorough  provisions  and 
stringent  punisliments,'"  Thus  directors  and  any  officer  in 
collusion  with  them  are  liable  to  indictment  for  consjjiracy  to  de- 
fraud by  the  publication  of  false  balance-sheets  and  the  circula- 
tion of  false  reports  as  to  the  condition  and  solvency  of  the  bank ; 
or  the  issuing  and  offering  for  sale  new  stock,  at  a  time  when  they 
know  the  bank  to  be  insolvent.'^  So  again  they  were  held  criminally 
responsible  for  representing  the  affairs  of  the  company  to  be 
prosperous,  and  declaring  large  dividends,  when  in  fact  the  bank 
was  embarrassed.^  Directors  are  liable  for  injuries  to  a  person 
who  relies  upon  a  statement  issued  by  them,  which  they  did  not 
know  to  be  true,  as  well  as  when  they  knew  it  to  be  false.^" 

iCuUen  V.  Thomson,  4  Macq.  H.  L.  Cas.  (Se.)  431,  9  Jur.  x.  s.  85; 
Ex  parte  Frowd,  9  W.  R.  328,  3  L  .T.  n.  s.  843;  Re  Royal  British  Bank, 
Ex  parte  Nicol,  5  Jur.  n.  s.  205,  28  L.  J.  n.  s.  257. 

1"  In  Idaho  if  an  officer  knowingly  publishes  a  false  wTitten  report  he 
is  guilty  of  a  felony,  and  those  who  concur  in  false  reports  are  guilty  of  a 
misdemeanor.  State  v.  Paulsen,  21  Idaho  686,  123  Pac.  588  (1912). 
See  also  People  v.  Britton,  134  App.  Div.  275  (1909),  118  N.  Y.  S.  989. 

2  Regina  v.  Esdaile,  1  F.  &  F.  213;   Grant  on  Bankers  and  Banking. 

3  Burnes  v.  Pennell,  2  H.  L.  C.  497 ;  Seale  ;;.  Baker,  70  Tex.  283,  7 
S.  W.  742  (1888). 

^  Solomon  v.  Bates,  118  N.  C.  287,  24  S.  E.  482  (1896) ;  Houston  t;. 
Thornton,  122  N.  C.  365,  29  S.  E.  827  (1898).  These  two  cases  are  called 
"extremely  harsh"  in  ]Mason  v.  Moore,  73  Ohio  St.  275,  76  N.  E.  932, 
4  L.  R.  A.(n.  s.)  597,  n.  (190(5),  which  holds  that  if  directors  honestly  attest 
a  false  report  of  cashier  they  are  not  lialilc  in  deceit ;  but  tliat  honesty  of 
intention  cannot  excuse  indifference  or  negligence.  Sec  also  ^McDonald 
V.  De  Fremery,  168  Cal.  189,  142  Pac.  73  (1914). 

If  the  directors  knew,  or  in  the  exercise  of  ordinary  diligence  in  the 
discharge  of  their  duties  would  have  known,  that  the  statement  was  not 
true  they  are  individually  liable  for  injuries  to  one  reiving  tlu>reon  in  good 
faith.     Smalley  v.  McGraw,  148  Mich.  384,  111  N.  W.  1093  (1907). 

The  report  required  by  statute  is  for  the  l)enefit  of  the  public,  and  one 
contemplating  the  purchase  of  stock  of  the  bank  has  a  right  to  rely  upon 
the  published  reports  as  a  true  statement,  without  further  inquiry,  in  the 
absence  of  knowledge  tending  to  show  them  unbelievable,  and  one  is  not 
chargeable  with  knowledge  that  he  may  have  discovered  but  only  with 
the  natural  inferences  deducible  from  the  knowledge  he  has.  Smalley 
V.  McGraw,  supra. 

287 


§  132  DIRECTORS 

In  a  New  York  case/  one  count  alleged  that  a  falsehood  con- 
cerning the  amount  of  stock  actually  subscribed  and  paid  in  had 
been  uttered  by  the  defendant,  as  director,  together  with  the 
other  directors,  in  the  articles  of  association,  whereby  the  plaintiff 
had  been  induced  to  buy  shares.  The  court  said  that  it  was 
difficult  to  understand  how  a  director  could  be  individually  charge- 
able for  false  statements  in  the  articles  of  association,  which  neces- 
sarily preceded  in  order  of  time  the  election  of  directors ;  or  how 
such  articles  could  have  the  character  of  a  continuing  false  repre- 
sentation bj^  every  director  who  might  subsequently  come  into  the 
board,  so  as  to  give  a  right  of  action  against  him  to  every  one  there- 
after purchasing  stock.  The  second  count  alleged  that  the  de- 
fendant falsely  and  fraudulently  represented  to  the  plaintiff  that 
the  shares  were  actually  worth  par  or  over,  whereby  the  plaintiff 
was  induced  to  purchase.  In  order  to  sustain  this  count  it  was 
necessary  to  make  out  a  good  cause  of  action  against  the  defendant 
in  his  individual  capacity.  As  director  he  could  not  be  charged 
with  knowledge  of  the  value  of  the  stock.  But  at  any  rate  the 
pleading  was  fatally  defective  in  failing  to  allege  that  the  mis- 
representations were  made  v/ith  the  intent  to  deceive  the  plaintiff. 
The  whole  statement  of  the  count  might  be  true,  and  yet  this 
intent  might  have  been  absent ;  and  the  allegation  and  proof  of 
the  intent  are  a  sine  qua  non  to  a  recovery.  The  principles  laid 
down  in  this  decision  are  unquestionably  correct.  Yet  as  the 
professional  man  studies  the  case  he  will  be  obliged  to  regret, 
either  that  it  was  so  wofully  misunderstood  or  mismanaged  by 
the  plaintiff's  counsel,  or  that  it  was  so  clumsily  reported.  One  or 
the  other  of  these  misfortunes  has  robbed  it  of  much  of  its  value 
as  an  authority. 

The  liability  of  directors  of  a  national  bank  to  a  common  law 
action  of  deceit  for  false  and  fraudulent  representations  made  by 
them  in  the  pretended  performance  of  duties  imposed  upon  them 
by  the  national  banking  law  is  not  precluded  by  the  liability 
imposed  in  that  law  for  violation  of  its  provisions.^ 

*  Mabey  v.  Adams,  3  Bosw.  (N.  Y.)  346. 

6  Preseott  v.  Haughev,  65  Fed.  653 ;  Mason  v.  Moore,  73  Ohio  St.  275, 
76  N.  E.  932,  4  L.  R.  A.  (n.  s.)  597,  n.  (1906). 

The  liability  of  the  directors  is  independent  of  the  national  banking 
act  and  is  derived  from  the  principles  of  the  common  law.  Smalley  v. 
McGraw,  148  Mich.  384,  111  N.  W.  1093  (1907).  But  see  opinion  in  the 
case  on  motion  for  a  rehearing. 

One  injured  by  reliance  on  the  false  statements  published  by  a  diree- 

288 


NOTICE    TO   THE    BOARD  §  133 

If  the  action  against  the  directors  is  for  deceit,  knowledge 
of  the  false  statements  ^^  and  damage  must  be  shown. ^ 

§  133.  Notice  to  the  Board.  —  It  is  a  question  of  frequent 
occurrence  and  considerable  moment,  under  what  circumstances 
a  bank  will  be  affected  with  notice  of  a  fact  which  has  not  been 
actually  and  formally  notified  to  its  assembled  directorial  board. 
It  is  not,  of  course,  indispensable  that  a  formal  statement  should 
be  made  to  the  board  at  its  regular  meeting.  A  discussion  or  open 
mention  of  the  matter  there,  however  introduced,  is  amply  suffi- 
cient.^  But  where  the  information  remains  the  private  knowl- 
edge of  a  portion  only  of  those  present,  it  is  important  to  know 
when  the  knowledge  of  this  portion  will,  and  when  it  will  not,  be 
considered  to  be  the  knowledge  of  the  bank.     Knowledge  once 

tor  that  the  bank  is  solvent  when  in  fact  it  is  insolvent  may  maintain  an 
action  in  his  own  name  and  for  his  own  benefit,  and  the  fact  that  the  state- 
ments are  not  known  to  be  false  is  no  defence.  Yates  v.  Jones  National 
Bank,  74  Neb.  734,  105  N.  W.  287  (190.5).  But  .Jones  National  Bank  v. 
Yates,  93  Neb.  121,  139  S.  W.  844  (1913),  holds  that  the  directors  are  not 
liable  unless  they  personally  knew  of  or  personally  participated  in 
the  acts  of  the  officers  of  the  bank.  A  director  of  a  national  bank 
is  not  liable  for  his  own  mistakes  or  blunders,  or  for  the  mistakes  or 
blunders  of  his  brother  directors;  neither  is  he  liable  for  the  fraudulent 
wrongs  of  the  officers  of  the  bank  unless  he  has  personal  knowledge  thereof 
or  participated  in  such  fraudulent  acts.  And  the  State  courts  cannot  dis- 
regard the  rule  provided  by  U.  S.  Rev.  Sts.  §  .5239,  nor  create  another  rule. 
Jones  National  Bank  v.  Yates,  supra.  And  see  Yates  v.  Jones  National 
Bank,  20GU.  S.  1.58,  51  L.  ed.  1002,  27  Sup.  Ct.  638  (1906),  reversing  74 
Neb.  734,  supra,  holding  that  U.  S.  Rev.  St.  §  5239  affords  the  exclusive 
rule  by  which  to  measure  the  rights  to  recover  damages  from  directors  in 
national  banks,  and  their  liability  cannot  be  measured  by  a  standard 
higher  than  that  imposed  by  the  Act  and  that  they  are  not*  liable  for  de- 
ceit, at  least  in  the  absence  of  knowledge,  actual  or  in  effect,  that  the 
reports  are  false.  But  Thomas  v.  Taylor,  224  U.  S.  73,  56  L.  ed.  673, 
32  Sup.  Ct.  403  (1911),  shows  that  where  the  requirements  of  deceit  are 
identical  with  the  requirements  of  the  national  baniving  act  an  action  may 
be  maintained  for  deceit,  and  that  recklessness  of  a  director  in  deliberately 
refusing  to  examine  that  which  it  is  his  duty  to  examine  is,  in  effect, 
knowledge.  And  it  is  no  defence  that  the  statement  of  the  condition  of 
the  bank  was  made  under  the  order  of  the  Comptroller  of  the  Currt>ncy 
if  the  statement  was  false  and  knowingly  made,  nor  is  it  a  defence  that 
the  action  was  not  based  on  the  federal  statute  when  the  requirements 
of  the  pl(>adings  and  the  requirement  of  the  statute  are  identical. 

5"  Delvin  v.  Moore, -64  Or.  433,  130  Pac.  35  (1913). 

«  Brady  v.  Evans,  78  Fed.  558. 

•  §  133.  Rank  of  Pittsburg  v.  Whitehead,  10  Watts  (Pa.)  397.  In  this 
case  it  was  noted  as  a  quwrc  whether  publication  in  a  newspaper  subscribed 
for  by  the  bank  would  operate  as  constructive  notice  to  the  bank.  It  is 
iardly  probable  that  such  a  notion  could  be  sustained ;  it  is  going  much 
too  far. 

VOL.  I  — 19  289 


§  133  DIRECTORS 

received  by  any  board  of  directors  is  in  law,  however  it  may  be 
in  fact,  retained  by  every  subsequent  board,  and  the  bank  will 
be  affected  by  it  without  a  repetition  of  the  communication.^ 

What  the  directors  ought  to  have  known  by  proper  diligence  as 
to  the  general  course  of  the  bank's  business,  they  are  presumed 
to  have  known  in  a  contest  between  the  bank  and  third  persons 
dealing  with  it  in  good  faith.^ 

§  134.  Notice  to  a  Single  Director.  —  The  question  whether 
it  is  just  to  hold  the  bank  bound  by  the  knowledge  of  a  single 
member  of  a  composite  agency  unless  he  decides  the  vote  or  action 
of  the  body,  is  discussed  above,  §  112. 

General  Rule  as  Actually  Adopted 

The  general  rule  actually  adopted  is  as  follows.  If  the  director 
acquired  it  in  his  official  capacity,  or  in  the  course  of  or  in  relation 
to  any  special  matter  or  function  of  which  he  had  charge  as  an 
agent  of  the  bank,  then  he  knows  it  as  a  director,  and  the  law  holds 
that  the  bank  also  knows  it.°  If  he  acquired  it,  however,  solely 
as  any  other  private  individual  might  have  acquired  it,  and  not 
officially,  or  in  connection  with  his  discharge  of  the  functions  of 
his  office,  or  if  it  did  not  relate  to  any  matter  in  which  he  owed  a 
peculiar  duty  to  the  bank,  he  does  not  know  it  as  director,  and  the 
bank  does  not  know  it  by  implication  from  his  knowledge,"'^  ex- 
cept when  he  afterward  acts  for  the  bank  having  such  knowledge 

2  Mechanics'  Bank  of  Alexandria  v.  Seton,  1  Pet.  299,  7  L.  ed.  152 ; 
Fulton  Bank  v.  New  York  &  Sharon  Canal  Co.,  4  Paige  (N.  Y.)  127. 

3  Martin  v.  Webb,  110  U.  S.  7,  28  L.  ed.  49,  3  Sup.  Ct.  428;  McDaniel 
V.  Harvey,  51  Mo.  App.  198;  Roberts  v.  Washington  National  Bank,  11 
Wash.  550,  40  Pac.  225  (1895) ;  Ames  v.  Farmers'  etc.  Bank,  48  Wash. 
328,  93  Pac.  530  (1908) ;  Orme  v.  Baker,  74  Ohio  St.  337,  78  N.  E.  439, 
113  Am.  St.  Rep.  968  (1906)  ;  Spongberg  v.  First  National  Bank,  18 
Idaho  524,  110  Pac.  716,  1912A  Ann.  Cas.  95,  n.,  31  L.  R.  A.  (n.  s.)  736; 
Lowndes  v.  City  National  Bank,  82  Conn.  8,  72  Atl.  150,  22  L.  R.  A. 
(n.  s.)  408  (1909)  ;  FrankUnz'.  Caldwell,  123  Ky.  528,96  S.  W.  605  (1906). 

"  §  134.  A  majority  of  the  directors  or  a  superior  officer  vested  with 
authority  to  condone  wrongdoing,  or  to  a  faithless  employee,  must  know  of 
the  default  of  its  officer  in  order  that  the  surety  may  be  discharged  on 
his  official  bond.  Fidelity  etc.  Co.  v.  Courtney,  186  U.  S.  342,  46  L.  ed. 
1193,  22  Sup.  Ct.  833  (1902). 

""  Notice  privately  given  to  a  director  of  an  incorporated  institution, 
or  which  he  acquires  from  rumor,  or  through  channels  open  alike  to  all 
and  which  he  does  not  communicate  to  his  associates  of  the  board  will 
not  bind  the  institution.  Black  v.  First  National  Bank,  96  Md.  399,  54 
Atl.  88  (1903) ;  First  Denton  National  Bank  v.  Kenny,  116  Md.  24,  63  Atl. 
70, 1913B  Ann.  Cas.  1337,  n. ;  Maryland  Trust  Co.  v.  National  Mechanics' 
Bank,  102  Md.  629,  63  Atl.  70  (1906). 

290 


NOTICE   TO    A    SINGLE    DIRECTOR  §  134 

presumably  still  present  in  his  iniiul  at  the  time  he  acts  in  the 
matter  to  which  it  relates,  and  having  no  adverse  interest  to  keep 
him  from  fulfilling  his  duty  by  communicating  his  information 
to  the  bank ;  "^  or,  if  he  has  such  adverse  interest,  then  to  hold  the 
bank  two  facts  must  coexist ;  viz.  the  party  C.  in  controversy 
with  the  bank,  or  the  one  on  whose  right  he  stands,  must  have 
been  aware  that  the  director  possessed  the  knowledge,  and  not 
aware  of  the  adverse  interest.^     §  136. 

The  knowledge  of  the  single  director  must  be  actual,  not  merely 
constructive.     §  135. 

(a)  IMany  cases  have  arisen  wherein  the  interpretation  of  the 
courts  has  been  called  in,  not  to  determine  the  rule,  but  to  declare 
whether  or  not  the  circumstances  bring  the  case  within  the  one 
or  the  other  division  of  the  rule.  The  question  is  whether  the 
law  will  endow  the  receiver  of  the  knowledge  with  an  official  and 
directorial  character,  or  only  with  his  private  and  individual 
personality  at  the  time  when  he  came  by  the  information  in  ques- 
tion. It  is  by  no  means  easy  to  establish  any  definite  test  by  which, 
as  by  a  touchstone,  all  doubtful  cases  can  be  at  once  and  infallibly 
solved,  and  arrayed  upon  the  one  or  the  other  horn  of  the  dilemma. 
Nothing  better  can  be  done  than  to  give  brief  abstracts  of  ten  or 
twelve  from  among  the  cited  cases,  selected  with  a  view  to  show- 
ing, as  well  as  may  be,  the  tendency  of  the  courts  in  such  causes. 

'"'  Knowledge  by  the  president  of  a  corporation  of  a  lien  on  machinery 
bought  by  it  is  not  notice  to  the  bank  loaning  money  to  such  corporation 
though  the  president  of  the  corporation  who  procured  the  loan  was  a 
director  and  a  member  of  the  loan  committee  of  the  bank.  Wardlow  v. 
Troy  Oil  Co.,  74  S.  C.  3G8,  54  S.  E.  658,  114  Am.  St.  Rep.  1004  (1906). 

1  Custer  V.  Tompkins  County  Bank,  9  Barr  (Pa.)  27  ;  National  Bank 
V.  Norton,  1  Hill  (N.  Y.)  572  (a  leading  authority) ;  Bank  of  United 
States  V.  Davis,  2  id.,  451 ;  Fulton  Bank  ;•.  Benedict,  1  Hall  (N.  Y.)  480; 
FultonrBank  v.  New  York  &  Sharon  Canal  Co.,  4  Paige  (N.  Y.)  127 ; 
Washington  Bank  v.  Lewis,  22  Pick.  (Mass.)  24 ;  Loomis  i'.  Eagle  I^ank 
of  Rochester,  Disney  (Oliio)  285;  Bank  of  Pittsburg  v.  Whitehead.  10 
Watts  (Pa.)  397 ;  Louisiana  State  Bank  v.  Seneeal,  13  La.  525 ;  Powles 
t'.  Page,  3  C.  B.  16,  15  L.  .1.  C.  P.  217;  In  re  Carew,  31  Beav.  39.  See 
The  Distillery  Spirits,  11  Wall.  356,  20  L.  ed.  107  ;  National  Bank  i-.  Cush- 
man,  121  Mass.  490 ;  Fairfield  Savings  Bank  v.  Chase,  72  Me.  226 ;  An- 
ketel  V.  Converse,  17  Ohio  St.  11;  Hart  v.  The  F.  &  M.  Bank,  33  Vt. 
252;  Blumenthal  v.  Brainard,  38  Vt.  410;  Hayward  v.  National  Ins.  Co., 
52  Mo.  181;  Dresser  v.  Norwood,  17  C.  B.  x.  s.  466;  Home  Sav.  etc. 
Bank  r.  Pooria  Trotting  Society,  206  111.  9,  69  N.  E.  17,  99  Am.  St.  Rep. 
132  (1903).  But  Pennsylvania  holds  notice  to  an  agent  twenty-four 
hours  before  the  agency  no  more  notice  to  the  principal  than  if  it  came 
twenty-four  hours  after  the  agency  ceased.  Houseman  i'.  Girard  Mut. 
Bldg.  and  Loan  Asso.,  81  Pa.  St.  256. 

291 


§  134  DIRECTORS 

When  Director  Acts,  Bank  Held 

(b)  In  Bank  of  the  United  States  v.  Davis,  a  bill  of  exchange 
was  forwarded  to  one  who  was  a  director  in  the  bank,  with  the 
request  that  he  would  procure  a  discount  upon  it.  He  did  so ; 
but  at  the  meeting  which  made  the  loan,  he  was  present  and  joined 
in  all  the  proceedings,  and  there  falsely  alleged  that  the  discount 
was  for  his  own  benefit,  and  dishonestly  received  the  money.  It 
was  held  that  the  bank  was  affected  with  knowledge  of  the  fraud, 
and  could  not  recover  the  amount  of  the  bill  from  the  defrauded 
party.  The  court  said  that  it  was  not  true  that  the  director  was 
not  acting  at  the  time  on  the  behalf  of  the  bank.  He  was  present, 
consulting,  advising,  doubtless  recommending  the  loan  upon  this 
very  paper,  all  in  his  capacity  as  director,  and  it  is  fair  to  suppose 
that  his  influence  as  a  director  procured  this  discount.  It  is  urged 
that  he  was  only  one  of  five  directors  engaged  in  the  transaction. 
But  the  bank,  having  employed  several  agents  to  transact  jointly 
a  particular  business,  is  equally  responsible  for  the  conduct  of  each 
and  of  all.  The  duty  of  any  one  of  them  to  communicate  his 
knowledge  is  as  obligatory  as  if  he  were  a  sole  agent. ^  It  will  be 
seen  from  the  language  of  this  decision  how  inextricably  the  matter 
of  notice  is  intertwined  with  the  principle  of  holding  the  bank 
liable  for  the  default  of  its  agent  committed  within  the  scope  of 
his  duty.  Indeed,  the  rule  may  be  expressed  in  the  language  of 
the  latter  principle  as  correctly  as  in  any  other  form,  —  thus : 
Whatever  knowledge  a  director  acquires  ivithin  the  scope  of  his 
official  employment,  he  is  bound  to  communicate  to  his  co-directors, 
that  is  to  say,  to  the  bank  itself.  If  he  neglects  to  do  so,  the  bank 
is  liable  for  the  neglect  of  its  agent  to  perform  the  duty  of  his 
agency .2"  By  either  road  the  same  conclusion  is  arrived  at,  which 
is  the  liability  of  the  bank  to  the  same  extent  as  if  it  had  known 
what  its  director  knew  and  what  he  ought  to  have  communicated. 
It  may  be  said  that  it  is  chargeable  with  his  knowledge,  received 
within  the  scope  of  his  agency  and  emplojonent ;  or  it  may  be  said 
that  it  is  chargeable  with  the  result  of  his  neglect  to  perform  the 
duty  of  communication  imposed  upon  him  by  his  agency  and  em- 
plojTnent.  Practically,  it  matters  little  which  course  is  chosen, 
or  whether,  as  in  the  foregoing  case,  an  effort  is  made  to  combine 
both. 

2  2  HiU  (N.  Y.)  451. 

2»  Twenty-sixth  Ward  Bank  v.  Stearns,  148  N.  Y.  515,  42  N.  E.  1050. 

292 


NOTICE   TO    DIRECTORS  §   136 

Director  Acted 

In  North  River  Bank  v.  Aymar  the  director  was  present  and 
did  act  in  his  official  character,  and  in  prosecution  of  his  directorial 
agency.  It  was  there  held  that,  if  the  note  of  a  firm  were  dis- 
counted by  a  bank,  one  of  the  directors  who  was  present  and  acted 
concerning  the  discount  being  also  a  member  of  the  firm,  and  having 
knowledge  of  facts  tending  to  invalidate  the  note,  the  bank  would 
be  affected  whh  his  knowledge  and  chargeable  with  notice. =* 

In  order  to  bind  the  bank  the  facts  known  by  the  director 
must  be  material  to  the  transaction.'' 

§  135.  The  Knowledge  of  the  Director  must  be  Actual.  —  A. 
was  director  in  a  bank,  and  a  member  of  the  discount  committee ; 
he  was  also  president  of  a  corporation,  one  of  whose  agents  had 
such  knowledge  of  certain  infirmities  in  a  note  discounted  by  the 
bank  as  afTected  this  corporation  with  knowledge.  Held,  that 
the  bank  was  not  afYected  by  this  merely  constructive  knowledge 
of  its  director.^ 

§  136.  If  the  Director  having  Notice  does  not  act  in  the  Matter, 
or  is  known  by  the  Third  Party  to  be  adverse  to  the  Bank's  Interest, 
the  information  he  has  is  not  imputed  to  the  bank. 

In  Terrell  v.  The  Branch  Bank  of  Mobile,^  the  opinion,  though 
not  emanating  from  a  leading  bench,  is  eminently  sound  and  keen  ; 
and  the  contrast  with  Bank  v.  Davis  is  well  worth  examination. 
A.  signed  a  promissory  note  in  blank  and  gave  it  to  B.,  a  director 
in  the  defendant  bank,  with  directions  to  fill  it  up  with  the  sum 
of  "  five  hundred  dollars  ",  and  to  use  it  in  renewal  of  A.'s  note 
for  the  same  amount  already  held  by  the  bank.  B.  filled  it  up 
with  a  larger  sum,  and  had  it  discounted  for  his  own  benefit.     He 

3  North  River  Bank  v.  Aymar,  3  Hill  (N.  Y.)  262. 

*  Caseo  National  Bank  v.  Clark,  139  N.  Y.  307,  34  N.  E.  90S;  Mer- 
chants' National  Bank  v.  Clark,  139  N.  Y.  314,  34  N.  E.  910. 

1  §  13.5.  Mann  v.  Second  National  Bank  of  Springfield,  34  Kan.  746. 
To  the  same  effect  see  Iowa  National  Bank  v.  Sherman,  17  S.  D.  396, 
97  N.  W.  12,  106  Am.  St.  Rep.  778  (1903),  where  the  president  of  the  bank 
was  a  stockholder  in  the  corporation  and  the  cashier  of  the  bank  was  a 
stockholder  and  secretary  of  the  corporation.  But  see  the  same  case 
reported  in  19  S.  D.  238,  103  N.  W.  19,  117  Am.  St.  Rep.  941  (1905), 
holding  that  the  case  should  be  submitted  to  tlie  jury  on  the  good  faith 
of  the  transaction. 

If  three  directors  do  an  authorized  act  and  purposely  withhold  all 
information  thereof  from  the  other  fifteen  directors  tlie  bank  is  not  bound. 
Traders'  etc.  Bank  v.  Black,  108  Va.  59,  GO  S.  E.  743  (1908). 

1  §  136.     12  Ala.  502. 

293 


§136 


DIRECTORS 


was  present  at  the  meeting  of  the  board  which  made  the  discount, 
but  of  course  he  did  not  disclose  the  truth.  In  this  case  his  knowl- 
edge was  not  held  to  affect  the  bank,  and  A,  was  obliged  to  pay 
upon  the  note  the  amount  fraudulently  filled  in.  The  two  cases 
seem  strikingly  alike  in  their  facts,  yet  the  opposite  decisions  in 
them  respectively  seem  equally  satisfactory.  The  point  at  once 
of  reconcilement  and  of  difference  lies  in  this  fact.  The  fraud  in 
Bank  V.  Davis  was  committed  by  the  director,  or  at  least  the 
first  steps  in  it  were  taken  by  him,  when  he  was  acting  officially 
and  on  behalf  of  the  bank,  and  within  the  scope  of  his  agency 
for  the  bank;  his  undisclosed  knowledge  of  the  truth  therefore 
affected  the  bank,  for  he  possessed  his  knowledge  officially ;  the 
fraud  in  the  second  case  was  committed  by  the  director  as  an  in- 
dividual, when  he  was  acting  as  agent  for  A.  in  a  matter  in  which 
A.  had  specially  commissioned  and  intrusted  him  to  act;  his 
knowledge  of  the  truth,  therefore,  was  his  private  knowledge,  and 
not  the  laiowledge  of  the  bank ;  for  he  did  not  possess  it  officially. 
In  each  case,  the  principal  in  whose  business  the  director  was 
agent  for  the  time  being,  and  within  the  scope  of  his  agency  for 
whom  he  committed  the  fraud  and  possessed  a  knowledge  of  the 
truth  which  he  did  not  disclose,  was  obliged  to  suffer  the  penalty 
of  his  breach  of  his  trust,  and  to  make  good  his  fraud. 

/  Director  Adverse  to  Bank 

(a)  In  Loomis  v.  Eagle  Bank  of  Rochester,^  a  bank  director 
was  payee  of  a  note,  a  part  of  which  the  makers  claimed  the  right 
to  recoup  by  reason  of  an  alleged  breach  of  contract  between 
themselves  and  the  payee.  The  director  transferred  and  indorsed 
over  the  note  to  the  bank  for  value  and  in  due  course  of  business, 
but  without  informing  them  of  the  claim  of  the  makers.  It  was 
held  that  the  claim  could  not  be  sustained  as  against  the  bank. 
The  knowledge  of  him  who  was  at  once  payee  and  director  was 
not  the  knowledge  of  the  bank.  He  did  not  come  by  it  or  possess 
it  officially.  The  court  remarked  that  to  insist  that  the  private 
knowledge  of  any  director  should  bind  the  bank  would  work  in- 
definite mischief  in  business. 

In  Washington  Bank  v.  Lewis,^'  a  director  procured  the  discount 

2  Disney  (Ohio)  285.  See  Lilly  v.  Hamilton  Bank,  178  Fed.  53  (1909)  ; 
American  National  Bank  v.  Ritz,  70  W.  Va.  409,  74  S.  E.  679,  10  L.  R.  A. 
(n.s.)  156  (1912). 

3  22  Pick.  (Mass.)  24. 

294 


NOTICE    TO    DIRECTORS  §  13G 

of  ca  note  which  was  afterwards  disputed  for  fraud.  The  defence 
was  not  considered  good.  But  this  case  is  to  he  distinguished 
from  the  case  of  Bank  of  the  United  States  v.  Dav-is ;  for  whereas 
in  that  case  the  director  had,  at  least  presumal)ly,  acted  as  a  di- 
rector in  procuring  the  loan,  in  the  present  case  the  court  distinctly 
state  that  it  was  because  he  did  not  act  officially  in  the  making 
of  the  loan,  but  simply  applied  for  and  ol^tained  it  as  any  other 
person,  wholly  an  outsider,  would  and  must  have  done,  that  the 
defence  cannot  be  sustained. 

Director  Did  not  Act.     Bank  not  Bound 

(h)  The  two  cases  differ  from  each  other  in  precisely  the  vital 
point;  —  in  the  former,  the  director  had  knowledge,  within  the 
scope  of  his  agency,  which,  since  he  acted  in  the  prosecution  of  his 
agency,  he  was  bound  to  communicate,  and  which  was  therefore 
in  law  the  knowledge  of  the  bank ;  in  the  latter  case  the  director, 
having,  in  fact  or  presumably,  the  same  si)ecies  of  knowledge, 
explicitly  refrained  and  declined  to  exercise  his  official  agency  in 
the  matter,  but  dealt,  as  he  had  a  right  to  do,  with  the  other 
directors  wholly  in  the  character  of  an  outside  negotiator  and 
contractor;  since  he  was  not  acting  in  his  agency,  it  followed, 
unavoidably,  that  he  owed  no  duty  to  the  bank,  and  that  his 
knowledge  was  private,  not  corporate,  in  its  character. 

Absent  Director's  Knoivledge 

Where,  in  absence  of  a  director  by  whom  a  note  has  been  offered 
for  discount,  the  bank  accepts  it,  and  accepts  as  collateral  a  note 
payable  to  him  and  indorsed  to  it  as  collateral,  the  bank's  rights 
are  not  affected  by  his  knowledge  of  illegality  in  the  inception  of 
the  note  accepted  as  security.* 

The  Party  Dealing  with  the  Cashier  Knew  he  was  Acting  Adversely 

(c)  A  cashier  wishing  to  procure  of  the  bank  money  to  buy 
railroad  stock,  agreed  with  II.,  a  third  party,  who  knew  that  a 
rule  of  the  bank  forbade  its  officers  to  become  its  debtors,  to  buy 
two  hundred  shares  of  stock,  the  cashier  to  advance  to  H.  money 
of  the  bank  to  pay  therefor,  H.  to  give  his  note  to  the  bank  for  the 
money,  and  deposit  the  stock  as  collateral  security.     This  was 

*  Third  National  Bank  of  St.  Louis  v.  Harrison,  3  McCrary  316  (1882). 

295 


§  136  DIRECTORS 

done,  and  the  cashier  assumed  pajTnent  of  the  note,  the  stock 
being  his.  The  bank  had  no  notice  of  this  arrangement  except 
the  cashier's  knowledge.  H.  afterwards  advised  the  cashier  to  sell 
the  stock,  and  the  cashier  agreed  that  H.  might  use  his  own  dis- 
cretion therein.  H.  thereupon  effected  a  sale,  but  the  cashier 
refused  to  confirm  it  or  deliver  the  stock. 

In  an  action  by  the  bank  on  H.'s  note,  the  court  held  that  the 
bank  was  not  concluded  by  the  cashier's  knowledge.  He  acted 
adversely  to  the  bank,  and  the  third  party  in  the  dealing  knew  it.^ 

Director  Acting  Adversely,  Bank  not  Bound  by  his  Knowledge 

{d)  The  law  has  been  laid  down  in  Massachusetts  to  the  same 
effect,  where  a  director  borrowed  money  from  his  own  bank.  It 
seems  that  in  such  a  transaction  the  director  is  to  be  regarded  as 
acting  in  his  independent  and  individual  capacity,  and  not  on  be- 
half or  for  the  interest  of  the  bank,  for  he  is  in  fact  the  other  party 
to  the  contract,  and  naturally  must  be  expected  to  look  out  for 
himself,  and  to  assume  to  a  certain  extent  the  character  of  an 
adversary  in  the  bargain.^"  A.  shipped  sugar  to  B.,  with  authority 
to  B.  to  sell  it  in  due  course  of  business  for  a  long  while  conducted 
between  them.  The  bill  of  lading  stated  the  shipment  to  be  made 
by  order  of  B.,  and  that  the  sugar  was  deliverable  to  his  order, 
with  no  words  indicative  of  agency  on  his  part.  B.  indorsed  this 
document,  and  pledged  it  as  collateral  security  for  a  loan  which 
he  negotiated  with  a  bank  of  which  he  was  a  director;  and  he 
himself  was  present  at  the  meeting  of  directors  which  passed  upon 
the  loan.  It  was  held,  in  action  by  A.  against  the  bank,  that  the 
bank  could  not  be  charged  with  the  knowledge  of  the  director 
that  his  act  was  fraudulent.® 

Director  did  not  Act,  and  the  Bank  not  Bound 

(e)  In  Shaw  v.  Clark  a  note  was  discounted  by  a  bank.  It 
was  claimed  that  one  of  the  directors,  E.,  knew  the  note  was  upon 

5  Savannah  Bank  &  Trust  Co.  v.  Hartridge,  73  Ga.  223  (1884). 
6°  Lilly  V.  Hamilton  Bank,  178  Fed.  53  (1909). 

6  Innerarity  v.  Merchants'  National  Bank,  139  Mass.  332,  1  N.  E.  282. 
Notice  to  one  of  the  directors  of  a  matter  affecting  the  interest  of  the  bank 
which  it  is  the  interest  of  such  director  to  conceal  is  not  notice  to  the 
bank.  First  National  Bank  v.  Lowther-Kaufman  Oil  Co.,  66  W.  Va.  505, 
66  S.  E.  713,  28  L.  R.  A.  (n.  s.)  511,  n.  (1910) ;  City  Bank  of  Wheeling 
V.  Bryan,  72  W.  Va.  29,  78  S.  E.  400  (1913). 

296 


NOTICE    TO    DIRECTORS  §  136 

a  gaming  consideration.  E.  recommended  the  discount,  but  did 
not  "  act  "  nor  "  control  the  discretion  "  of  the  board  in  making 
the  discount.  The  court  held  that  the  bank  was  not  charged 
with  his  knowledge.^ 

Director  Did  not  Act 

(f)  A  note  was  obtained  from  the  maker  by  fraud.  P.,  a  direc- 
tor of  the  bank  discounting  the  note,  had  notice  of  the  fraud,  but 
did  not  communicate  his  knowledge  to  any  other  bank  officers, 
neither  did  he  take  part  in  the  discounting,  wherefore  his  information 
did  not  affect  the  bank.^ 

Rule 

If  a  director  is  not  present  and  acting  at  the  discount  of  a  note, 
his  knowledge  of  illegality  or  want  of  consideration  is  not  notice 
to  the  bank ;  but  if  he  acts  with  the  board  the  bank  is  held  by  his 
knowledge. * 

N.   Y.  Director  Did  not  Act 

(g)  The  knowledge  of  usurious  taint  in  negotiable  paper  acquired 
by  a  director,  but  not  while  acting  for  the  bank,  is  not  thereby  the 
knowledge  of  the  bank  ;  and  as  said  director  did  not,  while  ha^'ing 
such  notice,  do  any  act  for  the  bank  in  respect  to  such  paper,  the 
bank  is  in  no  way  affected  by  his  information. ^° 

The  same  distinction  is  taken  in  a  case  where  one  of  the  directors 
who  did  not  act  at  the  discounting  had  notice  of  irregularities  at- 
taching to  the  note.     The  bank  was  not  affected  with  notice.^^ 

7  Shaw  V.  Clark,  49  Mich.  384  (1882) ;  National  Security  Bank  v. 
Cushman,  121  Mass.  490. 

*  First  National  Bank  of  Higlitstown  v.  Christopher,  40  N.  J.  L.  435 
(1878) ;   MeCalmont  v.  Lanning,  154  Fed.  353  (1907). 

Where  a  director  usurps  the  functions  of  the  board  of  directors  and 
discounts  a  note  \\'ithout  its  knowledge  or  authority,  the  board  is  not 
chargeable  with  notice.  Lanning  v.  Johnson,  75  N.  J.  L.  259,  69  Atl.  490 
(1908). 

»  North  River  Bank  v.  Aymar,  3  Hill  (N.  Y.)  202 ;  National  Security 
Bank  v.  Cushman,  121  Mass.  490;  Farmers'  Bank  v.  Payne,  25  Conn. 
444 ;  The  President  v.  Cornen,  37  N.  Y.  320  ;  Commercial  Bank  v.  Cun- 
.  ningham,  24  Pick.  (Mass.)  270;  Washington  Bank  v.  Lewis,  22  Pick. 
(Mass.)  24;  Housatonic  Bank  v.  Martin,  1  Met.  (Mass.)  294;  Mayor  of 
New  York  /•.  Tenth  National  Bank,  HI  N.  Y.  446,  IS  N.  E.  618  (1888). 
But  see  Lanning  /•.  Johnson,  75  N.  J.  L.  259.  69  Atl.  490  (1908). 

'0  Atlantic  State  Bank  v.  Savery,  82  N.  Y.  291. 

>'  National  Park  Bank  r.  German  Mutual  W.  &  Security  Co..  53  N.  Y. 
Superior  Ct.  367.     See  Lilly  v.  Hamilton  Bank,  178  Fed.  53  (1909). 

297 


§  137  DIRECTORS 

§  137.  Director  chargeable  with  Knowledge  as  against  himself.  — 
The  converse  of  the  doctrine  just  discussed  is  much  more  simple. 
Whatever  knowledge  a  director  has  or  ought  to  have  officially,  he 
has,  or  will  be  conclusively  presumed  at  law  to  have,  as  a  private 
individual."  In  any  transactions  with  the  bank,  either  on  his  own 
separate  account  or  where  others  are  so  far  jointly  interested  with 
him  that  his  knowledge  is  their  knowledge,  he  and  his  joint  con- 
tractors will  be  affected  by  this  knowledge  which  he  has,  or  which 
he  ought,  if  he  had  duly  performed  his  official  duties,  to  have 
acquired.^  Thus,  a  director  is  affected  with  notice  of  the  condi- 
tion ^^  and  transactions  ^^  of  the  bank,  of  its  legal  rights,  and  of  the 
action  of  its  directorial  board  on  any  subject.  If  the  bank  is 
insolvent,  or  if  it  offers  him  for  purchase  notes  which  could  only  be 
legally  sold  by  authority  of  a  directorial  vote  which  has  never  been 
given,  he  is  affected  with  knowledge  of  the  insolvency,  and  of 
the  illegality  of  the  notes. ^"^  He  cannot  collect  upon  them  from 
the  bank,  on  the  ground  of  presumed  regularity,  as  a  bona  fide  out- 
side purchaser  of  them,  without  notice  and  for  value,  could  do.^ 
But  in  a  suit  between  a  bank  and  its  directors,  a  director  is  not 
presumed  to  have  knowledge  of  all  that  is  shown  on  the  bank 
books.^" 

If  a  director  of  a  bank  is  surety  on  a  note,  or  if  a  director  is  a 
partner  in  a  firm  which  is  surety  on  a  note,  held  by  the  bank,  the 
surety  will  be  affected  with  knowledge  of  the  pajTnent  or  non- 
payment of  the  note  without  regard  to  any  statement  made  by  the 
cashier.  A  director  is  chargeable  with  this  amount  of  knowledge 
of  the  affairs  of  the  bank,  whether  in  fact  he  has  it  or  not,  and  can- 
al 1.37.  McCarthy  v.  Kepreta,  24  N.  D.  395,  139  N.  W.  992,  1915A 
Ann.  Cas.  834,  n. 

1  Lyman  v.  United  States  Bank,  12  How.  225,  13  L.  ed.  965,  1  Blatch. 
(C.  C.)  297 ;  McCarthy  v.  Kepreta,  24  N.  D.  395,  139  N.  W.  992,  1915A 
Ann.  Cas.  834,  n. ;  Rattelmiller  v.  Stone,  28  Wash.  104,  68  Pac.  168  (1902). 

1"  Tate  V.  Bates,  118  N.  C.  287,  24  S.  E.  482  (1896) ;  Hauser  v.  Tate, 
85  N.  C.  81. 

If-  McCarthy  v.  Kepreta,  24  N.  D.  395,  1,39  N.  W.  992,  1915A  Ann. 
Cas.  834,  n. 

i"^  He  is  also  affected  with  knowledge  that  a  note  sold  him  by  the  bank 
acting  through  its  cashier  was  taken  by  the  bank  without  consideration. 
McCarthy  v.  Kepreta,  24  N.  D.  395,  139  N.  W.  992,  1915A  Ann.  Cas. 
834,  n. 

^Gillet  V.  PhiUips,  3  Kern.  (N.  Y.)  114;  McCarthy  v.  Kepreta,  24 
N.  D.  395,  139  N.  W.  992,  191.5A  Ann.  Cas.  834,  n. 

^^  Wallace  v.  Lincoln  Savings  Bank,  89  Tenn.  630,  15  S.  W.  448 
(1890). 

298 


QUALIFICATIONS   OF   DIRECTORS  §  138 

not  escape  any  responsibility  wliieh  such  knowledge  properly 
entails."* 

In  the  discussion  of  this  topic  a  brief  abstract  of  the  case  of 
Curtis  V.  Leavitt  should  not  be  omitted.^  Bank  directors  author- 
ized the  issue  of  bonds  to  certain  trustees  for  sale.  The  officers 
whose  duty  it  was  to  make  the  issue  assigned  the  bonds  to  persons 
other  than  those  named  as  trustees,  and  also  to  an  amount  in 
excess  of  that  authorized.  Their  action  in  the  latter  particular, 
however,  was  subsequently  ratified  by  the  corporation.  One  of 
the  persons  acting  as  a  trustee  was  also  a  director.  The  court 
declaretl  the  assignment  valid  for  the  benefit  of  buna  fide  purchasers 
of  the  bonds  for  value  and  without  notice,  and  that  the  knowledge 
possessed  byhim  whocoml)inedthe  positions  of  director  and  trustee, 
that  the  assignment  was  in  fact  without  due  authority,  did  not 
make  the  purchasers  of  bonds  under  the  trust  chargeable  with  a  like 
knowledge.  It  is  dear  from  the  language  of  the  court,  that,  if  the 
director  and  trustee  had,  in  his  latter  capacity,  been  the  real  party 
in  interest,  instead  of  only  a  trustee  nominally  representing  entirely 
innocent  third  parties,  the  decisicm  would  have  been  to  the  con- 
trary eiTect.  So  that  this  case  at  once  proves  the  general  doctrine, 
and  furnishes  a  valuable  specimen  of  exception  to  it. 

It  is  not  a  conclusive  presumption  that  a  director  knows  the  cir- 
cumstances under  which  a  bank  takes  a  note.  B.,  a  director,  bought 
a  note,  not  knowing  that  the  payee  had  delivered  it  to  the  bank  with- 
out indorsement  as  collateral  security.  In  a  suit  against  the  maker, 
it  was  held  that  B.'s  directorship  did  not  afi'ect  him  with  notice.^ 

§  138.  Qualifications  of  Directors.^  —  A  method  frequently 
resorted  to  for  securing  the  fidelity  of  directors  in  the  exercise  of 

3  Merchants'  Bank  v.  Rudolf,  5  Neb.  527;  McCarthy  v.  Kepreta, 
24  N.  D.  395,  139  N.  W.  992,  1915A  Ann.  Cas.  834,  n. 

*  15  N.  Y.  9. 

5  Baldwin  v.  Proctor,  82  Ind.  370.  But  see  McCarthy  v.  Kepreta, 
24  N.  D.  395,  139  N.  W.  992,  1915A  Ann.  Cas.  834,  n.,  where  the  question 
is  fully  discussed  and  which  holds  that  the  president  of  a  bank  must  be 
presumed  to  have  received  the  knowk>dge  possessed  by  the  cashier  that 
a  note  taken  by  him  for  the  bank  was  without  consideration.  The  knowl- 
edge is  not  only  constructive  but  is  conclusively  presumed  to  be  actual 
and  estops  the  president  who  has  purchased  the  note  from  the  bank  from 
claiming  to  be  a  holder  in  due  course  to  the  same  extent  that  it  would 
have  operated  upon  the  cashier  individually  who  negotiated  the  loan, 
and  the  president  is  also  chargeable  with  knowledge  that  the  note  was 
given  for  an  excessive  loan  and  so  with  the  bank's  violation  of  law  for- 
bidding such  loans,  and  his  neglect  of  duty  by  failing  to  participate  in 
the  active  management  of  the  bank  is  immaterial. 

"§  138.     See  Fed.  Res.  Act,  See.  4,   Part  11.  §  106. 

299 


§  138  DIRECTORS 

their  duties  is  to  require  them  to  own  in  their  own  right  and  un- 
incumbered a  certain  number  of  the  shares  of  the  corporation. 
Imperfect  as  this  must  be  as  a  check  upon  men  of  large  property, 
it  is  perhaps  the  best  available  plan.  It  has  been  adopted  in  our 
National  Banking  Act,  which  declares  (sect.  9)  that  each  director 
shall  own  at  least  ten  shares  of  the  corporate  stock.  This  regula- 
tion, however,  simply  prescribes  the  requisite  qualification  for 
election  to  the  office.  If  a  person  not  thus  qualified  is  elected,  and 
seeks  to  enter  upon  the  office  without  qualifying  by  the  purchase  of 
the  requisite  number  of  shares,  he  may  be  ousted  by  legal  process, 
but  his  acting  as  a  director  will  not  make  him  in  any  manner 
liable  for  this  number  of  shares.  Neither  can  he  be  regarded 
either  at  law  or  in  equity,  or  for  any  purposes,  as  the  constructive 
owner  of  them.  His  entering  upon  the  enjoyment  of  the  office 
does  not  in  any  case  estop  him  from  alleging  his  non-ownership 
of  the  requisite  number  of  shares  to  qualify  him  for  the  position.^ 
The  cases  cited  show  that,  in  England,  where  a  person  who  had 
subscribed  for  twenty-five  shares  was  chosen  a  director,  and  acted 
as  such,  though  the  ownership  of  fifty  shares  was  required  by  law 
in  order  to  qualify  him  for  the  position,  yet  he  could  be  held  liable 
as  a  contributor  only  for  the  price  of  the  twenty-five  shares,  though 
the  company  was  insolvent  and  the  creditors  were  sufferers.  A 
stronger  or  more  conclusive  case  than  this  one  could  not  be  desired.^ 
§  139.  Continuance  in  Office.  —  It  is  a  common  proviso  that 
directors,  once  chosen,  shall  remain  in  office  until  a  choice  of  suc- 
cessors has  been  made.  It  is  a  useful  and  convenient  precaution, 
by  which  accidental  or  unavoidable  intervals  are  bridged  over 
without  an  interregnum,  than  which  nothing  could  be  more  injuri- 
ous to  the  interests  of  the  bank.  Though  the  original  term  of 
office  be  limited  to  one  year,  yet  it  may  be  indefinitely  prolonged 
under  this  provision.  The  irregularity  in  failing  to  make  a  choice 
in  due  season  may  subject  the  corporation  to  statutory  penalties ; 
but  this  is  a  different  matter,  and  does  not  touch  the  tenure  of 
office  of  the  old  board.  The  rule  and  its  working  are  usually 
simple  enough,  and  we  have  found  only  one  case  where  litigation 
has  arisen  under  it.  Here  choice  of  a  board  of  directors  was  made, 
but  the  company  was  hopelessly  insolvent.     It  was  not  formally 

1  Ex  parte  Marquis  of  Abercorn,  31  L.  J.  Ch.  828 ;  Ex  parte  Roney, 
33  id.,  733. 

2  Richards  v.  Attleborough  National  Bank,  148  Mass.  187,  19  N.  E. 
.353  (1889) ;  Crease  v.  Babcock,  23  Pick.  (Mass.)  334;  Thornton  v.  Mar- 
ginal Freight  Railway,  123  Mass.  32. 

300 


PAY  OF  DIRECTORS  FOR  SERVICES  §  140 

dissolved,  but  no  l)iisiness  whatsoever  was  undertaken  by  it  for 
sixteen  years  thereafter.  It  was  held  that  the  last  chosen  directors 
could  not  be  regarded  as  continuing  in  office  throughout  this  period 
on  the  ground  that  no  choice  of  successors  had  relieved  them. 
Their  neglect,  not  objected  to,  to  perform  any  official  duty  in  so 
long  a  time,  was  construed  as  equivalent  to  their  abandonment  or 
resignation  of  their  positions.^ 

The  provision  in  the  United  States  Revised  Statutes,  §  5145, 
that,  when  elected,  a  director  shall  hold  office  for  one  year  and 
until  his  successor  is  elected,  does  not  preclude  him  from  resigning 
within  the  year.^" 

The  mere  fact  that  the  bank  is  insolvent  or  bankrupt  does  not 
vacate  the  office  of  director.- 

§  140.  Pay  of  Directors  for  Services."  —  Ordinarily  the  position 
of  director,  whether  in  a  bank  or  any  other  corporation,  is  not  one 
entitling  the  incumbent  to  demand  compensation  for  his  services. 
Usage  is  so  uniformly  to  the  efl'ect  that  the  services  are  rendered 
gratuitously,  that  an  especial  contract  or  vote  could  alone  enable 
a  director  to  demand  pay  as  a  legal  right.  Nor  could  even  a 
formal  vote  confer  upon  hun  this  right,  if  it  were  not  passed  until 
after  the  rendition  of  the  services.  For  it  would  then  become 
invalid  on  the  ground  of  want  of  consideration.^  So  it  has  been 
held  that  a  director,  who  was  receiving  no  compensation,  could 
not  recover  from  the  bank  a  reward  offered  by  it  for  the  recovery 
of  money  stolen  and  the  detection  of  the  thief.  For  it  was  only  a 
part  of  the  legal  duty  imposed  by  his  office  to  give  all  the  informa- 
tion upon  these  points  w^hich  he  might  succeed  in  acquiring.  But 
the  principle  applies  only  to  the  services  performed  by  directors 
in  the  execution  of  their  directorial  functions.  For  services  ren- 
dered prior  to  their  becoming  directors  they  may  properly  be  paid. 
So  also  for  services  in  any  special  duty  or  agency  wholly  outside 
of  the  ordinary  duty  or  agency  of  a  director,  they  are  entitled  to 
pay  upon  the  principle  of  quantum  meruit.^     If  a  peculiar  and 

1  §  139.     Bartholomew  v.  Bentley,  1  Ohio  St.  37. 

i«  Briggs  r.  Spaulding,  141  U.  S.  133,  35  L.  ed.  662,  11  Sup.  Ct.  924 
(1889). 

2  Holland  v.  Hoyman,  60  Ga.  174  (1878). 

0  §  140.     See  Fed.  Res.  Act,  Sec.  4,  Part  11.  §  109. 

1  Hall.  V.  Vermont  &  M.  R.  R.  Co.,  28  Vt.  401 ;  Pierson  v.  Thompson, 
1  Edw.  Ch.  (N.  Y.)  212;  Loan  Association  v.  Stonemetz,  29  Pa.  St. 
534;  Godbold  v.  Branch  Bank,  11  Aha.  191;  Dunston  v.  Imperial  Gas 
Co.,  3  B.  &  Ad.  125. 

2  Stacy  V.  State  Bank,  4  Scamni.  (111.)  91. 

301 


§140 


DIRECTORS 


especial  task  is  undertaken  by  a  director  at  the  request  of  the 
board,  which  he  is  under  no  obUgation  to  undertake  simply  because 
he  is  a  director,  and  which  he  could  not  reasonably  be  expected 
or  required  to  undertake  gratuitously  after  the  fashion  of  his 
ordinary  directorial  functions,  neither  justice  nor  any  judicial 
decisions  oppose  his  receiving  or  requiring  just  compensation  for 
the  labor .^  But  in  Alabama,  where  pay  was  allowed  to  directors 
of  the  State  Bank,  and  the  amount  was  fixed  by  law,  it  was  declared 
that  no  additional  pay  could  be  allowed  for  extra  services  rendered 
during  incumbency  in  the  office.^  The  fact  that  regular  pay  was 
given  takes  this  case  out  of  the  operation  of  the  general  rule.  It 
was  probably  considered  that  the  pay  was  intended  to  buy  all 
such  services  as  the  directors  should  undertake,  or  be  able  or  called 
upon  to  render,  whether  strictly  within  their  ordinary  duties  or 
not.  If  the  duty  was  unusual,  so  also  was  the  receipt  of  any  salary 
at  least  equally  unusual. 

Misconduct  in  a   Transaction  Forfeits  Pay  for  Service   in  it 

(a)  If  the  directors  are  guilty  of  misconduct  they  forfeit  all  right 
to  compensation.  As  against  the  holders  of  the  bank's  notes,  and 
other  creditors  of  the  bank,  the  trustees  are  entitled  to  no  com- 
pensation;  as  against  the  stockholders,  whose  wishes  they  had 
carried  out,  a  different  rule  might  apply,  did  not  the  principle  of 
public  policy  intervene,  denying  compensation  to  a  trustee  who 
has  shown  bad  faith  toward  the  public.^ 

Where  bank  officials  omit  to  charge  and  draw  their  salaries  in 
order  to  make  a  better  showing  in  the  published  reports,  they  are 
not  estopped,  as  against  the  stockholders,  from  claiming  their 
salaries  upon  the  failure  of  the  bank.^ 

§  141.  Records.  —  Records  of  the  proceedings  of  the  board  of 
directors  are  good  at  law,  although  not  taken  at  the  time  of  the 
meeting.  They  may  be  made  at  any  time  subsequently,  and  relate 
back.^ 

3  Branch  Bank  v.  Collins,  7  Ala.  95 ;  Chandler  v.  Monmouth  Bank, 
1  Green  (N.  J.)   255. 

"  Branch  Bank  v.  Collins,  7  Ala.  95 ;    Branch  Bank  v.  Scott,  id.,  107. 

5  Moses  V.  Ocoll  Bank,  1  Lea  (Tenn.)  398. 

6  Wheeler  ;;.  Aiken  Co.  Loan  and  Savings  Bank,  75  Fed.  781  (1896). 
1  §  141.     Commercial  Bank  v.  Bonner,  13  Sm.  &  M.  (Miss.)  649. 


302 


CHAPTER   X 

THE  PRESIDENT 

Authority.     §§  98,  114,  151. 
§  143.  Inherent,  confined  to  charge  of  bank's  litigation. 

(d)  May  enter  remittitur  for  sufficient  consideration. 

(e)  May  receive  deposits. 

(/)    May  offer  reward  in  certain  cases. 
(g)   May  assign  a  judgment. 

(h)  May  take  from  debtor  property  incumbered  by  other  debts, 
(i)    May  bind  the  bank  by  his  fraud  in  certain  cases. 
§  144.  (J)    IMay  give  a  receipt  for  securities  deposited. 

May  certify  checks.      §§  155  d,  413. 
{g)   ISIay  agree  on  a  place  of  payment  other  than  that  named  in 
a  note. 

(a)  And  may  bind  the  bank  in  other  ways,  where  the  usage  of 

banks  and  routine  of  business,  or  the  custom  of  the  par- 
ticular bank,  give  him  implied  authority,  or  wiiere  he 
has  authority  expressly  by  the  charter  or  vote  of  direc- 
tors, or  where  he  has  publicly  done  a  series  of  acts  of  a 
certain  character  wathout  objection  from  the  bank,  or 
where  his  act  has  been  ratified  by  the  bank,  as  by  long 
acquiescence. 
§  145.  (c)    For  example,  the  president  may,  by  custom,  have  power 

to  take  a  debt  due  from  the  bank  out  of  the  statute. 
Duty.     §§  114,  125,  151. 
§  143.  To  preside  at  board  meetings,  and  give  careful  supervision 

to  the  affairs  of  the  bank. 
No  Power  inherent.     §§  125,  127,  671. 
§  144.  (6)   To  draw  checks  against  the  bank's  funds. 

(J)    Or  to  indorse  negotiable  paper  belonging  to  the  bank. 
(6)   Or  to  control  its  finances. 
(5)   Or  to  settle  with  creditors. 

(b)  Or  to  dispose  of  or  control  the  bank's  property  any  more 

than  any  other  director. 
(i)    Or  to  certify  his  own  check, 
(c,  h)    Or  to  release  a  claim  or  stay  execution,  though  by  long  ac- 
quiescence in  such  act  the  bank  is  bound, 
(d)  Or  to  contract  for  the  bank,  though  he  may  bind  the  bank 
by  express  or  implied  authority.     See  above   (o),  and 
Chap.  VIII. 

303 


§  143  THE    PRESIDENT 

(fc)  Cases  in  which  a  narrower  doctrine  as  to  the  president's 

contract  power  was  held. 
(l)    Statutory  authority, 
(m,  n)    Authority  given  to  president  and  cashier  construed  strictly. 
§  145.     Representations  and  Admissions.     §§  42  c.  2,  103,  124,  1G7, 
168,  203. 

(a)  Made  within  the  scope  of  his  agency  {i.e.  while  transact- 

ing business  for  which  he  has  authority,  either  express  or 
implied)  bind  the  bank. 

(b)  No  inherent  authority  to  release  debt  by  admission. 
(d)  Nor  to  charge  the  bank  with  a  debt. 

(c)  By  usage,  his  acknowledgment  at  the  bank  or  away  from 

it  may  take  a  debt  out  of  the  statute, 
(e,  <7)    Not  made  as  agent  for  the  bank,  in  its  business  do  not 
affect  the  bank. 
(/)    Representations  to  be  construed  strictly. 
§  146.     Knowledge  of  the  President.     §  9,  n.  9,  §§  104,  133,  166. 

(a)  His  knowledge  of  an  indorser's  address  is  the  bank's  knowl- 

edge, and  though  he  may  be  accidentally  absent,  the 
bank  is  not  excused  for  failure  to  notify. 

(b)  Notice  of  suit  is  properly  served  on  president,  though  away 

from  bank. 

(c)  President's  knowledge  that  a  payment  to  bank  is  in  fraud 

of  the  bankruptcy  laws  is  imputed  to  the  bank. 
(d,  e,  k,  I)      President's  knowledge  of  his  own  frauds  not  attributable 

to  bank. 
ig)  President's   knowledge   that   note   is   for   accommodation 

binds  the  bank. 
(/i)  Notice  to  the  president  that  a  note  was  procured  by  fraud 

does  not  bind  the  bank  if  made  to  the  president  in  an 

unofficial  capacity. 
(i)    Otherwise,  if  made  to  him  in  his  official  capacity. 
§  147.     Liability  of  the  President  to  the  Bank  for  Breach  of  Trust. 

§§  79,  128,  129,  717  c;  II.  §§  53,  253. 
(o)  Passing  bank's  money  to  an  irresponsible  person. 
(6)    Selling  property  without  authority. 

(c)  Statute  of  Limitations  only  begins  to  run  against  the  bank 

from  the  time  it  discovers  the  fraud. 
Liability  to  Third  Parties. 

(d)  Not  liable  unless  the  parties  acted  upon  his  false  repre- 

sentations. 

(e)  Approving  false  report. 

(/)    Constructive  knowledge  of  president  a  question  for  the  jury. 

§  148.     Liability  of  One  held  out  as  President.      §  130. 

§  148A.     Liability  for  Acts  of  Other  Officers. 

§  149.     Personal  Undertakings  for  the  Benefit  of  the  Corpora- 
tion. 

§  150.     Pay  of  the  President. 

§  150A.     Power  to  tax  President. 

State  cannot  tax  president  of  a  national  bank. 

§143.    President's    Authority   Virtute    Officii.  —  The   president 
of  the  bank  is  usually,  perhaps  universally,  a  member  of  the  board 
304 


president's  authority  virtute  officii  §  143 

of  directors,  and  is  customarily  chosen  by  the  board  from  their 
own  number.  Sections  8  and  9  of  our  National  Banking  Act 
prescribe  this  method  for  all  banks  organized  under  it.  It  is  the 
duty  of  the  president  to  preside  at  meetings  of  the  board  of  direc- 
tors. The  amount  and  nature  of  the  duties  imposed  upon  him 
may  vary  in  different  associations  according  to  the  usages  or  the 
by-laws  of  each.  But  ordinarily  the  jwsitinn  is  one  of  dignity,  and 
of  an  indefinite  general  responsibility,  rather  than  of  any  accurately 
known  power.  The  president  is  usually  expected  to  exercise  a 
more  constant,  immediate,  and  personal  supervision  over  the  daily 
affairs  of  the  bank  than  is  required  from  any  other  director." 

Inherent  Authority  Small 

(a)  Usage  or  directorial  votes  may  confer  upon  him  special 
functions,  and  may  extend  his  authority  to  correspond  with  the 
increase  of  active  duties.""  But  the  authority  inherent  in  the 
office  itself  is  very  small ;"''  indeed,  it  is  very  difficult  to  say  precisely 
how  or  wherein  it  is  really  much  in  excess  of  that  which  can  be 
exercised  by  any  other  single  director.    Practically  this  legal  prin- 

"  §  143.  The  duty  of  the  president  is  to  preside,  and  his  other  duties 
may  vary  according  to  usage  or  by  law,  and  the  fact  tliat  the  cashier  is 
allowed  to  retain  physical  control  over  securities  is  not  neeessarilj^  e\idenee 
of  negHgence.  The  president  is  to  be  regarded  as  a  trustee  and  bound 
to  exercise  care  and  prudence  in  his  office  in  the  same  degree  that  men 
of  common  prudence  ordinarilj'  show  in  their  own  affairs.  Davenport  i'. 
Prentice,  12G  App.  Div.  451  (1908),  110  N.  Y.  S.  1050. 

In  the  District  of  Columbia  the  president  of  a  bank  is  its  chief  repre- 
sentative and  entitled  to  act  as  its  agent  in  the  transaction  of  its  business. 
Russell  V.  Washington  Savings  Bank,  23  App.  Cas.  (D.  C.)  398  (1904). 

When  the  president  is  substantially  paid  for  his  super\nsion  he  must  use 
a  higher  degree  of  care  than  when  he  is  a  mere  figurehead.  First  State 
Bank  v.  Morton,  140  Ky.  287,  142  S.  W.  094  (1912)  ;  Ex  parte  Rickey, 
31  Nev.  82,  100  Pac.  134,  135  Am.  St.  Rep.  051  (1909). 

""  The  president  may  be  authorized  by  the  directors  to  do  anything 
within  the  authoritv  of  the  bank's  charter.  Boyd's  E.x'r.  v.  First  National 
Bank,  128  Ky.  408,  108  S.  W.  300  (1908);  Ex  parte  Rickey,  supra;  Ex 
parte  Smith,  33  Nev.  400,  111  Pac.  930  (1913). 

<">  The  president  has  no  authority  other  than  what  is  expressly  granted 
by  the  charter,  by-laws  etc.  Alontgomcry  Bank  v.  Walker,  181  Ala.  308, 
61  So.  951  (1913).  He  has  only  inherent  power  to  preside  at  meetings 
and  attend  to  the  bank's  litigation.  Commercial  National  Bank  v.  First 
National  Bank,  97  Tex.  530,  80  S.  W.  001  (1904) ;  Griffin  v.  Erskine,  131 
Iowa  444,  109  N.  W.  13  (1900).  So  neither  he  nor  a  director  is  legally 
authorized  to  close  the  bank  or  to  prevent  the  receipt  of  deposit  by  the 
bank.  Ex  parte  Smith,  supra.  But  see  Bartlett's  Estate  Co.  v.  Eraser, 
11  Cal.  App.  373,  105  Pac.  130  (1912). 

VOL.  1  —  20  305 


I  143  THE   PRESIDENT 

ciple  is  not  known,  or  not  distinctly  recognized,  in  very  many 
banks,  and  frequently  presidents  undertake  to  exercise  a  very  con- 
siderable control  in  the  daily  routine  of  business.  When  this  is 
done  with  the  knowledge  and  approbation,  or  the  tacit  sanction,  of 
the  board  of  directors,  it  may  be  regarded  as  legalized  by  the  prin- 
ciples of  ratification  or  usage.  Yet  these  afford  an  indefinite  and 
dangerous  basis  on  which  to  rest  important  dealings.  A  careful 
collation  of  all  the  adjudicated  cases,  it  must  be  confessed,  wears 
a  striking  and  peculiar  aspect,  which  is  not  very  favorable  to  the 
assumption  of  any  species  of  executive  power  by  a  bank  president 
without  direct  authorization.  With  scarcely  an  exception,  all  the 
decisions  are  to  the  effect  that  the  president  had  no  right  to  per- 
form some  particular  act,  which  he  had  undertaken  probably  in 
perfectly  good  faith  to  perform,  and  which  had  been  called  in 
question,  and  had  given  rise  to  the  litigation  in  which  it  was 
condemned.  So  the  reader  will  notice  that  in  discussing  this 
topic  we  are  obliged,  in  order  to  keep  within  the  bounds 
of  established  law,  to  confine  ourselves  almost  wholly  to  declar- 
ing what  a  president  can  not  do. 

Charge  of  Bank's  Litigation 

(b)  Indeed,  it  is  a  singular  fact  that  the  entire  collection 
of  judicial  authorities  justifies  the  enunciation  of  only  one  act  as 
falling  withm  the  properly  inherent  power  of  the  president.  This 
solitary  function  is  to  take  charge  of  the  litigation  of  the  bank.°<^ 
There  is  no  question  that  this  matter  belongs  to  him  by  virtue  of 
his  office  .°'^    He  may  institute  and  carry  on  legal  proceedings  "« to 

"« If  the  president  or  other  officers  of  the  bank  will  not  act  the  stock- 
holders may  do  so.  Feess  v.  Mechanics'  State  Bank,  87  Kan.  313,  124 
Pac.  412  (1912). 

o-i  National  Bank  v.  Berry,  53  Kan.  696,  37  Pac.  131  (1894) ;  Com- 
mercial National  Bank  v.  First  National  Bank,  97  Tex.  .536,  80  S.  W.  601 
(1904) ;  First  National  Bank  v.  National  Park  Bank,  175  Fed.  881  (1910). 
And  a  vice  president  or  any  other  officer  who  is  acting  for  the  time  in  the 
place  and  stead  of  the  president  has  the  same  authority  in  case  of  enier- 
gency  arising  during  his  encumbrance  of  the  office.  Russell  v.  Washing- 
ton Savings  Bank,  23  App.  Cas.  (D.  C.)  398  (1904).  But  the  president 
cannot  bind  the  bank  to  a  contract  of  employment  retaining  the  services 
of  an  attorney  by  the  year  for  consultations  and  advice.  Dent  v.  People's 
Bank,  118  Ark.  157,  175  S.  W.  1154  (1915). 

"^  But  if  his  own  interests  are  in  conflict  with  those  of  the  bank  the 
proceedings  may  be  avoided  without  showing  actual  fraud.  Gund  v.  Bal- 
lard, 73  Neb.  547,  103  N.  W.  309  (1905). 

306 


president's  authority  virtute  officii  §  143 

collect  demands  or  claims  of  tlie  bank.  He  may  appear,  answer, 
and  defend  in  suits  against  the  bank.  He  may  retain  and  empltjy 
counsel  on  behalf  of  the  bank.  Counsel  requested  by  him  to 
act  for  the  bank  will  bind  it  by  their  action  in  the  case,  within  the 
ordinary  powers  of  counsel,  by  sole  authority  of  their  engagement 
hy  him.  Nor  will  it  make  any  diii'erence,  though  circumstances 
render  that  engagement  originally  wrong  or  improper.^  This 
would  be  his  own  breach  of  trust  towards  the  bank,  committed 
within  the  scope  of  his  authority,  damages  for  which  the  bank 
could  only  recover  from  himself,  and  which  could  aflFect  no  innocent 
outside  parties,  whether  these  should  be  the  counsel  employed,  or 
the  other  litigants  in  the  cause. 

In  Pacific  Bank  v.  Stone,^"  it  was  held  that  a  president,  or  acting 
president,  has  no  authority,  as  such,  to  engage  an  attorney,  in 
addition  to  the  regular  counsel  emi)loyed  by  the  bank,  unless  with 
the  sanction  or  ratification  of  the  directors.  It  is  to  be  noted 
in  this  case  that  the  bank  sued  the  attorney'  on  a  note,  and  he  set 
up  his  special  contract  with  the  president.  It  would  seem  that  he 
might  have  recovered  against  the  bank  on  quantum  meruit  by 
showing  that  the  bank  received  the  services. 

(c)  The  National  Banking  Act  does  not  specify  the  powers  of 
president  or  cashier.  They  are  held,  therefore,  to  have  only  such 
powers  as  are  inherent  in  such  positions  by  the  very  nature  of 
things.  All  other  powers  are  left  to  the  directors.  The  president 
is  generally,  if  not  always,  a  member  of  the  board  of  directors,  and 
it  is  his  duty  to  preside  over  their  meetings.  lie  has  inherently 
only  one  power  beyond  that  of  any  other  director,  viz.  charge  of 
the  bank's  litigation.^ 

(d)  A  bank  president  may,  on  sufficient  consideration,  contract 
with  the  defendant  in  a  judgment  in  favor  of  the  bank  to  enter  a 
remittitur.^ 

(e)  The  president  may  receive  a  deposit  for  the  bank,  and  it  is 
not  necessary  for  the  depositor  to  show  that  such  deposit  was 
actually  applied  to  her  credit  upon  the  books  of  the  bank.^ 

1  Savings  Bank  of  Cincinnati  v.  Benton,  2  Met.  (Ky.)  240 ;  American 
Ins.  Co.  V.  Oakley,  9  Paige  (N.  Y.)  496;  Mumford  v.  Hawkins,  5  Den. 
(N.  Y.)  355  ;  Oakley  v.  Workingmen's  Benevolent  Society,  2  Hilt.  (N.  Y.) 
487  ;   Alexandria  Canal  Co.  r.  Swann,  5  How.  83,  12  L.  ed.  60. 

1°  Pacific  Bank  v.  Stone,  121  Cal.  202.  .53  Pac.  634  (1898). 

-  Hodges,  Executor,  v.  First  National  Bank,  22  Gratt.  (Va.)  51. 

'  Case  V.  Hawkins,  53  Ala.  702  (1876). 

*  Juniper  v.  Bank,  48  S.  C.  430  (1896). 

307 


§  143  THE    PRESIDENT 

(/)  The  offer  of  a  reward  made  by  the  president  of  a  bank,  for 
information  leading  to  the  arrest  of  a  defaulting  paying  teller,  is 
binding  on  the  bank,  unless  contrary  to  its  by-laws.^ 

(g)  And,  in  Guernsey  v.  Black  Diamond  Coal  and  Mining  Co.,^ 
it  was  held  that  the  president  by  virtue  of  his  office  may  make  a 
valid  assignment  of  a  judgment  in  favor  of  a  bank. 

(A)  The  president  may,  for  the  purpose  of  making  up  a  debt  due 
the  bank,  take  from  the  debtor  property  incumbered  by  other 
debts. ^ 

(i)  If  the  president  commits  a  fraud,  relative  to  a  subject  that 
concerns  his  duty  to  the  bank,  in  dealing  with  persons  having 
business  with  the  bank,  the  bank  will  be  liable  to  such  third  person.^ 

§  144.  (a)  Where  the  President  has  no  Inherent  Power,  he 
binds  the  bank  in  many  cases  by  usage  or  express  authority. 

In  Many  Cases  Bank  Bound  by  President,  though  he  has  No 
Inherent  Power  to  Act  in  the  Matter 

The  cases,  though  largely  occupied  in  deciding  that  a  president 
has  no  authority  by  virtue  of  his  office,  yet  hold  the  bank  bound  by 
his  action  wherever  the  charter,  or  a  vote  of  the  directors,"  or  usage 
of  the  bank,  or  long  acquiescence  by  the  bank  in  a  course  of  action 
by  the  president,*'  or  any  facts  constituting  a  holding  out  of  the 
president  by  the  bank  as  having  a  right  to  act  for  it,  lay  a  founda- 
tion for  authority  actual  or  inferred,  and  whenever  the  bank  has 
ratified  his  action. °^ 

The  general  rule  is,  a  corporation  acts  through  its  president, 
and  through  him  executes  its  contracts  and  agreements,  and  an  act 

5  Bank  v.  Griffin,  168  111.  314,  48  N.  E.  154  (1897). 

6  68N.  W.  777  (1896). 

7  Panhandle  National  Bank  v.  Emery,  78  Tex.  498,  15  S.  W.  23  (1890). 

8  Bickley  v.  Bank,  43  S.  C.  528,  21  S.  E.  886  (1892). 
«  §  144.     Rankin  v.  Tygard,  198  Fed.  795  (1912). 

»  Bell  V.  Hanover  National  Bank,  57  Fed.  821 ;  Rankin  v.  Tygard, 
198  Fed.  795  (1912) ;  Citizens'  Life  Ins.  Co.  v.  Owensboro  Savings  Bank, 
150  Ky.  161,  150  S.  W.  26  (1902) ;  Griffin  v.  Ersldne,  131  Iowa  444,  109 
N.  W.  13  (1906)  ;  Citizens'  Bank  etc.  Co.  v.  Thornton,  174  Fed.  752  (1909). 

"1  Quoted  in  Montgomery  Bank  v.  Walker,  181  Ala.  368,  61  So.  951 
(1913). 

Even  if  the  president  of  a  bank  has  not  the  inherent  power  by  virtue 
of  his  office  to  represent  the  bank  in  securing  the  execution  of  a,  bond 
guaranteeing  the  fidelity  of  its  cashier,  if  the  bank  ratifies  the  action  by 
suing  on  the  bond  it  must  accept  it  subject  to  the  president's  representa- 
tion inducing  its  execution.  Warren  Deposit  Bank  v.  Fidelity,  etc.  Bank, 
116  Ky.  38,  74  S.  W.  1111  (1903). 
308 


WHERE    THE    PRESIDENT    HAS    NO    INHERENT    POWER  §  144 

pertaining  to  the  business  of  the  corporation,  not  clearly  foreign 
to  the  general  power  of  the  president,  done  through  him,  will, 
in  the  absence  of  proof  to  the  contrary,  be  presumed  to  have  been 
authorized  to  be  done  by  the  corporate  body."" 

No   Inherent  Poiccr  over  Bank's  Property 

(b)  The  control  of  the  president  of  a  bank  over  its  property 
of  any  description  whatsoever,  from  real  estate  down  to  a  naked 
right  to  bring  an  action  at  law,  is  of  the  slightest.  lie  has  no  power 
to  draw  checks  in  its  })ehalf,  or  against  its  funds.°°"  Xor  has  he 
authority  to  bind  the  bank  by  executing  a  note  in  its  namc^*  lie 
is  not  theexecutive  officer  who  haschargeof  itsmoneyed  operations. 
It  is  not  among  his  functions  to  withdraw  or  remove  its  deposited 
funds,  or  to  use  them  for  any  purpose  whatsoever.  He  cannot  even 
employ  any  portion  of  the  assets  or  credits  of  the  bank  for  paying 
or  settling  with  its  creditors,  unless  by  virtue  of  an  express  delega- 
tion of  authority  from  the  directors.  He  has  no  implied  authority 
to  use  the  funds  of  the  bank  to  pay  his  personal  obligations."'^  He 
has  no  more  power  of  management  or  disposal  over  the  property 
of  the  corporation  than  any  other  single  member  of  the  board. ^ 
He  has  no  power  to  allow  overdrafts.^"  Nor  can  he,  even  though 
clothed  with  the  general  authority  to  lend  money,  bind  the  l)ank 
by  loaning  its  funds  to  himself  or  to  the  cashier  who  knows  the 
loan  is  for  the  president's  benefit.'*     He  cannot  close  the  bank  or 

"^  Bank  v.  Griffin,  IGS  111.  314,  48  N.  E.  154  (1897).  See  Boyd's 
Exr.  V.  First  National  Bank,  128  Ky.  468,  108  S.  W.  3G0  (1908). 

'""'  And  if  he  draws  checks  on  the  funds  of  the  bank  in  a  trust  company 
of  which  he  is  cashier  and  deposits  them  in  a  trust  company  to  his  own 
credit  and  afterwards  draws  them  out  the  bank  may,  upon  tlie  insolvency 
of  the  trust  company,  recover  the  funds  so  deposited,  since  it  is  without 
fault.  Bank  of  Roxie  r.  Lampton,  104  Miss.  427,  61  So.  4r)2  (1913).  But 
a  general  resolution  of  the  directors  containing  no  limitation  on  its  face 
will  justify  payment  by  a  depository  of  checks  drawn  by  the  president. 
First  National  Bank  v'.  National  Park  Bank,  175  Fed.  881  (1910). 

'^  National  Bank  v.  Atkinson,  55  Fed.  465. 

<"=  Chrystie  v.  Foster,  61  Fed.  551. 

»  Gibson  r.  Goldthwaite,  7  Ala.  281.  Where  a  president  loses  in  specu- 
lative dealings  and  pays  his  brokers  with  drafts  of  the  bank,  the  brokers 
are  chargeable  with  notice  that  the  drafts  represent  money  embezzled 
from  the  bank.  Beard  v.  :Milmine,  88  Fed.  868  (1898) ;  Lamson  v.  Beard, 
94  Fed.  30  (1899).  See  Campbell  v.  Manufacturers'  National  Bank,  67 
N.  J.  L.  .301,  51  Atl.  497,  91  Am.  St.  Rep.  438  (1902). 

'«  Western  Bank  /•.  Coldewcy.  120  Ky.  776.  83  S.  W.  629  (1904). 

1*  McGregor  v.  Witham,  126  Ga.  707,  56  S.  E.  55  (1906). 

309 


§  144  THE   PRESIDENT 

prevent  the  receipt  of  deposit  by  the  bank.^'^  He  cannot  lease  the 
real  estate  of  the  bank  or  cancel  outstanding  leases  thereof.^*^  He 
cannot  bind  the  bank  to  make  good  the  default  of  another.^*  But 
in  California  under  the  usages  and  customs  of  modern  banking  the 
president  of  a  bank  is  its  executive  officer  and  the  rule  that  his 
power  is  limited  to  transactions  expressly  authorized  by  the  direc- 
tors no  longer  obtains. ^-^  These  remarks,  of  course,  refer  to  his  in- 
herent powers  enjoyed  virhite  officii;  for,  of  course,  if  any  resolu- 
tion ^"  or  any  established  usage  gives  him  the  power,  either  at  all 
times  or  under  special  circumstances,  to  draw  against  the  cor- 
porate deposits,  he  may  do  so  within  the  limits  of  the  power.  Thus, 
in  a  Tennessee  case,  a  usage  was  shown  for  the  president  to  draw 
checks  when  the  cashier  was  absent,  and  the  judges  went  the  length 
of  holding  that  he  might  legally  do  so  in  the  absence  of  the  regular 
cashier,  even  though  a  cashier  j^ro  tern,  had  been  chosen.^ 

When  the  general  management  of  the  affairs  of  the  bank  is 
left,  as  is  customary,  with  the  directors,  the  president  has  not  power 
to  mortgage,  assign,  or  pledge,  any  more  than  he  has  to  dispose 
otherwise  of  any  of  its  property  of  any  description  whatsoever,  or 
for  any  purpose,  however  proper  and  justifiable  in  itself.^  In  the 
case  in  Selden's  Reports  the  court  say  :  "  In  Massachusetts  it  has 
been  held  that  neither  the  president  nor  the  cashier  has  power, 
virtute  officii,  to  transfer  negotiable  funds,  without  express  author- 
ity from  the  directors.  This,  however,  must  be  erroneous,  if  the 
transfer  be  made  in  the  usual  course  of  business,  and  bona  fide. 
But  it  is  safe  to  say  that,  when  the  sale,  assignment,  or  transfer 

1'^  Ex  parte  Smith,  33  Nev.  466,  111  Pae.  930  (1913). 

1''  People's  Bank  v.  Bennett,  159  Mo.  App.  1,  139  S.  W.  219  (1911). 

i«  Swenson  Bros.  Co.  v.  Commercial  State  Bank,  98  Neb.  702,  154  N. 
W.  233  (1915). 

'/  Bartlett  Estate  Co.  v.  Fraser,  11  Cal.  App.  373,  105  Pae.  130  (1912) ; 
Roe  V.  Versailles  Bank,  167  Mo.  406,  67  S.  W.  303  (1902). 

1"  When  "  the  board  of  directors  gives  the  president  the  supervision  of 
the  conduct  and  business  of  said  bank  under  the  direction  of  the  board  of 
directors"  a  negotiation  for  the  sale  of  property  held  by  the  bank  is  fairly 
within  the  presumptive  authority  of  its  president.  Ida  Co.  Savings 
Bank  v.  Johnson,  1,56  Iowa  234,  136  N.  W.  225  (1912). 

2  Neiffer  v.  Bank  of  Knoxville,  1  Head  (Tenn.)  162 ;  Fulton  Bank  v. 
New  York  &  Sharon  Canal  Co.,  4  Paige  (N.  Y.)  127.  But  as  to  when 
the  bank  is  justified  in  paying  on  the  signature  of  the  president,  see 
chapter  on  Checks. 

3Hoyt  V.  Thompson,  1  Seld.  (N.  Y.)  320;  Leggett  v.  New  Jersey 
Manufacturing  &  Banking  Co.,  Saxt.  Ch.  (N.  J.)  542;  Parker  v.  Carolina 
Sa\ings  Bank,  53  S.  C.  583,  31  S.  E.  673  (1898) ;  Montgomery  Bank  v. 
Walker,  181  Ala.  368,  61  So.  951  (1913). 

310 


WHERE    THE    PRESIDENT    HAS    NO    INHERENT    POWER  §  144 

requires  the  use  of  the  corporate  seal,  it  cannot  be  made  without 
the  assent  and  authority  of  the  board."  However  reluctant  we 
may  be  to  confess  that  the  learned  judge  correctly  interpreted  the 
opinion  of  the  Massachusetts  court,  it  cannot  be  denied  that  his 
amendment  thereof  and  the  doctrine  laid  dcjwn  by  him  are  correct. 
But  this  is  by  no  means  necessarily  to  be  construed  as  extending 
the  power  of  the  i)resident  to  the  performance  of  any  of  the  acts 
specified.  The  judge  says  only  that  the  president  or  cashier  must 
be  able  to  do  them,  and  certainly  the  cashier  is  able  to  do  them. 
Equally  certain  it  is  that  there  is  no  authority  whatsoever  for 
supposing  that  the  intention  was  to  declare  the  president  also 
able  to  do  them. 


Cannot  Release  Claim,  or  Stay  Execution 

(c)  The  same  species  of  limitation  upon  the  power  of  the  presi- 
dent forbids  him  to  surrender  or  release  ^  claims  of  the  bank  against 
any  person,  from  whatsoever  source  arising ;  or  to  stay  the  collec- 
tion of  an  execution  against  the  estate  of  a  judgment  debtor; 
or  to  extend  time  to  a  debtor.^"  For  either  of  these  acts  is  the 
exercise  of  a  discretionary  authority  over  the  affairs  and  property 
of  the  bank,  which  is  the  peculiar  and  exclusive  province  of  all  the 
directors.^ 

No  Inherent  Power  to  Contract  for  Bank 

(d)  The  president,  unless  specially  empowered,  cannot  enter 
into  contracts  or  agreements  on  behalf  of  the  corporation.^"  Au- 
thority so  to  do  may,  however,  be  conferred  on  him  by  the  charter, 
by  vote  of  the  board  of  directors,  or  by  the  existence  of  such  facts 
as  constitute  a  public  holding  out,  and  warrant  the  public  in  be- 

••  Olney  v.  Chadsey,  7  R.  I.  224 ;  Swindell  v.  Bainbridge  State  Bank, 
3  Ga.  App.  364,  (30  S.  E.  13  (1908). 

•»"  Arbogast  v.  American  Exchange  National  Bank,  125  Fed.  518  (1913). 

^  Ibid.;  Brouwer  v.  Appleby,  1  Sandf.  Super.  (N.  Y.)  158;  Sypker  i'. 
Spence,  8  Ala.  333. 

*»  Robertson  v.  Bixffalo  Co.  National  Bank,  40  Neb.  235,  58  N.  W. 
715  (1894) ;  Arbogast  v.  American  Exchange  National  Bank,  125  Fed. 
518  (1913). 

The  president  has  no  implied  power  to  lease  the  bank's  real  estate  or 
cancel  leases  which  it  has  outstanding  in  respect  thereto  or  enter  into 
new  ones  for  it  as  lessee.  People's  Bank  v.  Bennett,  159  Mo.  App.  1,  139 
S.  W.  219  (1911). 

311 


§  14i  THE    PRESIDENT 

lieving  that  the  undertaking  is  within  the  scope  of  his  legitimate 
delegated  authority.^ 

No  Potver  to  Borrow 

The  president  of  a  savings  bank,  having  authority  to  carry  on  its 
general  business,  is  not  virtute  officii  empowered  to  borrow  money 
on  its  behalf.^" 

When  President's  Contract  Binds  Bank 

(e)  Where  one  transacts  business  or  enters  into  contracts  or 
agreements  with  the  president  of  the  bank,  which  in  form  run 
between  the  person  upon  the  one  part,  and  the  president,  described 
as  such,  upon  the  other,  if  it  was  understood  by  the  party  at  the 
time  that  he  was  in  fact  dealing  or  agreeing  with  the  bank,  if  he 
acted  upon  this  supposition  in  good  faith,  if  the  president  had 
from  any  source  authority  to  bind  the  bank  in  such  a  transaction, 
and  especially  if  the  bank  actually  receives  whatever  benefit  may 
accrue  from  it,  —  then  there  can  be  no  doubt  that  the  bank  could 
be  held  to  perform  wdiatever  was  undertaken  on  its  behalf  by  its 
president/  But  if  the  president  was  acting  beyond  the  scope  of 
any  authority  derived  from  his  office,  or  from  directorial  votes, 
or  from  usage,  then  his  act,  except  of  course  by  virtue  of  a  subse- 
quent ratification,  could  not  bind  the  bank.'^"  Even  where  the 
president  does  not  designate  himself  as  such,  yet  the  circumstances 
of  the  transaction  may  be  put  in  evidence,  to  show,  so  far  as  they 
may  be  able,  that  he  was  in  fact  acting  in  his  official  capacity ;  and 
if  this  be  established,  the  failure  to  designate  himself  formally  by 
his  official  title  will  not  affect  the  binding  force  of  the  transaction 
upon  the  bank.  But  if  the  dealing  was  with  him  as  an  individual, 
not  as  an  officer,  the  bank  has  nothing  to  do  with  the  affair. ^^ 

«Mt.  Sterling  Turnpike  Co.  v.  Looney,  1  Met.  (Ky.)  550;  Farmers' 
Bank  v.  McKee,  2  Pa.  St.  318. 

In  Manny  v.  Spokane  State  Bank,  78  Wash.  230,  138  Pac.  682  (1914), 
the  court  held  that  the  president  of  a  bank  which  held  a  mortgage  on 
insured  property  was  acting  within  the  apparent  scope  of  his  authority 
in  contracting  for  repairs  of  the  building  after  a  fire. 

^  Fifth  Ward  Savings  Bank  v.  First  National  Bank,  47  N.  J.  L.  357, 
1  Atl.  478  (1885). 

7  Tremont  Bank  v.  Paine,  28  Vt.  24. 

''"  First  National  Bank  v.  Hanover  National  Bank,  66  Fed.  34. 

'"'  It  is  for  the  jury  to  determine  whether  a  contract  made  by  the  presi- 
dent in  his  own  name  was  really  made  as  agent  of  the  bank.  Northern. 
National  Bank  v.  Lewis,  78  Wis.  475, 47  N.  W.  834. 

312 


WHERE    THE    PRESIDENT   H-\S    NO    INHERENT    POWER  §   144: 

Thus  where  one  gave  money  to  a  bank  president,  who  signed  a 
receipt  for  it  "  to  be  deposited  in  the  bank  to  the  credit  of  A."  and 
signed  the  receipt  simplj'  with  his  name  alone,  it  was  held  that  the 
facts  were  admissible  to  go  to  the  jury  for  what  they  might  be 
worth  as  tending  to  show  that  the  money  was  paid  to  and  rec'ei\-ed 
by  the  president  in  his  official  capacity  on  behalf  of  the  l)ank ; 
but  that  they  were  by  no  means  conclusive  of  this,  and  that  if  the 
jury  should  find  that  the  money  was  intrusted  to  the  i)resi(k'nt  as 
a  private  individual  simply  for  the  convenience  of  getting  him  to 
deposit  it  on  behalf  of  A.,  then  he  was  A.'s  agent,  and  if  he  failed 
to  make  the  deposit  regularly  and  honestly,  it  was  his  individual, 
not  his  official  default,  and  the  bank  was  not  liable.^  Precisely 
to  the  same  effect  was  the  decision  in  Terrell  v.  Branch  Bank.^ 
Though  the  officer  receiving  the  money  was  in  this  case  a  director, 
the  principle  of  law  is  identical  in  the  two  rulings. 

In  Northern  National  Bank  v.  Lewis, ^"  a  firm,  which  was  in- 
debted to  a  bank,  ga\'e  to  the  president,  in  his  own  name,  a  contract 
under  seal  by  which  he  received  an  option  to  purchase  certain  land. 
The  contract  further  i)rovided  that  in  case  he  purchased  the  land 
he  might  retain  out  of  the  purchase  price  a  sum  sufficient  to  pay 
the  indebtedness  of  the  firm  to  the  bank.  It  was  held  that  parol 
evidence  was  admissible  to  show  that  the  contract  was  taken  by 
the  president  as  agent  of  the  bank,  for  its  benefit,  and  as  security 
for  the  payment  of  the  firm's  indebtedness. 

ir/ic/i  President's  ^id   is  that  of  the  Bank.     Receipt 

(J)  Government  securities  were  given  to  a  bank  president  to 
exchange ;  he,  using  bank  paper,  gave  a  receipt,  signing  his  own 
name.  In  a  suit  to  recover  the  value  of  the  securities,  the  act  of 
the  president  was  held  the  bank's  ac't.^° 

May  Agree  to  receive  Money  on  Note  at  a  Place  other  than 
the  One  Named 

(g)  The  president  of  a  bank  may,  without  special  authority, 
agree  with  the  payor  of  a  note,  or  an  agent,  to  receive  the  money  at 

*  Sterling  v.  Marietta  &  Susquehanna  Trading  Co.,  11  Serg.  &  R.  (Pa.) 
179. 

9  12  Ala.  502. 

""  Northern  National  Bank  v.  Lewis,  78  Wis.  475,  48  N.  W.  834. 

^"  Van  Leuven  v.  First  National  Bank  of  Kingston,  54  N.  Y.  G71. 

313 


§  144  THE    PRESIDENT 

another  place  than  that  designated  in  the  note  for  pajinent,  to 
forward  it  to  the  bank  where  the  note  is  held  and  payable." 

But  the  president  of  a  national  bank  has  no  authority  to  agree 
to  receive  anything  but  money  in  payment  of  a  non-negotiable 
note  indorsed  to  it."" 

Cannot  Discharge  a  Debtor  of  the  Bank,  even  though  He  Substitutes 

Himself 

(h)  W.,  a  director  of  a  bank,  owed  it  a  note  of  $1000,  and  held 
$1000  of. its  stock.  T.,  the  president,  agreed  with  him  to  buy  the 
stock  for  himself,  received  it  from  him,  handed  it  to  the  cashier, 
instructing  him  to  hold  it  in  place  of  W.'s  note  and  to  surrender 
the  note  to  W.,  saying  that  he,  T.,  would  pay  the  amount  to  the 
bank.  The  cashier  received  the  stock,  stamped  the  note  paid, 
and  surrendered  it  to  W.  Held,  that  the  bank,  not  having  ratified 
the  transaction,  was  not  bound  by  it,  and  that  it  did  not  discharge 
W.'s  liability  upon  the  note.^^ 

Nor  can  the  president  discharge  himself  as  debtor.^-" 

Acquiescence 

But  where  a  president  released  the  lien  of  a  judgment,  the  long 
acquiescence  of  the  bank  was  held  a  ratification.^^ 

(i)  A  president  cannot  certify  his  own  check ;  such  certification 
is  on  its  face  notice  of  fraud  to  all.^^  Nor  can  he  use  the  bank  funds 
to  pay  his  personal  obligations.^^" 

Where  the  president  of  a  bank  certifies  bonds  left  with  the  bank 
as  trustee  to  be  certified  as  called  for,  and  uses  them  as  collateral 
to  cover  his  embezzlement,  the  bank  cannot  claim  any  rights  there- 
under against  the  owner.^"^* 

Indorsement  Good  by  Habit  Known  to  Board 

(j)  The  president  has  no  inherent  power  to  indorse  or  transfer 
negotiable  paper  belonging  to  the  bank,  but  such  authority 'may 

"  Vilas  National  Bank  of  Plattsburgh  v.  Strait,  58  Vt.  448. 

"«  First  National  Bank  v.  Alexander,  152  Ala.  585,  44  So.  866  (1907). 

12  Rhodes  V.  Webb,  24  Minn.  292  (1877). 

12"  State  Bank  of  Isanti  v.  Mutual  Telephone  Co.,  123  Minn.  314,  143 
N.  W.  912,  1915A  Ann.  Cas.  1082,  n. 

13  Winton  v.  Little,  94  Pa.  St.  64  (1880). 

1^  Claflin  V.  Bank,  25  N.  Y.  293.         ''"  Chrystie  v.  Foster,  61  Fed.  551. 
i^'-  Washington  etc.  R.  Co.  v.  Real  Estate  Tr.  Co.,  177  Fed.  306  (1910) ; 
Real  Estate  Tr.  Co.  v.  Washington  etc.  R.  Co.,  191  Fed.  566  (1910). 

314 


WHERE    THE    PRESIDENT   HAS    NO    INHERENT   POWER  §   144 

be  implied  from  his  lia])it  of  doing  acts  of  the  same  general  char- 
acter, known  to  the  directors.'' 

One  receiving  a  note  from  a  president  who  has  no  authority  to 
transfer  it  is  not  a  bona  fide  holder,  though  he  supposes  the  presi- 
dent to  have  such  power,  such  supposition  being  a  mistake  of  law.'' 

Where  the  president  returns  A.'s  note,  held  by  the  bank,  as 
paid,  in  consideration  of  the  discharge  of  a  mortgage  held  by  A.  and 
executed  by  the  president  in  his  individual  capacity,  which  mort- 
gage has  never  been  held  or  pledged  to  the  bank,  the  bank  is  not 
bound  by  the  act  of  the  president  and  the  note  is  not  thereby 
discharged.'^" 

Cases  in  which  a  Narroiver  Doctrine  was  Sufficient 

(k)  Such  is  the  general  doctrine,  forbidding  any  species  of  con- 
tract to  be  made  by  a  president  on  behalf  of  his  bank.  But  in 
some  few  cases,  such  as  will  occasionally  arise,  in  which  the  special 
contract  could  be  condemned  as  invalid  without  the  necessity  of 
making  the  prohibition  against  contracting  at  all  quite  so  sweeping 
and  absolute,  the  courts  have  contented  themselves  with  holding 
that  a  president  cannot  bind  the  bank  in  any  unusual  manner,  or 
in  any  undertaking  lying  outside  of  its  customary  routine  of  busi- 
ness. Upon  this  narrower  ground  have  been  based  rulings: 
(1)  That  a  bank  president  has  no  right  to  agree  to  receive  deposits 
of  money  on  interest,  it  not  being  a  part  of  the  ordinary  business 
of  banking  to  do  so.'^  (2)  That  the  president  cannot  charge  the 
bank  with  any  greater  liability  for  the  safety  of  a  special  deposit 
than  the  bank  is  wont  to  undertake  for  such.''  To  the  same  prin- 
ciple may  be  also  referred  the  ruling  that  the  promise  of  the  presi- 
dent and  cashier  that  an  indorser  shall  not  be  liable  on  his  indorse- 
ment does  not  bind  the  bank,  though  it  may  be  so  specific  as  to 
bind  the  president  and  cashier  as  individuals.  An  agreement  so 
contrary  to  the  usual  course  of  business  and  to  the  probable  interest 
of  the  corporation  can  be  made  by  no  less  an  authority  than  that 
of  the  directors. 

"  Smith  V.  Lawson,  18  W.  Va.  212  (1881) ;  United  States  National 
Bank  v.  First  National  Bank,  79  Fed.  29G  (1897). 

15"  Dundee  National  Bank  v.  Huntington,  20  App.  Div.  (Ilun,  N.  Y.) 
104  (1897).  ^    ,^  ^ 

16  Fulton  Bank  ;;.  New  York  &  Sharon  Canal  Co.,  4  Paige  (N.  Y.) 
127. 

"  Focter  v.  Essex  Bank,  17  Mass.  479. 

315 


§  144  THE    PRESIDENT 

In  a  recent  case  it  is  a  qiicBve  whether  the  president  of  a  bank  has 
power  to  bind  the  bank  by  his  agreement  with  an  accommodation 
acceptor  of  a  draft  discounted  by  the  bank  that  the  bank  will  not 
look  to  him  for  payment  of  the  draft  (other  security  having  been 
furnished  to  the  bank  by  the  drawer).  It  was  not  necessary  to 
determine  this  point,  because  the  arrangement  between  the  presi- 
dent and  the  acceptor  was  merely  verbal,  and  the  court  held  it 
void  under  the  Statute  of  Frauds.^* 

If  the  president  negotiates  notes  for  value,  and  at  the  same  time 
executes  in  the  name  of  the  bank  a  written  guaranty  of  payment, 
the  retention  and  enjoyment  by  the  bank  of  the  proceeds  of  such 
transaction  constitutes  a  ratification  of  the  president's  act.^^" 

Statutory,  Charter,  or  Special  Authority  of  President.  —  (/)  In 
New  York,  special  statutes  have  allowed  many  matters  to  be  con- 
ducted in  the  president's  name.  Thus  the  bank  may  sue  and  be 
sued  in  the  name  of  its  president,  provided  the  cause  of  action  is 
distinctly  laid  to  be  for  or  against  the  corporation,  and  not  for  or 
against  him.^^  Mortgages  to  secure  subscriptions  for  stock  prop- 
erty run  to  him.  And  it  has  been  accordingly  held  that  the  assign- 
ment of  such  mortgages  should  be  executed  by  him,  personally,  in 
his  own  name,  with  the  addition  of  his  official  designation,  and 
under  his  private  seal,  rather  than  under  the  corporate  seal. 2"  A 
transfer  made  to  "  D.  L.,  President  of  the  American  Exchange 
Bank",  was  construed  to  be,  by  fair  interpretation,  a  transfer 
directly  to  the  bank,2i  with  the  same  effect  of  vesting  title  as  if  it 
had  been  made  to  the  bank  itself  by  its  corporate  name.  In  sup- 
port of  this  case  the  statutes  of  the  State  were  referred  to.  But 
the  reference  seems  needless,  for  the  decision  could  well  have  rested 
solely  upon  the  general  principles  enunciated.  These  perhaps 
afford  some  support  to  the  doctrine  advanced  in  the  preceding 
paragraph  {k),  and  certainly  made  the  cited  case  useful  as  a  general 
precedent,  without  regard  to  the  effect  of  local  legislation. 

(m)  A  charter  provision,  or  a  directorial  vote  conferring  a 
power  upon  the  "  president  and  directors",  or  the  "  president  and 

18  Davis  V.  Randall,  115  Mass.  547. 

i8»  Thomas  v.  City  National  Bank,  40  Neb.  501,  58  N.  W.  943  (1894) ; 
Rich  V.  State  National  Bank,  7  Neb.  201. 

19  Delafleld  v.  Kinney,  24  Wend.  (N.  Y.)  345;  Ogdensburgh  Bank  v. 
Van  Rensselaer,  6  Hill  (N.  Y.)  240;  Pentz  v.  Saekett,  Hill  &  D.  (N.  Y.) 
113.     See  also  Hunt  v.  Van  Alstyne,  25  Wend.  (N.  Y.)  605. 

20  Valk  V.  Crandall,  1  Sandf.  Ch.  (N.  Y.)  179. 
"  Leavitt  v.  Fisher,  4  Duer  (N.  Y.)  1. 

316 


REPRESENTATIONS   AND   ADMISSIONS    OF   THE    PRESIDENT      §  145 

cashier",  will  be  strictly  construed  as  conferring  only  a  joint  power, 
exclusively,  and  by  no  means  a  joint  and  several  power.  The 
execution  can  be  by  neither  of  the  designated  parties  singly,  but 
must  always  be  strictly  by  both  in  conjunction."  Though,  if  both 
agree  that  a  certain  course  shall  be  pursued,  and  that  an  executive 
act  occurring  therein  shall  be  done  by  one  alone,  that  act  may  be 
legally  performed  according  to  such  arrangement.  This  is  mere 
matter  of  detail,  and  pertains  to  the  execution,  not  to  the  exercise, 
of  the  power.  For  example,  where  their  power  is  to  borrow  money, 
if  they  agree  upon  all  the  items  going  to  make  up  the  transaction, 
but  that  the  note  given  for  the  loan  shall  be  indorsed  by  the  cashier 
alone,  this  will  be  a  perfectly  regular  and  sufficient  execution  of 
the  duty  intrusted  to  them.^^ 

Authority  given  by  the  directors  to  the  president  to  sell  and 
convey  certain  real  estate  includes  an  authority  to  enter  into  a  valid 
written  contract  for  such  sale  and  conveyance  to  be  made  at  a 
certain  day  future.^^ 

(n)  But  where  the  president  is  authorized  to  execute  to  the 
purchaser  of  certain  property,  a  bond  of  indemnity  against  the 
claims  of  a  certain  company,  and  said  president,  instead,  exe- 
cutes a  bond  conditioned  upon  the  bank's  procuring  from  the 
company  a  good  and  sufficient  lease  of  the  property,  the  presi- 
dent exceeds  his  authority  and  the  bank  is  not  bound .^^ 

(o)  Where  the  president  is  held  out  to  the  public  as  empowered 
to  attend  to  all  the  bank's  business,  he  has  authority  to  adjust  a 
claim  in  favor  of  the  bank  by  taking  an  assignment  of  a  judgment, 
and  such  adjustment  is  valid  if  the  agreement  is  afterwards  carried 
into  effect.'*^ 

§  145.  Representations  and  Admissions  of  the  President.  — 
Admissions  of  the  president  afTect  the  bank  only  when  they  relate 
to  matters  within  the  scope  of  his  agency.^     The  fact  of  his  high 

22Ridgway  v.  Farmers'  Bank,  12  Serg.  &  R.  (Pa.)  256;  Macbean  v. 
Irvine,  4  Bibb  (Ky.)  17.  Nor  can  they  delegate  their  authority  to  a 
third  person.  Bryant  v.  Bank  of  Commerce,  95  Wis.  476,  70  N.  W. 
480  (1897). 

"  Fleekncr  v.  Bank  of  United  States,  8  Wheat.  338,  5  L.  ed.  631. 

2^  Augusta  Bank  v.  Hamblet,  35  Me.  491. 

"  National  Bank  r.  Levanseler,  115  Mich.  372,  73  N.  W.  399  (1898). 

2«  First  National  Bank  v.  New,  146  Ind.  411,  45  N.  E.  597  (189()). 

1  §  145.  Spalding  ;•.  Bank  of  Susquehanna  County,  9  Barr  (Pa.)  28; 
Panhandle  National  Bank  v.  Emery,  78  Tex.  498,  15  S.  W.  23  (1890); 
National  Bank  of  Rondout  r.  Byrnes,  84  Apj).  Div.  100  (1903),  82  N.  Y. 
S.  497.     See  remarks  on  Declarations  and  Admissions  of  Cashiers,  post. 

317 


§  145  THE    PRESIDENT 

and  responsible  position  does  not  operate  to  extend  in  any  degree 
the  rigidity  of  this  rule  of  the  common  law. 

(a)  Representations  of  a  president,  made  in  transacting  the 
bank's  business,  are  admissible  against  it ;  but  statements  in  which 
the  bank  has  no  interest  are  not ;  neither  are  declarations  made 
after  completion  of  the  transaction.^"  Like  other  agents,  the 
president  must  act  within  the  scope  of  his  authority  to  bind  his 
principal,  unless  his  acts  are  ratified .^ 

He  and  the  bank  are  different  parties,  and,  in  an  action  in  which 
the  plaintiff  seeks  to  reach  securities  in  the  hands  of  the  bank,  the 
fact  that  the  president,  when  called  as  a  witness  by  the  plaintiff, 
prevaricates,  cannot  be  charged  against  the  bank.^" 

(b)  The  president  has  no  inherent  authority  to  make  admissions 
that  will  release  the  maker  of  a  note  from  his  liability  on  it.* 
Nor  has  he  authority  to  make  representations  that  the  maker 
of  a  note  will  not  be  liable  thereon  when  the  note  is  for  the  benefit 
of  a  corporation  of  which  he  and  the  maker  are  officers  and  the 
agreement  is  adverse  to  the  interests  of  the  bank.^" 

By  Usage,  a  President  may  Have  Power  to  Take  Debt  out  of  Statute 

of  Limitations 

(c)  The  president,  P.,  acknowledged  a  debt  due  from  the  bank 
to  C,  which  was  guaranteed  by  the  E.  firm,  of  which  P.  was  a  mem- 
ber.    Not  as  inherent  in  his  office,  but  by  the  custom  of  the  bank, 

i»  First  National  Bank  v.  Booth,  102  Iowa  333,  71  N.  W.  238  (1897) ; 
National  Bank  of  Rondout  v.  Byrnes,  84  App.  Div.  100  (1903),  82  N.  Y. 
S.  497. 

-  Kennedy  v.  Otoe  County  National  Bank,  7  Neb.  59. 

The  bank  cannot  be  held  even  though  it  passes  a  resolution  to  indem- 
nify the  president  against  liability  on  a  personal  bond  previously  executed 
by  him.  People  v.  Mercantile  Co-op.  Tr.  Co.,  104  App.  Div.  219  (1905), 
99  N.  Y.  S.  521. 

Where  a  bank  claims  credit  for  payments  made  by  its  president  on  a 
construction  contract  contra  to  its  provisions  it  is  estopped  to  deny  au- 
thority of  the  president  to  make*  them.  First  National  Bank  v.  Fidelity 
etc.  Co.  145  Ala.  335,  40  So.  415,  117  Am.  St.  Rep.  45,  5  L.  R.  A.  (n.  s.) 
418,  n.  (1906). 

The  president  of  a  national  bank  cannot  bind  the  bank  by  representing 
the  signature  of  a  note  to  be  genuine.  Commercial  National  Bank  v. 
First  National  Bank,  97  Tex.  .536,  80  S.  W.  601  (1904). 

2«  Brown  v.  Thompson  and  Ohmstede,  79  Tex.  58,  15  S.  W.  168  (1890). 

3  Hodges,  Executor,  v.  First  National  Bank  of  Richmond,  22  Gratt. 
(Va.)  51 ;  Farmers'  National  Bank  v.  Templeton,  40  S.  W.  412  (1897) ; 
Fowler  v.  Walsh,  119  App.  Div.  ,542  (1907),  104  N.  Y.  S.  54. 

^  Bank  of  Le  Roy  v.  Purdy,  100  App.  Div.  64  (1905),  91  N.  Y.  S.  310. 

318 


REPRESENTATIONS    AND    ADMISSIONS    OF    THE    PRESIDENT       §   145 

P.  had  power  to  make  such  achnissions,  and  his  interest  as  guarantor 
did  not  destroy  its  efi'eet,  since  his  act  did  not  all'ect  liis  liabiUty  as 
guarantor ;  he  was  liable  after  as  truly  as  before  the  admission. 
After  so  remarking,  the  court  procee(k'd  :  "  Can  the  achiiission  of 
an  unquestionable  fact,  which  did  not  in  any  way  affect  his  liabil- 
ity, or  promote  his  own  interest,  or  wrong  his  principal,  be  held  to 
place  him  in  a  position  antagonistic  to  his  princi{)al  ?  "  ^  Such 
admission  may  be  made  away  from  the  bank. 

{d)  The  president  of  a  bank  cannot  by  his  admissions  charge 
it  with  a  debt.^ 

Representations  not  Affecting  the  Bank 

(e)  A.,  a  business  man  a  "customed  to  financial  transactions, 
inquired  of  a  bank  president  whether  the  bank  paid  interest  on 
deposits.  The  president  replied  that  it  did  not,  l)ut  that  he  would 
give  him  a  certificate  that  would.  He  thereupon  gave  A.,  for  his 
money,  an  interest-bearing  certificate  of  deposit  with  a  banking 
firm  of  which  the  president  was  a  member.  A.  noticed  that  the 
certificate  was  not  that  of  the  bank,  and  the  president  replied 
that  it  was  all  the  same  thing ;  that  the  firm  owned  the  bank,  and 
that  A.  could  get  his  money  at  the  bank  at  any  time.  The  firm, 
in  fact,  owned  1500  of  2500  shares  of  the  bank  stock.  The  firm 
became  insolvent ;  and  it  was  held  that  A.  had  no  claim  on  the 
bank.  The  president  did  not  mislead  A. ;  he  knew  the  certificate 
was  not  that  of  the  bank,  and  all  the  president  told  him  was  that 
the  certificate  was  as  good  as  the  bank's,  which  was  a  matter  of 
opinion,  and  would  hardly  base  an  action,  unless  the  president 
knew  the  firm  was  in  a  dangerous  condition,  or  otherwise  was 
guilty  of  intentional  fraud,  and  then  the  suit  would  be,  not  against 
the  bank,  but  the  president.  The  court  distinguished  the  case  from 
Steckel  v.  First  National  Bank  of  Allentown.  In  that  case,  the 
bank  officers  positively  asserted  that  the  certificates  were  those  of 
the  bank.^ 

*  Morgan  v.  Merchants'  National  Bank  of  Memphis,  13  Lea  (Tenn.) 
234  (1884).     See  Morawetz,  §§  537-8. 

6  Henry  v.  Northern  Bank  of  Alabama,  63  Ala.  527  (1879). 

6  First  National  Bank  of  Allentown  v.  Williams,  100  Pa.  St.  123  (1882), 
distinguishing  Steckel  v.  First  National  Bank  of  Allentown.  93  Pa.  St. 
37G;  Hein  v.  First  National  Bank,  76  Neb.  831,  107  N.  W.  1019  (190(;). 
See  Patterson  v.  First  National  Bank,  73  Neb.  384,  102  N.  W.  765  (1905). 
where  in  exchange  for  a  check  on  the  bank  the  president  gave  his  personal 
time  check  but  which  the  depositor  believed  to  be  a  certificate  of  deposit. 

319 


§  145  THE    PRESIDENT 

(/)  P.,  who  was  liable  as  second  indorser  on  a  promissory  note 
held  by  a  bank,  met  its  president,  and  said  to  him,  "  Well,  K. 
[the  first  indorser]  didn't  pay  the  note?  "  The  president  replied, 
**  The  matter  is  arranged."  P.  thereupon  satisfied  the  judgment 
against  K.,  which  was  held  as  a  security  against  liability  as  indorser. 
In  this  case  the  president  was  not  asked  to  say,  nor  did  he  say, 
how  "  the  matter  "  was  "  arranged."  His  statement  did  not 
justify  the  inference  that  he  meant  to  assert  that  the  note  was  paid.'' 

(g)  The  president  conspires  with  the  cashier  to  rob  the  bank, 
and  in  pursuance  of  such  conspiracy  gives  to  a  surety  company 
a  certificate  required  from  the  bank,  and  relating  to  the  cashier's 
honesty.  The  directors  having  no  knowledge  of  the  misrepresenta- 
tion, the  bank  is  not  responsible  therefor.  The  giving  of  certifi- 
cates relating  to  the  character  of  employees  is  no  part  of  the  ordi- 
nary business  of  a  bank.^ 

§  146.  Knowledge  of  President.  —  (a)  A  bank  president  knew 
the  address  of  an  indorser  who  should  have  been  notified  of  the 
dishonor  of  a  note ;  but  as  the  president  was  absent,  and  the 
cashier  did  not  know  the  address,  the  bank  failed  to  give  the  proper 
notice.  The  court  held  the  accidental  absence  of  the  president  no 
excuse  for  the  bank's  failure  to  act  on  the  knowledge  possessed 
by  him.  An  officer  should  provide  for  such  contingencies ;  and 
between  the  bank,  the  negligence  of  whose  president  prevented 
proper  action,  and  the  indorser,  entirely  without  fault  and  not 
receiving  the  notice  to  which  the  law  entitles  him,  the  loss  clearly 
rests  with  the  bank.^ 

Notice  of  Suit 

(h)  Notice  of  an  action  against  the  bank  is  well  served  on  the 
president,  though  away  from  the  bank.^ 

7  First  National  Bank  of  Lock  Haven  v.  Peltz,  186  Pa.  St.  204,  40  Atl. 
470  (1898). 

When  the  president  of  a  bank  is  a  surety  on  a  bond  and  induces  his 
cosurety  to  execute  a  note  to  the  bank  by  telling  him  it  is  for  the  purpose 
of  satisfying  the  bank  examiners,  that  it  is  a  mere  matter  of  form  and 
that  he  will  not  be  bound  thereon,  the  bank  is  not  chargeable  with  notice 
of  his  statements  and  they  are  no  defence  to  an  action  on  the  note  by 
the  bank  which  has  parted  with  value.  National  Bank  v.  Casper,  28  Tex. 
Civ.  App.  334,  67  S.  W.  188  (1902). 

8  American  Suretv  Co.  v.  Pauly,  72  Fed.  470,  482 ;  id.,  170  U.  S.  133, 
42  L.  ed.  977,  18  Sup.  Ct.  552  (1898).  See  U.  S.  Fidelity  etc.  Co.  v. 
Muir,  115  Fed.  264  (1902). 

1  §  146.     Central  National  Bank  v.  Levin,  6  Mo.  App.  543  (1879). 

2  Village  of  Port  Jervis  v.  First  National  Bank  of  Port  Jervis,  96  N.  Y. 
550. 

320 


KNOWLEDGE    OF    PRESIDENT  §  146 

(c)  In  an  action  by  an  assignee  in  bankruptcy  to  recover  of  a 
bank  a  payment  made  to  it,  as  in  viokation  of  U.  S.  Rev.  Sts. 
§  5128,  the  bank  is  chargeable  with  knowledge  of  all  facts  in 
regard  to  the  debtor's  intention  and  solvency  which  its  president 
had  acquired  while  acting  as  president  in  its  behalf.^ 

Whenever  information  is  given  to  the  president  for  the  purpose 
of  transmission  through  him  to  the  bank,  the  law  will  regard  it 
as  having  been  so  transmitted.^" 

(d)  Knowledge  of  the  president  of  his  own  frauds,  appear- 
ing upon  books  of  the  bank  i)urposely  kept  by  him  in  a  manner 
to  conceal  the  truth,  is  not  attributable  to  the  bank.' 

And  where  the  president  kept  a  deposit,  as  executor,  and 
fraudulently  appropriated  the  fund  to  his  own  use,  without  the 
knowledge  of  the  bank,  the  bank  is  not  liable.^" 

Where  the  president  takes  a  note  in  order  that  he  might  use  the 
funds  of  the  bank  l)y  making  a  loan  in  which  he  had  a  personal 
interest,  under  the  appearance  that  he  had  taken  the  obligation 
of  the  maker,  and  the  purpose  was  to  evade  the  law  and  deceive 
the  bank  examiner,  the  deception  was  a  breach  of  trust  and  the 
maker  of  the  note,  who  knowingly  entered  into  the  scheme,  is 
liable  thereon  even  though  told  by  the  president  that  he  would 
not  be  liable.'** 

(e)  Knowledge  of  a  president,  who  is  also  a  member  of  the 
discount  committee,  that  a  note  which  was  discounted  for  his 
benefit  was  given  for  an  unlawful  purpose,  is  not  to  be  imputed 
to  the  bank.'' 

(/)  Where  the  president,  wdio  is  also  a  member  of  the  discount 
committee,  has  knowledge  that  the  indorser  of  a  note  has  become 

3  Getman  v.  Second  National  Bank  of  Oswego,  23  Hun  (N.  Y.)  408. 

3«  Bartlett  v.  Woodbine  Savings  Bank,  57  111.  App.  42.") ;  Milhvard  v. 
Cliff  Estate,  IGI  Pa.  St.  157,  28  All.  1072;  Smith  v.  Anderson,  57  Hun 
(N.  Y.)  72;  Chipman  r.  McClellan,  159  Mass.  363,  34  N.  E.  379  (1893) ; 
Forbes  v.  Howe,  102  Mass.  427 ;  Ditty  v.  Dominion  National  Bank,  75 
Fed.  769. 

*  Lamson  v.  Beard,  94  Fed.  30  (1899).  But  see  Cook  v.  American  Tub- 
ing etc.  Co.,  28  R.  I.  41,  65  Atl.  641,  9  L.  R.  A.  (n.  s.)  193,  n.,  where  a 
trust  company  was  chargeable  with  knowledge  that  certain  discounts 
were  part  of  a  fraudulent  scheme  on  the  part  of  its  president  to  obtain 
money  for  his  individual  jiurpose. 

'"  knobelock  v.  Cxermania  Savings  Bank,  50  S.  C.  259,  27  S.  E.  962 
<1897). 

">  Arthur  v.  Brown,  91  S.  C.  316,  74  S.  E.  652  (1912). 

"•  Crraham  v.  Orange  Co.  National  Bank,  59  N.  J.  L.  225,  35  Atl.  1053 
(189G). 

VOL.   1  —  21  321 


§  146  THE    PRESIDENT 

incompetent  to  do  business,  but  is  not  present  when  a  renewal  of 
the  note  is  taken,  and  has  no  part  in  such  transaction,  nor  knowl- 
edge of  it  until  its  completion,  his  knowledge  is  not  enough  to 
charge  the  bank  with  notice  of  such  incompetency.^ 

But  if  the  president  who  has  actual  control  of  all  the  affairs  of 
the  bank  personally  superintends  and  directs  the  discount  before 
maturity  of  a  promissory  note  belonging  to  him  and  of  which  he 
was  the  payee,  his  knowledge  affecting  the  validity  of  the  note  is 
imputed  to  the  bank.^" 

(g)  If  the  president  of  a  bank,  which  is  assignee  of  a  note,  re- 
ceives notice  that  the  same  is  for  accommodation,  and  that  it  was 
made  under  an  agreement  which  was  violated  by  the  transfer,  with- 
out the  consent  of  the  maker,  of  certain  collaterals  given  to  secure 
the  note,  the  bank  cannot  enforce  payment  against  the  makerJ 

(h)  Where  the  maker  of  a  promissory  note  tells  the  president  of 
a  bank  that  said  note  was  procured  by  fraud  and  that  he  will  not 
pay  it,  such  remark,  not  being  made  to  the  president  in  his  official 
capacity,  nor  at  the  bank,  nor  with  reference  to  the  bank's  business,, 
does  not  bind  the  bank  when  it  subsequently  discounts  the  note.* 

(i)  The  president's  knowledge  of  fraud  in  obtaining  notes 
payable  to  the  bank  is  notice  to  the  bank  if  such  notice  comes  to 
the  president  in  his  official  capacity.^ 

Knowledge  of  the  president  who  is  manager  of  the  bank  is 
knowledge  of  the  bank  where  he  acts  for  himself  and  for  the  bank 
in  making  a  purchase  of  a  note  from  himself.^" 

When  the  president  acquires  knowledge  outside  of  his  official 
duties  and  it  is  to  his  personal  interest  to  conceal  it  from  the  bank 
his  knowledge  will  not  be  imputed  to  the  bank.^^ 

(j)  H.,  who  is  a  school  trustee,  deposits  the  school  funds  in  a 
common  deposit  with  his  own.  He  does  this  with  the  knowledge 
of  the  president  and  other  officers.  If  H.  draws  money  from  the 
common  deposit  to  buy  a  homestead,  the  bank,  in  order  to  claim  a 
trust  interest  in  the  homestead  as  being  purchased  with  the  bank's 

6  Bank  v.  Sneed,  97  Tenn.  120,  36  S.  W.  716  (1896). 

e«  McKinney  v.  Ellsworth,  165  Cal.  326,  132  Pac.  7.5  (1913). 

7  Smith  V.  Traders'  National  Bank,  74  Tex.  457,  12  S.  W.  113  (1889). 

8  Washington  National  Bank  v.  Pierce,  6  Wash.  491,  33  Pac.  972  (1893). 

9  Wilson  V.  Paidy,  72  Fed.  129. 

9-  First  National  Bank  v.  Burns,  88  Ohio  St.  434,  103  N.  E.  93,  49 
L.  R.  A.  (n.  s.)  764,  n.  (1913). 

^''  City  Bank  of  Wheeling  v.  Bryars,  72  W.  Va.  29,  78  S.  E.  400  (1913). 
People's  Bank  v.  Exchange  Bank,  116  Ga.  820,  43  S.  E.  269  (1902). 

322 


KNOWLEDGE    OF   PRESIDENT  §  14G 

money,  cannot  set  up  the  fact  that  the  school  money  did  not 
belong  to  II.i° 

(/,•)  Where  the  president,  acting  in  his  own  interest  and  not 
that  of  the  bank,^''"  procures  from  the  directors  the  discount  of 
promissory  notes  given  by  the  treasurer  of  another  company,  the 
directors  having  no  knowledge  or  notice  of  any  fact  afi'ecting  the 
validity  of  the  notes,  the  bank  is  not  chargeable  with  the  president's 
knowledge." 

When  the  president  of  a  bank  who  is  the  owner  of  another  bank, 
is  insolvent  and  it  is  for  his  interest  to  keep  such  knowledge  away 
from  his  bank  his  knowledge  of  insolvency  at  the  time  of  executing 
a  check  is  not  to  be  imputed  to  the  bank."" 

A  president  who  makes  a  contract  with  himself  against  the 
interests  of  the  bank  is  a  stranger  to  the  bank  and  his  knowledge 
cannot  be  imputed  to  the  bank."^ 

(/)  If  the  president  for  his  own  purposes  obtains  a  promissory 
note  from  a  third  person,  without  consideration,  and  the  cashier 
of  the  bank,  although  without  authority,  discounts  the  note  at  the 
president's  request  and  places  the  proceeds  to  the  credit  of  the 
latter,  who  uses  them  for  his  own  benefit,  and  does  not  disclose 
to  the  directors  of  the  bank  the  character  of  the  note,  or  the  nature 
of  the  transaction,  the  president's  knowledge  is  not  to  be  imput-ed 
to  the  bank,  and  the  latter  can  recover  on  the  note.^^ 

Where  one  who  takes  certificates  of  stock  in  a  bank  as  a  pledge 
for  a  loan  exhibits  them  to  the  president  of  the  bank  to  learn  if  tliey 
have  been  properly  issued  and  informs  the  president  that  tlie 
certificates  have  been  assigned  to  him  as  security  for  a  loan  the 
knowledge  of  the  president  is  the  knowledge  of  the  bank.^^ 

If  the  president  or  cashier  of  a  bank  which  purchased  municipal 

1"  Hale  V.  Richards,  80  Iowa  164,  45  N.  W.  734. 

lO"  See  Dominion  Trust  Co.  v.  Hildner,  243  Pa.  St.  253,  90  Atl.  69 
(1914) ;  Real  Estate  Trust  Co.  v.  Washington  etc.  Ry.  Co.,  191  Fed. 
566  (1910);  American  National  Bank  v.  Ritz,  70  W.  Va.  409,  74  S.  E. 
679,  40  L.  R.  A.  (x.  s.)  1.56  (1912) ;  Bank  of  Le  Roy  v.  Purdy,  100  App. 
Div.  64  (1905),  91  N.  Y.  S.  310. 

"Corcoran  v.  Snow  Cattle  Co.,  151  Mass.  74,  23  N.  E.  727  (1894); 
Inneraritv  v.  Merchants'  National  Bank,  1.39  Mass.  332,  1  N.  E.  282; 
First  National  Bank  v.  Persall,  110  Minn.  333,  125  N.  W.  506,  136  Am. 
St.  Rep.  499  (1910). 

""  American  National  Bank  v.  Millar,  185  Fed.  338  (1911).  Approved 
in  229  U.  S.  517,  57  L.  ed.  1310,  .33  Sup.  Ct.  883  (1913). 

i"-  Bank  of  Hartford  v.  McDonald,  107  ^Vrk.  232,  154  S.  W.  512  (1913). 

'2  National  Bank  v.  BablMdge,  1()0  Mass.  .563.  3(5  N.  E.  362  (1894). 

»3  Curtice  v.  Crawford  County  Bank,  118  Fed.  390  (1902). 

323 


§  146  THE    PRESIDENT 

bonds  had  notice  or  knowledge  of  facts  which  would  reasonably 
lead  a  careful  person  to  make  inquiry  as  to  what  the  bonds  were 
given  for,  no  notice  can  be  imputed  to  the  bank  \^-hen  the  purchase 
was  not  made  by  the  one  who  had  notice  but  by  the  one  who  had 
no  notice  or  knowledge.^'* 

§  147.  Liability  of  President  to  Bank  for  Breach  of  his  Trust.  — 
(a)  A  president  of  a  bank,  who,  knowing  a  customer  to  be  without 
means,  induces  him  to  open  an  account  at  a  bank,  and  to  overdraw 
that  account,  and  who  by  his  orders  to  the  cashier  establishes  the 
custom  of  paying  such  overdrafts,  may  be  held  liable  to  the  bank 
for  the  amount  of  the  overdrafts.^ 

The  president.  P.,  who  directed  the  cashier  to  pay  the  bank's 
money  to  N.,  an  irresponsible  person  (in  whose  business  P.  was 
interested),  without  security,  and  charge  it  to  N.  on  the  bank 
books,  is  personally  responsible  to  the  bank  for  the  money  thus 
paid  under  his  direction  in  violation  of  his  trust.^ 

Where  the  president  of  a  bank,  its  managing  officer,  took  a  note 
and  paid  ^20,000  of  the  bank's  funds  for  it  with  the  knowledge 
that  it  was  burdened  with  a  guaranty  which  might  destroy  its 
value  and  cause  loss  to  the  bank,  it  is  such  negligence  as  will  render 
the  president  liable  to  account  for  any  loss  which  might  result.^" 

If  the  president  negligently  accepts  doubtful  securities  in  pay- 
ment of  good  debts  he  is  chargeable  with  any  resulting  loss.^^ 

A  president  is  liable  to  the  bank  when  he  in  neglect  of  duty  or  in 
fraud  suffers  his  son  to  withdraw  the  funds  of  the  bank  without 
consent  of  the  board  of  directors  or  advisory  committee,  and 
without  collateral  or  other  security  whereby  the  bank  sustains 
loss,  and  it  is  immaterial  that  the  cashier  and  other  directors  are 
also  liable.^" 

When  the  president  makes  a  pretended  sale  of  his  own  shares  of 
stock  and  discounts  at  the  bank  the  notes  received  therefor  with 
the  understanding  that  they  would  not  be  enforced  against  him, 
such  a  transaction  is  a  fraud  and  the  bank  may  recover  from  the 
president  what  it  paid  on  the  notes.^''  The  president  is  liable 
when  he  wrongfully  charges  a  depositor's  account  off  the  books  of 

1^  Thompson  v.  Mecosta,  141  Mich.  17.5,  104  N.  W.  694  (1905). 

1  §  147.     Oakland  Bank  of  Sa^angs  v.  Wilcox,  60  Cal.  127  (1882). 

2  First  National  Bank  of  Sturgis  v.  Reed,  36  Mich.  263. 
2«  Stearns  v.  Lawrence,  83  Fed.  738  (1897). 

^  Lawrence  v.  Stearns,  79  Fed.  878. 

2^  Western  Bank  v.  Coldewev,  120  Ky.  776,  83  S.  W.  629  (1905). 

^  Bassett  v.  AlUson,  158  Ky.  G21,  166  S.  W.  204  (1914). 

324 


LIABILITY    OF    PRESIDENT    TO    BANK    FOR    BREACH    OF   TRUST       §   147 

the  hank  and  appHes  the  amount  thereof  in  payment  of  a  note  of 
the  depositor's  husband.^* 

Selling  Property  without  Authority 

(h)  As  between  the  corporation  and  himself,  a  president  of  a 
bank  ordinarily  has  no  authority  to  sell  the  property  of  the  cori)()ra- 
tion  of  which  he  is  such  officer.  Before  he  can  legally  do  so,  he 
must  have  authority  by  the  charter,  the  direction  of  the  board  of 
directors  or  managing  committee,  or  by  usage.  And  where  the 
property  of  a  bank  is  sold  by  a  president  without  authority,  and  the 
bank  suffers  loss  thereby,  he  may  be  held  to  respond  in  damages 
to  the  extent  of  such  loss.^ 

Statute  of  Limitations 

(c)  The  Statute  of  Limitations  does  not  run  to  shield  a  president 
from  suit  by  the  bank  to  recover  for  damage  by  his  fraud,  until  the 
fraud  is  discovered  by  the  baiik.^ 

Liability  to   Third  Parties 

(d)  It  is  the  duty  of  the  president  to  use  reasonable  diligence  to 
acquaint  himself  with  the  affairs  of  the  bank ;  and,  if  by  due 
diligence  he  can  ascertain  the  condition  of  the  bank,  and  fails  to  do 
so,  he  is  responsible  "*"  for  any  false  representations  in  regard  to 
that  condition  although  made  in  good  faith.''  But  in  actions 
against  him  for  making  such  representations,  unless  they  were  the 
inducement  that  caused  the  plaintifi's  to  continue  their  relations 
with  the  bank,  they  cannot  recover.^ 

The  unsalaried  president  is  not  liable  for  the  negligence  of  the 
cashier  who  has  charge  of  the  executive  affairs  of  the  bank  in 
lending  upon  insufficient  security  or  beyond  the  limit  fixed  by 
statute.^" 

2«  Weems  v.  Melton,  150  Pac.  720  (Okla.)  (1915). 

3  First  National  Bank  of  Central  City  v.  Lucas,  21  Neb.  281  (1887). 

^Atlantic  National  Bank  v.  Harris,  118  Mass.  147;  JSIcGregor  v. 
Wetham,  126  Ga.  707,  56  S.  E.  55  (1906). 

''"  A  president  who  is  a  mere  figurehead  of  the  bank  is  liable  only  for 
gross  neglect  in  its  management  and  is  not  liable  for  permitting  the  cashier 
to  make  a  loan  beyond  the  statute  limit.  First  State  Bank  v.  Morton,  146 
Ky.  287,  142  S.  W.  694  (1912). 

5  Giddings  v.  Baker,  80  Tex.  308,  16  S.  W.  33  (1891) ;  Seale  v.  Baker, 
70  Tex.  283,  7  S.  W.  742. 

^  First  State  Bank  v.  Morton,  146  Ky.  287,  142  S.  W.  694  (1912). 

325 


§  147  THE    PRESIDENT 

{e)  The  president  is  liable  to  a  person  who  has  suffered  loss  by  a 
false  statement  or  report  of  its  affairs  officially  made  or  approved 
by  him,  especially  when  he  has  been  personally  benefited  thereby.® 

(f)  The  question  of  constructive  knowledge  by  the  president, 
sufficient  to  hold  him  liable  for  false  statements  made,  should  be 
found  as  a  question  of  fact  by  the  jury,  under  appropriate  instruc- 
tions from  the  court,  and  not  be  assumed  by  the  court  conclusively 
to  exist. '^ 

{g)  The  president  is  liable  for  a  loan  unlawfully,  imprudently 
and  negligently  made  without  authority  of  the  bank  and  without 
adequate  security.^ 

§  148.  Liability  of  One  held  out  as  President.  —  P.  allowed 
himself  to  be  held  out  as  president  of  a  bank  not  legally  organized. 
C.  deposited  money,  which  was  lost  by  the  cashier's  mismanage- 
ment. C.  sued  P.,  as  inducing  his  loss  by  giving  an  appearance  of 
integrity  to  an  unworthy  institution.  The  court  held  the  presi- 
dent chargeable  with  constructive  notice  of  the  management  by 
the  subordinate  officers.  The  directors  invite  the  public  to  deal 
with  the  bank,  and  the  public  has  a  right  to  expect  reasonable  care 
and  oversight  on  their  part;  and  the  law  will  presume  that  P. 
knew  of  the  cashier's  action,  as  it  was  his  duty  to  know.^ 

§  148  A.  Liabilities  for  Acts  of  Other  Officers.  —  A  president  of 
a  bank  is  not  an  insurer  of  the  honesty  of  the  cashier  of  a  bank  and 
is  only  expected  to  exercise  ordinary  care  and  supervision  of  officers 
in  the  discharge  of  their  duties.^ 

§  149.  Personal  Undertakings  for  the  Corporate  Benefit.  — 
If  the  notes  of  the  corporation  are  protested  for  nonpayment,  and 
are  thereafter  paid  by  the  president  individually  from  his  own 
private  funds,  for  the  honor  of  the  bank,  the  whole  transaction 
having  been  conducted  throughout  in  strict  good  faith,  the  presi- 
dent becomes  thereby  a  creditor  of  the  bank  for  the  amount  so 
paid  by  him,  and  may  prove  the  claim  against  the  bank  in  insol- 
vency.^    But  if  the  president  guarantees  or  indorses  the  promissory 

6  Prewitt,  Trustee,  v.  Trimble,  92  Ky.  176,  17  S.  W.  356  (1891). 

7  Trimble  v.  Reid,  97  Ky.  713,  31  S.  W.  861  (1895). 

8  Seventeenth  Ward  Bank  v.  Webster,  67  App.  Div.  228  (1901),  73 
N.  Y.  S.  648. 

1  §  148.     Hauser  v.  Tate,  85  N.  C.  81  (1881). 

1  §  148  A.  Davenport  v.  Prentice,  126  App.  Div.  451  (1908),  110 
N.  Y.  S.  1056. 

^  §  149.  Bank  Commissioners  v.  St.  Lawrence  Bank,  8  Barb.  (N.  Y.) 
436,  3  Seld.  (N.  Y.)  135. 

326 


PAYMENT    OF   THE    PRESIDENT  §  150 

notes  of  the  bank,  he  will  be  presiiiiied  to  do  it  gratuitously,  and 
from  the  disinterested  motive  of  promoting  the  welfare  of  the  insti- 
tution over  which  he  presides.  He  will  not  be  allowed  to  maintain 
any  claim  by  reason  of  his  so  doing,  except  upon  proof  of  an  exj)licit 
contract  entered  into  by  himself  with  the  government  of  the  cor- 
poration.^ 

§  150.  Payment  of  the  President.  —  With  regard  to  whether 
or  not  a  president  is  entitled  to  payment  for  his  services,  no  abso- 
lute and  unvarying  rule  can  be  laid  down.  Xo  implied  promise 
to  pay  him,  any  more  than  to  pay  any  other  director,  is  raised  by 
his  appointment  to  the  office.  On  the  contrary,  it  has  been  said 
that  the  presumption  is  that  he  is  not  to  be  paid."  Even  for  such 
a  service  as  superintending  the  repairs  upon  the  bank's  real  estate, 
it  has  been  held  hi  ^Massachusetts  that  the  president  cannot  recover 
payment.^ 

But  frequently  a  bank  requires  so  much  of  the  time  of  its  presi- 
dent to  be  devoted  to  its  interests  and  afi'airs  that  it  in  a  great 
measure  precludes  or  materially  interferes  with  his  prosecution  of 
other  and  private  business.  In  such  cases  it  is  customary  to  pay 
him  a  salary,  as  a  cashier  or  any  other  officer  who  devotes  his  time 
to  the  service  of  the  bank  is  paid.  Ordinarily  the  matter  of  his 
compensation,  in  such  cases,  is  left  to  be  arranged  by  the  board  of 
directors,-  and  whatever  they  vote  to  pay  him  he  has  an  unques- 
tionable title  to  recoA'cr.  But  if  they  take  no  definite  action  in  the 
premises,  his  right  to  demand  pay  will  depend  upon  the  nature 
of  the  services  rendered  by  him,  and  upon  all  the  circumstances 
attendant  upon  his  acceptance  and  incumbency.  If  these  suffice 
to  show  that  he  had  a  right  to  expect  that  he  was  to  be  paid,  and 
that  the  bank  or  board  of  directors  ought  to  have  so  understood, 
and  ought  to  have  expected  to  pay  him,  then  he  may  recover 
what  would  have  been  a  fair  salary  for  the  position.-"    The  pre- 

2  Leavitt  v.  Beers,  Hill  &  D.  (N.  Y.)  221. 

0  §  150.  See  Withers  v.  Edmonds,  2(i  Tex.  Civ.  App.  189,  62  S.  W. 
795  (1901)  where  the  court  says  that  the  positions  of  the  president  and 
teller  are  lucrative  and  that  they  arc  to  be  remunerated  for  such  ser\'ices 
as  they  may  perform. 

1  Pew  V.  First  National  Bank  of  Gloucester,  130  Mass.  391. 

2  Holland  v.  Lewiston  Falls  Bank,  52  Me.  564. 

2"  Under  the  Illinois  Banking  Act  the  directors  have  no  power  to  give 
the  president  a  V)onus  (or  sum  in  addition  to  his  salary)  in  consideration 
of  his  "acceptance"  of  the  presidency  and  the  doing  of  acts  outside  the 
duties  of  his  office.  McNulta  t'.  Corn  Belt  Bank,  164  111.  427,  45  N.  E. 
954. 

327 


§  150  THE    PRESIDENT 

sumption  that  payment  is  to  be  made  arises  where  the  work  or 
employment  is  usually  the  subject  of  pay.  But  it  does  not  attach 
simply  because  the  work  is  valuable,  and  therefore  might  properly 
be  given  in  exchange  for  money.  The  custom  or  usage  to  pay  for 
such  work  must  be  existent,  and  established  like  any  other  custom 
or  usage,  so  that  it  cannot  but  be  presumed  that  the  parties  respec- 
tively conferred  and  accepted  the  office  and  functions  of  president 
in  view  of  this  custom  and  usage,  and  with  the  expectation  of 
conforming  to  it.  But  informal  statements,  or  remarks  made  by 
the  president  to  various  individuals,  members  of  the  board  of 
directors,  to  the  effect  that  he  shall  expect  or  require  pay,  have  no 
bearing  upon  his  rights  whatsoever;  especially  where  no  definite 
reply  appears  to  have  been  elicited.^  If  the  bank  charter  distinctly 
provides  that  the  president  shall  have  no  pay  unless  it  be  voted  to 
him  by  the  directors,  any  service  which  he  may  perform  for  the 
bank  will  be  presumed  to  be  done  by  him  as  president,  and  will 
give  him  no  extraordinary  right  to  pay,  unless  from  its  nature, 
or  from  evidence  adduced,  it  is  shown  beyond  a  reasonable  doubt 
that  the  act  was  really  rendered  outside  of  the  duties  appurtenant 
to  the  official  position.^ 

Where  his  contract  to  serve  as  president  is  terminated  by  no 
act  of  the  bank  but  by  its  suspension,  which  disables  both  the  bank 
and  the  president  from  continuing  its  affairs,  his  salary  ceases  when 
the  bank  goes  out  of  business.^ 

§  150  A.  Power  to  tax  President.  —  A  State  act  imposing  a 
tax  upon  "  presidents  of  each  of  the  banks  of  the  State",  is  inopera- 
tive as  to  presidents  of  national  banks  doing  business  in  the  State, 
as  tending  to  impair  the  efficiency  of  national  banks  which  are 
for  certain  purposes  agencies  of  the  Federal  government.^ 

'  Sawyer  v.  Pawners'  Bank,  6  Allen  (Mass.),  207;  Olney  v.  Chadsey, 
7  R.  I.  224 ;   Hargroves  v.  Chambers,  30  Ga.  580. 

^  Olney  v.  Chadsey,  supra.  ^  EUiott  v.  Peet,  192  Fed.  699  (1912). 

1  §  150  A.     Linton  v.  Childs,  105  Ga.  567,  32  S.  E.  617  (1898). 


328 


CHAPTER   XI 

THE   CASHIER 

§  152.  The  cashier  is  the  bank's  executive,  the  performer.     He  has 

charge  of  the  routine  of  the  bank's  business,  but  is  not 
clothed  with  discretion  in  weighty  matters  amounting  to 
management. 

§  153.     Inherent  Powers.     §§  114,  143. 

§  154.  To  draw  checks  on  the  bank's  funds. 

(a)  Form  of  signature  that  Avill  bind  the  bank. 

(b)  Parol  admitted  when  on  the  face  of  the  instrument 

there  is  doubt. 

(c)  The  bank's  hability  depends  not  on  form,  but  on  the 

facts,  the  autliority,  and  the  intent  of  the  parties. 
§§  89,  94,  95  a,  97,  98. 
§  155.  To  CERTIFY  Checks.     See  §  155/;    §  413. 

(a)  Not  those  given  as  collateral. 
(6)  Nor  liis  own  checks.     See  (j). 

(c)  Form  of  certification. 

(d)  President  and  teller  may  perhaps  certify. 
(g)    Restrictions  on  the  power  of  certification. 

(h)  Wrongful  certification  good  as  to  innocent  party. 
§  156.  To  BL'Y  AND  SELL  BiLLS  OF  EXCHANGE,  and  to  arrange  for 

exchange.      Quaere  as  to  his  power  to  accept  bills 
for  the  bank. 

§  157.  To  CONTROL  THE  Bank's  PERSONALITY,  unlcss  withdrawn 

from  liis  charge  by  the  directors   (§  159),  and  to 
dispose  of  it  in  regular  course  of  business. 
§  158.  To  INDORSE  the  bank's  negotiable  paper  for  collection,  dis- 

count (see  §  1()5  d),  payment  of  bank's  debts  (?), 
{h,  g),  or  to  make  over  securities  held  for  a  debt 
when  the  same  is  paid.      §  159  g. 
But  he  cannot,  by  virtue  of  his  office,  indorse  for  accom- 
modation, nor  indorse  the  bank's  name  on   his  own 
paper  (§  109),  nor  transfer  non-negotiable  paper.     See 
(a),  §  158. 
Bona  fide  holder  without  notice  is  secure.     §§  171,  565, 
n.  1".     See  (6),  §  158. 
(a)  General  rule. 
{h)  Form  of  indorsement, 
(i)    Countersigning  hank  bills. 

329 


THE    CASHIER 

§  159.  To  COLLECT  Debts  due  the  Bank. 

(o)  To  discharge  a  mortgage  as  an  incidental  power. 

(b)  To  indorse  notes  for  collection. 

(c)  Protest. 

(d)  Authorizing  suit  for  a  debt  is  an  inherent  power  of 

cashier.      §§  143,  169. 

(e)  May  compromise  a  claim  as  far  as  usage  gives  him  au- 

thority, but  has  no  inherent  power.      §  119. 
.  (/)    No   inherent   power   to   take   anything   but    money. 
§247. 
§  160.  To  borrow  money  in  the  bank's  name  in  the  regular  course 

of  business,  and  to  give  security  or  pledge.      §§  48, 
63,  116  a. 
(a)  Borrowing  on  time. 
§  161.  To  receive  deposits.      §  179. 

§  162.  To  attend  to  the  correspondence  of  the  bank. 

§  163.  To  attend  to  the  transfer  of  shares. 

§  164.  To  buy  government  bonds.      §§  59,  77,  164;   II.  §  35. 

Special  Authority. 
§  165.  By  organic  law,  vote,  verbal  order  of  board,  usage  and 

tacit  approval  (c),  or  by  necessity  (d).      §§  97,  116  a. 
(a)  Exercise  of  discretion. 

(6)   The  law  presumes  regularity ;    and  in  favor  of  third 

parties  the  cashier  is  presumed  to  be  acting  within 

his  authority  if  the  nature  of  the  act  is  such  that  he 

might  be  authorized  to  perform  it. 

§  166.     Notice  to   and  Knowledge  of  Cashier.     §  9,  n.  9,    §§  104, 

133,  146. 
§  167.     Declarations  and  Admissions.     §  42   c.   2,    §§  103,   124,    145, 
167,  168,  203. 

(a)  and  (b)  Questions  as  to  genuineness  of  paper. 

(c)  Past  transactions. 

(d)  Representation  as  to  payment  of  note  held  to  bind  the  bank, 

(e)  and  this  even  if  the  cashier  had  an  adverse  interest  unknown 

to  C.     See,  on  this  principle,  §§  99,  109,  125,  136,  167  e. 
(J)    Representations  aside  from  duties  as  cashier  do  not  bind. 
§  168.     Limitations  of  Time  and  Place. 

(o)  Test.     Can  the  business  be  as  well  done  away  from  the 
bank  as  at  the  bank  ?     §  §  45,  46. 

(b)  Checks  may  be  drawn  elsewhere. 

(c)  Indorsement  elsewhere  held  good,  also  notice  received  away 

from  bank. 

(d)  Must  not  pay  or  certify  checks,  nor  in  general  give  infor- 

mation away  from  the  bank.      §  412.     But  see  (h). 

(e)  But  bo7ia  fide  holder  is  not  affected  by  the  cashier  having 

acted  in  an  improper  place. 
(/)    Deposits  must  be  received  at  bank. 
Ig)  Bank  may  adopt  an  act  wrongfully  done  away  from  it. 
§  169.     No  Power  inherent. 

To  pledge  the  bank's  property  for  antecedent  debt. 

Nor  make  an  agreement  to  indemnify  a  sheriff. 

Nor  sue  on  bank's  notes.      §  159  d. 

Nor  release  a  surety. 

Nor  to  indorse  the  bank's  name  on  his  own  paper. 

330 


THE    CASHIER   IS   THE    CHIEF   EXECUTIVE    OFFICER  §  152 

Nor  to  buy  or  sell  roalty  for  the  bank,  etc.      See  above, 

under  Inherent  Powers. 
Nor  to  allow  over-draft.      §  357. 
Nor  to  make  loans  to  himself. 
§  170.     On  Instruments  in  form  to  or  from  the  cashier,  the  bank  may 
sue  or  be  sued  if  the  contract  is  really  a  corporate  one, 
though  the  title  "cashier"  is  omitted.      §§  O.j,  144  >■. 
§  171.     When  the  Cashiek  binds  the  Bank.     §§  89,  94,  9;j,  97,  98. 
General  rule. 

Intra  vires  and  ultra  vires  acts  (j). 
(d)  Inherent  powers  and  bona  fide  third  parties.    See  also  (e),  (/). 
{g)   Holding  out  by  failure  to  ol)ject. 
ih)  Paj'ment  of  forged  paper  l)inds  the  bank, 
(i)    Implications  from  cashier's  acts. 
§  172.     Liability  of  Cashieu  to  the  Bank.     §§79,  128,  129,  717  c; 
II.  §§  53,  2.53. 

(a)  Not  respon.sible  for  his  subordinates  if  he  properly  super- 

intends them ;  and  he  is  not  obliged  to  examine  every 
entry  mad(!  by  them,  but  only  to  exercise  such  care  as 
a  man  of  ordinary  prudence  does  in  his  own  business  of 
a  similar  nature. 

(b)  Director's  order  will  not  excuse  an  act  that  the  officer  ought 

to  know  is  wTongfuI. 
§  173.     Cashier  as  Trustee. 
His  duty. 

(a)  Property  bought  with  funds  stolen  from  the  bank  not  sub- 

ject to  a  resulting  trust. 

(b)  But  equity  will  compel  cashier  to  account. 
§  174.     The  Cashier's  Subordinates. 

Teller's  power  not  exclusive  of  the  cashier,  but  the  justice 
of  this  ruling  has  been  questioned, 
(a)    The  teller. 
§  175.  A  temporary  substitute's  authority. 

§  176.  Cashier  after  expiration  of  charter. 

§  176  A.        Cashier  estopped  to  deny  his  authority. 
§  180.     When  same  Officer  acts  for  two  Institutions. 

§  152.    The    Cashier    is    the    Chief    Executive    Oflacer,   through 
whom  the  whole  financial  operations  of  the  bank  are  conducted.^ 

1  §  152.  Merchants'  Bank  v.  State  Bank,  10  Wall.  650,  19  L.  ed.  1019  ; 
Security  S^aings  Bank  v.  Smith,  144  Iowa  203,  122  N.  W.  825  (1909) ; 
First  National  Bank  v.  Greenville  Oil  etc.  Co.,  24  Tex.  Civ.  App.  645, 
60  S.  W.  828  (1901);  Davenport  v.  Prentice,  126  App.  Div.  451  (1908), 
110  N.  Y.  S.  1056;  Knat)p  v.  Saunders,  15  S.  D.  4(54,  90  N.  W.  137 
(1902)  ;  Pemiscot  County  Bank  v.  Central  State  National  Bank,  177 
S.  W.  74  (1915);  Ledgerwood  v.  Dashiell,  177  S.  W.  1010  (Tex.  Civ. 
App.)  (1915).  Its  money  transactions  of  every  description,  though  they 
may  not  be  determined  by  his  discretion,  will  yet  lie  conducted  by  and 
through  him.  Baldwin  v.  Bank  of  Newbury,  1  Wall.  234,  17  L.  ed. 
534 ;  United  States  v.  Citv  Bank  of  Columbus,  21  How.  356.  16  L.  ed. 
130;  McBovle  r.  Union  National  Bank,  162  Cal.  277.  122  Pac.  458 
(1912);  Spongberg  v.  First  National  Bank,  IS  Idaho  .524.  110  Pac.  716, 
1912A  Ann.  Cas.  95,  n. ;   Citizens'  Bank  v.  Douglass,  178  Mo.  App.  664, 

.331 


§  152  THE   CASHIER 

In  the  discussion  of  the  powers  and  duties  of  cashiers  we  enter 
upon  a  very  difficult  topic.  In  no  other  branch  of  banking  law 
are  the  usages  of  business  so  frequently  at  variance  with  the  rules 
of  law,  so  powerful  in  warping  and  altering  those  rules,  so  diverse 
among  themselves  in  different  places  and  different  institutions, 
and  at  different  times.  In  no  other  branch  of  banking  law  is  it 
so  difficult  to  reconcile  the  decisions  and  opinions  uttered  from 
numerous  independent  judicial  tribunals,  or  to  educe  from  them 
generalizations,  principles,  and  rules  in  any  satisfactory  shape. 

The  key-note  to  the  whole  subject  lies  in  this :  that  the  office 
of  the  cashier  is  strictly  executive.  He  is  the  business  officer  of  the 
bank,  but  in  the  sense  of  one  who  transacts  the  business,  not  of 
one  who  regulates  and  controls  it.  The  grand  difficulty  which 
has  been  experienced  in  defining  his  exact  functions  has  always 
lain  in  the  necessity  of  giving  him  sufficient  practical  power  to 
enable  him  to  conduct  the  daily  routine  of  business  without 
trespassing  upon  the  domain  of  discretionary  authority  which 
pertains  exclusively,  and  for  the  most  part  inalienably,  to  the 
directors.  Acts  which  demand  only  confidence  in  the  integrity  of 
the  official,  and  familiarity  with  the  forms  and  customs  of  business, 
acts  strictly  of  ijerformance,  ivhich  do  not  rise  to  the  importance  of 
the  semi-judicial  character,  are  those  which  he  is  properly  delegated 
to  do.  But  the  responsible  conduct  and  management  of  the  affairs 
of  the  institution,  upon  the  soundness  and  wisdom  of  which  its 
prosperity  and  success  depend,  which  call  for  the  exercise  of  a 
high  degree  of  care,  knowledge,  and  experience,  and  a  semi-judicial 
discretion,  which  demand  general  business  qualifications  of  a  high 
order,  are  not,  and  never  have  been  held  to  be,  appurtenant  to 
the  office  of  cashier.  He  is  properly  the  executive  agent  of  the 
directors.2  It  is  his  duty  to  carry  out  what  they  devise.  They 
are  responsible  for  the  soundness  of  the  action  resolved  upon ; 
he  is  responsible  for  the  honesty,  accuracy,  regularity,  and  skill 
with  which  that  action  is  carried  out.  They  are  the  mind  and  he 
is  the  hands  of  the  corporation.     They  may  decide  to  make  a 

161  S.  W.  601  (1913) ;  Taylor  v.  Commercial  Bank,  174  N.  Y.  181,  66 
N.  E.  726,  95  Am.  St.  Rep.  564  (1903) ;  Houston  Bank  v.  Kirkman,  156 
INIo.  App.  309,  137  S.  W.  38  (1911) ;  Arnold  v.  Waupaca  National  Bank, 
126  Wis.  362,  105  N.  W.  828,  77  Am.  Dec.  759,  n.,  3  L.  R.  A.  (n.  s.)  580 
(1905);  Knoxville  Water  Co.  v.  East  Tennessee  National  Bank,  123 
Tenn.  364,  131  S.  W.  447  (1910) ;  Third  National  Bank  v.  St.  Charles 
Savings  Bank,  244  Mo.  554,  149  S.  W.  495  (1912). 

^  Bank  of  Houston  v.  Kirkman,  156  Mo.  App.  309,  137  S.  W.  38  (1911). 

332 


POWER  TO  DRAW  CHECKS  §  154 

certain  loan  or  discount,  to  sell  or  mortgage  corporate  property. 
He  will  pay  over  the  money,  take  the  borrower's  promissory  note, 
and  see  that  it  is  in  proper  form  ;  he  may,  by  direction  of  the  board, 
affix  the  corporate  signature  and  seal,  and  make  delivery,  on 
behalf  of  the  corporation,  of  all  instruments  necessary  to  comjilete 
the  conveyance  or  the  mortgage.  It  is  not  wholly  unapt  to  liken 
the  board  of  directors  to  a  bench  of  judges,  and  the  cashier  to  the 
clerk  of  court. 

§  153.  Inherent  Powers  of  Cashier.^  —  There  are  certain  func- 
tions which  by  long  and  universal  usage  have  come  to  be  recog- 
nized as  belonging  to  the  office  of  cashier,  and  have  been  judicially 
ascertained  and  declared  to  be  inherent  in  the  cashier  as  matter 
of  law,  and  without  any  vote  of  the  directors  or  provision  of  the 
organic  law.  Such  power  may  of  course  be  enlarged  or  restricted 
by  the  charter,  the  bank,  or  the  board;  but  in  the  absence  of 
such  special  action  these  "  inherent  "  powers  that  are  connoted 
by  the  title  "  cashier  "  belong  to  him  by  virtue  of  his  appoint- 
ment to  such  office. 

§  154.  Power  to  draw  Checks.  —  The  cashier  has  power  to  draw 
checks  or  drafts  upon  the  funds  of  the  bank  deposited  elsewhere. 
Indeed,  he  is  ordinarily  the  only  oflficer  of  the  institution  who  can 
legally  do  this.  It  is  proper  for  him  to  designate  himself  as  "  Cash- 
ier of  the Bank",  in  order  to  show  that  he  is  acting  officially, 

and  that  the  check  is  intended  to  withdraw  corporate  funds. 
But  if  he  fails  to  make  this  fact  clear  by  these  or  any  other  words 
in  the  instrument,  yet,  if  the  drawee  bank  pays  the  check  from 
corporate  funds,  it  will  be  protected  and  the  payment  will  be 
valid,  if,  as  a  matter  of  fact,  the  cashier  was  acting  officially, 

1  §  153.  The  question  whether  any  particular  act  does  or  does  not 
fall  within  the  general  power  of  a  cashier  has  been  said  to  he  a  question 
of  law  for  the  court,  and  not  of  fact  for  the  ju^5^  Fanners  &  Mechanics' 
Bank  v.  Troy  City  Bank,  1  Dougl.  (Mich.)  457 ;  Peninsular  Bank  ;•.  llan- 
mer,  14  Mich.  208;  Merchants'  Bank  v.  State  Bank,  10  Wall.  (504,  10 
L.  ed.  1008.  The  ser\'iees  of  a  jury  may  indeed  be  called  in  when  it  is 
claimed  that  acts  or  conduct  of  the  board  have  amounted  to  a  public 
holding  out,  or  that  a  banking  usage  relative  to  the  subject  of  ilispute 
exists.  Merchants'  Bank  v.  State  Bank,  10  Wall.  ()04,  19  L.  ed.  1008; 
Taylor  r.  Commercial  Bank,  174  N.Y.  181,  (i6  N.  E.  726,  95  Am.  St.  Rep. 
5G4  (1903).  But  after  the  jury  has  found  upon  these  matters,  it  still 
remains  for  the  court  to  declare  whetlier  or  not  the  usage  is  one  which 
accords  with  and  will  be  sanctioned  by  law;  and  whether  the  holding 
out  was  ^\^thin  the  possible  legal  scope  of  a  cashier's  authority. 

The  power  of  the  cashier  generally  exceeds  that  of  the  president. 
Montgomery  Bank  v.  Walker,  181  Ala.  368,  61  So.  951  (1913). 

333 


§  154  THE   CASHIER 

and  did  intend  to  draw  against  the  balance  standing  to  the  credit 
of  his  corporation.  To  prove  this,  parol  evidence  is  admissible, 
and  by  such  evidence  the  paying  bank  may  even  be  allowed  to 
explain  away  the  fact  that  the  check  has  been  credited  upon  its 
books  to  the  cashier's  private  account,  and  to  rebut  the  inference 
against  itself  which  must  at  first  arise  from  this  state  of  the  ac- 
counts.^ 

Form  of  Cashier's  Signature.     Was  the  Act  Official  or  Not  ? 

(a)  In  Mechanics'  Bank  v.  Bank  of  Columbia,  the  facts  were 
briefly  these.  William  Baton,  Jr.,  cashier  of  the  Mechanics' 
Bank  of  Alexandria,  drew  a  check  in  form  as  follows :  — 


oq 


No.  18. 

Mechanics' 

Bank 

OF  Alexandria, 

June  25, 

1817. 

Cashier  of  the  Bank  of  Columbia, 

Pay  to  the  order  of  P. 

H.  Minor, 

Esq. 

,  Ten  Thousand  Dollars. 

$10,000. 

WM 

.  PATON,  JUN. 

Minor  was  the  teller  of  the  Mechanics'  Bank.  The  check  was 
one  of  the  printed  blanks  from  the  official  check-book  of  the  bank. 
Other  checks  had  been  customarily  drawn  by  the  cashier  on 
behalf  of  the  bank,  in  the  like  form  in  all  respects,  save  that  he 
usually  added  "  Cas."  or  "  Ca."  to  his  name.  Much  testimony 
was  introduced  wdth  the  object  of  showing  that  in  drawing  this 
check  he  was  acting  officially,  and  intended  to  draw  it  on  behalf 
of  the  bank.  Mr.  Justice  Johnson  delivered  the  opinion  of  the 
court,  substantially  as  follows  :  — 

"The  merits  of  this  case  lie  within  a  very  limited  compass. 
The  question  is,  whether  a  certain  act,  done  by  the  cashier  of  a 
bank,  was  done  in  his  official  or  individual  capacity.  Had  the 
draft  signed  by  Baton  borne  no  marks  of  an  official  character  on 
the  face  of  it,  the  case  would  have  presented  more  difficulty. 
But  if  marks  of  an  official  character  not  only  exist  on  the  face, 

1  §  154.  Mechanics'  Bank  v.  Bank  of  Columbia,  5  Wheat.  326,  5  L.  ed. 
100 ;  United  States  v.  City  Bank  of  Columbus,  21  How.  356,  16  L.  ed. 
130;  Merchants'  Bank  v.  Central  Bank,  1  KeUy  (Ga.)  418. 

334 


POWER  TO  DRAW  CHECKS  §  154 

but  predominate,  the  case  is  really  a  very  familiar  one.  Evidence 
to  fix  its  true  character  becomes  indispensable.    .    .    . 

"  Upon  comparing  the  exceptions  (taken)  with  the  evidence, 
it  does  not  appear  that  they  affirm  any  other  i)r()p()siti()n  f^rowing 
out  of  that  evidence,  but  that  the  check  on  the  face  of  it  pur- 
ported to  be  the  private  check  of  Paton  ;  and  no  extrinsic  evidence 
could  be  received  to  ])r()ve  tlie  contrary. 

"  The  ground  on  which  it  can  be  contended  that  this  check 
was  a  private  check  is,  that  it  had  not  below  the  name  the  letter 
*  Cas.'  or  '  Ca.'  But  the  fallacy  of  the  proposition  will  at  once 
appear  from  the  consideration  that  the  consequence  would  be  that 
all  Paton's  checks  must  have  been  adjudged  private.  For  no 
definite  meaning  could  have  been  attac-hed  to  the  addition  of  those 
letters  without  the  aid  of  parol  testimony. 

Parol  is  Admitted  ivlieii  on  the  Face  of   the  Instrument  there  is 

.   Doubt 

(b)  "  But  the  fact  that  this  appeared  on  its  face  to  be  a  private 
check  is  by  no  means  to  be  conceded.  On  the  contrary,  the  ap- 
pearance of  the  corporate  name  of  the  institution  on  the  face  of 
the  paper  at  once  leads  to  the  belief  that  it  is  a  corporate,  and  not 
an  individual  transaction ;  to  which  must  be  added  the  circum- 
stances, that  the  cashier  is  the  drawer  and  the  teller  the  payee, 
and  the  form  of  ordinary  checks  deviated  from  by  the  substitu- 
tion of  '  to  order  '  or  '  to  bearer.'  The  evidence,  therefore,  on 
the  face  of  the  bill,  predominates  in  favor  of  its  being  a  bank 
transaction.  Applying  then  the  plaintiff's  own  principle  to  the 
case,  and  the  restriction  as  to  the  production  of  parol  or  extrinsic 
evidence  could  have  been  only  applicable  to  himself.  But  it  is 
enough  for  the  purposes  of  the  defendant  to  establish  that  there 
existed  on  the  face  of  the  paper  circumstances  from  which  it  might 
reasonably  be  inferred  that  it  was  either  one  or  the  other.  In 
that  case,  it  became  indispensable  to  resort  to  extrinsic  evidence 
to  remove  the  doubt.  The  evidence  resorted  to  for  this  purpose 
was  the  most  obvious  and  reasonable  possible,  viz. :  that  this 
was  the  appropriate  form  of  an  official  check  ;  that  it  was,  in  fact, 
cut  out  of  the  official  check-book  of  the  bank,  and  noted  on  the 
margin ;  that  the  money  was  dra^vn  in  behalf  of,  and  applied  to 
the  use  of,  the  Mechanics'  Bank,  and  by  all  the  banks  and  all  the 
officers  of  the  banks  through  which  it  passed  was  recognized  as  an 

335 


§154  THE   CASHIER 

official  transaction.  It  is  true  it  was  in  evidence  that  this  check 
was  credited  to  Paton's  own  account  on  the  books  of  his  bank. 
But  it  was  done  by  his  own  order,  and  with  the  evidence  before 
their  eyes  that  it  was  officially  drawn.  This  would  never  have 
been  sanctioned  by  the  directors  unless  for  reasons  which  they 
best  understood,  and  on  account  of  debits  which  they  only  could 
explain. 

In  General  the  Liahility  of  Bank  Depends  not  on  Forms  hut  on  Facts. 
1st,  Authority  of  Agent;   2d,  Intent  of  the  Parties 

(c)  "  It  is  by  no  means  true,  as  was  contended  in  argument, 
that  the  acts  of  agents  derive  their  validity  from  professing  on  the 
face  of  them  to  have  been  done  in  the  exercise  of  their  agency. 
In  the  more  solemn  exercise  of  derivative  powers,  as  applied  to 
the  execution  of  instruments  known  to  the  common  law,  rules 
of  form  have  been  prescribed.  But  in  the  diversified  exercise 
of  the  duties  of  a  general  agent  the  liability  of  the  principal 
depends  upon  the  facts ;  that  the  act  was  done  in  the  exercise 
and  within  the  limits  of  the  power  delegated.  These  facts  are 
necessarily  inquirable  into  by  a  court  and  jury ;  and  this  inquiry 
is  not  confined  to  written  instruments  (to  which  alone  the  prin- 
ciple contended  for  could  apply),  but  to  any  act  with  or  without 
writing  within  the  scope  of  the  power  or  confidence  reposed  in  the 
agent ;  as,  for  instance,  in  the  case  of  money  credited  in  the  books 
of  a  teller,  or  proved  to  have  been  deposited  with  him,  though  he 
omits  to  credit  it." 

The  law  concerning  the  manner  in  which  a  cashier  may  sign 
checks  intended  to  be  officially  drawn  against  deposits  or  funds 
standing  in  other  banks  to  the  credit  of  his  own  bank,  is  contained 
in  the  foregoing  opinion,  almost  as  in  a  nutshell.  Any  form  of 
check  whatsoever,  and  any  form  of  signature,  provided  the  instru- 
ment bears  anj^vhere  upon  its  face  any  indication  of  a  corporate 
character,  will  suffice  to  open  the  door  for  the  introduction  of 
testimony  to  prove  that  in  fact  the  character  was  corporate.  And 
even  though  there  be  nothing  on  the  face  of  the  check  to  indicate 
its  character,  it  might  still  be  the  corporate  check,  under  the  gen- 
eral principle  that,  if  any  agent  has  authority  to  make  a  written 
contract  (not  under  seal),  and  makes  it  in  his  own  name,  whether 
he  describes  himself  as  agent  or  not  (and  even  whether  his  prin- 
cipal be  known  or  not,  which  in  the  case  under  consideration  would 
336 


POWER   TO    CERTIFY    CHECKS   INHERENT  §  155 

not  happen),  both  the  agent  and  his  prhicipal  can  hold  the  third 
party,  C,  and  C.  can  hold  them,  unless  from  attendant  circum- 
stances it  is  clearly  manifest  that  an  exclusive  credit  was  given 
to  the  agent,  and  it  was  intended  by  both  parties  that  no  resort 
shoukl  be  had  by  or  against  the  principal  in  any  event.^  If  by 
usage  or  otherwise  the  cashier  has  authority  from  the  bank  to  check 
against  its  funds  in  his  own  name,  and  he  does  so,  the  bank  is  ulti- 
mately liable  on  the  facts,  whether  it  is  on  the  face  of  the  check 
or  not,  and  therefore  the  law  holds  it  immediately  liable. 

If  it  can  be  collected  from  the  whole  instrument  that  it  is  the 
intent  to  bind  the  bank,  it  will  be  held,  no  matter  how  informal 
the  expression,  and,  if  unintelligible  or  uncertain,  parol  evidence 
is  admissible  to  show  what  party  is  bound.^  In  the  case  just  cited, 
a  note  signed  by  the  president,  directors,  and  secretary  was  held 
a  corporate  note ;  and  in  New  York,  where  S.  B.  S.  sent  the  plain- 
tiff a  bill  of  exchange  payable  to  the  order  of  S,  B.  S.,  Cash.,  and 
indorsed  the  same  and  enclosed  it  in  a  letter  dated  at  bank  and 
signed  by  S.  B.  S.,  Cash.,  the  indorsement  was  held  that  of  the 
bank.^ 

It  cannot  be  doubted  that  proof  that  the  check  was  drawn  and 
signed  in  the  manner  in  which  the  cashier  was  uniformly  wont 
to  draw  and  sign  when  he  intended  to  draw  on  behalf  of  his  bank, 
and  which  the  drawee  bank  was  wont  to  pay,  without  objection 
from  the  cashier's  bank,  out  of  its  corporate  credit,  would  always 
be  regarded  as  jmma  facie andhy most  juries  as  conclusive  evidence 
of  the  corporate  character,  and  would,  wherever  the  interests 
of  justice  required  it,  be  held  to  estop  the  cashier's  bank  from 
denying  this  character.  Whence  it  follows,  that  a  check  in  any 
form  customarily  used  by  the  cashier  in  drawing  checks  on  behalf 
of  his  bank  would  be  sustained  at  law  as  the  check  of  the  bank, 
however  little  in  accordance  with  old-fashioned  rules  might  be 
the  agent's  method  of  signing  on  behalf  of  his  principal.  Dif- 
ficulty could  only  arise  where  the  cashier  had  a  private  account 
at  the  same  bank. 

§  155.  Power  to  certify  Checks  Inherent.  —  By  the  universal 
usage  of  banks  the  certification  of  checks  has  become  a  part  of 
the  ordinary  daily  routine  of  banking  business  and  is  therefore 
inherent  in  the  cashier's  office,  being  a  matter  of  execution 
requiring  no  great  discretion.      (See  /.) 

2  story's  Agenev,  §  100  a.  ^  piaile  v.  Peirce,  32  Md.  327. 

*  Baniv  of  Genesee  i'.  Patcliin  Bank,  19  N.  Y.  312. 

VOL.  1  —  22  337 


§  155  THE    CASHIER 

Check  given  as  Collateral 

(a)  But  in  case  the  check  is  not  drawn  in  the  usual  course  of 
business,  as  if  it  is  given  as  collateral  security,  the  cashier  has  no 
inherent  authority  to  certify,  and  if  the  fact  appears  on  the  face 
of  the  check  as  where  it  contained  the  words  "  To  hold  as  collat. 
for,  etc.",  the  holder  is  put  to  his  inquiry  concerning  the  special 
power  that  would  be  necessary  to  enable  the  cashier  to  certify.^ 
Of  course  the  cashier  has  no  right  to  certify,  if  the  drawer  has  not 
sufficient  funds  in  the  bank,  nor  to  certify  his  own  checks.      (See  j.) 

(b)  The  certification  is  usually  made  by  writing  "Good"  across- 
the  face  of  the  check,  followed  by  the  initials  of  the  officer ;  but 
it  may  perhaps  be  done  verbally,^  —  though  it  is  much  to  be 
regretted  that  any  such  decision  should  have  been  made.  For 
the  effect  of  certification,  see  §  403. 

We  have  here  to  deal  with  the  powers  and  duties  of  the  various 
bank  officers  concerning  this  transaction,  developing  the  above 
points  and  considering  the  important  cases  bearing  thereon.  So 
soon  as  a  check  has  been  certified,  the  amount  should  at  once  be 
debited  to  the  drawer  and  credited  to  the  payee,  or,  as  is  sometimes 
preferred,  to  a  "  certified  check  account",  upon  the  books  of  the 
bank.  The  payee  thereafter  occupies  in  several  respects,  as, 
for  example,  the  running  of  the  Statute  of  Limitations,  the  posi- 
tion of  an  ordinary  depositor.  Though  of  course  he  cannot  insist 
upon  the  right  to  continue  a  deposit  account  if  the  bank  does  not 
wish  to  open  it;  neither  can  he  draw  checks  against  his  credit, 
which  is  properly  only  to  be  paid  over  upon  presentment  and  sur- 
render of  the  accepted  check.  He  is  an  ordinary  contract  creditor 
for  the  amount.  The  duty  to  make  this  entry  is  what  might  be 
described  as  a  purely  internal  duty.  It  is  a  part  of  the  mechanism 
of  the  institution  itself.  The  neglect  of  the  officials  to  do  it  may 
render  them  personally  liable  to  the  bank  for  any  consequent 
loss,  but  does  not  affect  the  rights  of  any  outside  party.  For  the 
substance  of  the  doctrines  thus  far  laid  down  we  have  the  direct 
authority  of  the  Girard  Bank  v.  Bank  of  Penn  Township,^  a  case 
in  which  the  object  of  the  court  seemed  to  be  to  refrain  so  far  as 
possible  from  saying  anything  useful.     Also  we  have  the  indirect 

1  §  155.     Dorsey  v.  Abrams,  85  Pa.  St.  299 ;  Fidelity  etc.  Co.  v.  National 
Bank,  48  Tex.  Civ.  App.  301,  lOG  S.  W.  782  (1908). 

2  Espy  V.  Bank  of  Cincinnati,  18  Wall.  604,  21  L.  ed.  947. 

3  39  Pa.  St.  92. 

338 


POWER   TO    CERTIFY    CHECKS    INHERENT  §   155 

authority  of  all  the  New  York  cases,  which  tacitly  assume  the 
inherent  legality  of  certification  as  the  necessary  basis  of  all  their 
decisions  (post). 

Form 

(c)  The  most  common  form  in  which  to  express  the  certification 
is  by  simply  writing  upon  the  check  the  word  "  good",  follo\\'e(l 
by  the  initials  of  the  certifying  officer.  But  it  is  not  essential 
that  this  form  should  be  observed.  Any  other  writing,  as  the  name 
or  initials  of  the  officer,  or  the  word  "  good  "  alone,  if  intended 
and  understood  to  bear  this  meaning,  will  be  construed  accordingly. 
In  England  the  "  marked  checks",  which  in  some  respects,  though 
not  in  all,  resembled  our  certified  checks,  were  customarily,  until 
the  statute  interfered,  literally  only  marked,  and  bore  no  written 
word  whatsoever.  It  makes  no  difference  how  meaningless  in 
itself  may  be  the  method  resorted  to,  or  even  that,  like  the  word 
"good",  it  might  seem  easily  capable  of  a  different  meaning; 
it  will  be  construed  in  reference  to  the  customs  and  usages  of  the 
business,  and  to  the  understanding  of  the  parties,  and  will  be 
held  valid  or  invalid  solely  in  reference  to  this  construction.  It  is 
a  certification  if  it  be  done  animo  certificandi,  if  we  may  be  allowed 
to  coin  the  phrase.     See  (b)  above,  and  Checks  and  Certification. 

Who  may  Certify 

(d)  Rarely  the  president  undertakes  to  certify  checks ;  quite 
frequently  the  teller;  but  perhaps  by  far  the  most  frequently 
the  cashier.*  By  reason  of  this  proportion  it  has  always  been 
assumed  that,  if  the  power  be  inherent  in  any  office,  it  is  inherent 
in  that  of  the  cashier."*"  But  here  has  been  a  grand  question  and 
doubt  in  this  whole  subject.  Is  it,  or  is  it  not,  an  implied  power 
of  the  cashier,  —  a  power  which  is  to  be  assumed  as  constituting 
by  custom  one  of  the  essential  elements  of  his  office  and  position, 
which  it  is  to  be  taken  for  granted  that  he  can  exercise  simply  by 
virtue  of  the  fact  of  his  being  cashier?     Or,  from  another  ])()int 

*  Barnes  v.  Ontario  Bank,  19  N.  Y.  152. 

"That  the  president  or  cashier  of  a  bank  ex  officio  has  implied  power 
to  certify  a  check  drawn  in  the  usual  course  of  banking  business  when 
presented  for  payment,  seems  to  be  well  settled."  Fidelity  etc.  Co.  v. 
National  Bank,  48  Tex.  Civ.  App.  301,  106  S.  W.  782  (1908). 

*"  A  cashier  has  no  implied  power  to  authorize  an  officer  of  another 
bank  to  accept  checks  in  tlie  cashier's  name.  United  States  National 
Bank  v.  First  etc.  Savings  Bank,  00  Or.  200,  119  Pac.  343  (1911). 

339 


§   155  THE    CASHIER 

of  view,  Will  his  certification  of  a  check  bind  the  bank  in  favor 
of  an  innocent  holder  who  had  no  actual  notice  that  the  bank 
had  never  clothed  him  with  any  such  authority,  nor  intended  that 
he  should  exercise  it  ? 

(e)  The  well-known  case  of  Mussey  v.  The  Eagle  Bank^  is 
the  strongest  authority  against  the  inherent  power.  That  case, 
it  is  true,  passes  directly  only  upon  the  power  of  the  teller,  but 
the  line  of  argument  is  general  enough  to  include  also  the  cashier 
or  the  president.  An  effort  was  made  to  prove  a  usage  for  the 
teller  to  certify.  But  the  evidence  was  declared  wholly  incompe- 
tent to  sustain  the  usage,  and  the  court  went  on  to  say  that  the 
usage,  even  if  proved,  would  not  have  sustained  the  theory  that 
the  power  was  "  inherent."  For  it  would  be  a  usage  to  allow  the 
teller  to  pledge  the  bank's  credit,  a  power  which  by  the  constitu- 
tion of  the  bank  can  be  exercised  only  by  the  corporate  government, 
or  under  their  special  delegation,  and  consequently  cannot  be  an 
implied  or  resulting  function  of  any  individual  officer.  Certainly 
it  is  sound  to  say  that  a  power  exercised  by  virtue  of  a  usage  is 
strictly  a  power  exercised  by  virtue  of  a  delegation  of  authority, 
which  the  law,  by  reason  of  the  usage,  conclusively  presumes 
to  have  been  made.  Therefore  the  recognition  of  the  fact  that 
the  corporate  government  could  delegate  this  power  carries  with 
it  a  recognition  also  of  the  further  fact,  that  the  usage  (which 
conclusively  implies  such  delegation  as  matter  of  imperative  law), 
if  proved,  would  be  good.  Yet  the  tendency  of  the  court  in  this 
case  appeared  so  strongly  opposed  to  any  possible  validity  of  the 
usage,  that  it  has  been  often  cited  and  commented  upon  as  if  it 
went  to  this  length.  In  point  of  fact,  it  is  an  unavoidable  logical 
sequence  from  the  language  used,  that  the  usage,  if  shown,  would 
be  valid,  though  perhaps  this  result  of  his  own  words  was  not 
recognized  even  by  the  learned  judge.  A  little  fault  also  can 
be  found  with  the  phraseology  in  this  opinion.  Certification  is 
said  to  be  a  ijledging  of  the  credit  of  the  hank.  This  has  a  formi- 
dable sound,  as  though  an  act  so  important  should  be  done  by  or 
under  the  immediate  supervision  of  those  officials  who  have  the 
supreme  discretionary  control  of  the  corporate  business.  But 
the  phrase  is  deceptive.  It  is  obvious  that,  in  point  of  fact,  if 
the  transfer  of  credit  from  the  drawer  to  the  payee  or  to  "  certified 
check  account  "  is  duly  made,  contemporaneously  with  the  certi- 
fication, there  is  no  possibility  of  any  loss  accruing  to  the  bank. 
"*  9  Met.  (Mass.)  306. 
340 


POWER   TO    CERTIFY    CHECKS    INHERENT  §  155 

As  well  might  it  be  said  that,  if  A.  draws  his  check  in  favor  of  B., 
both  being  tlepositors  in  the  same  bank,  and  B.  dei)osits  it,  the  siiift- 
ing  of  the  credit  from  the  one  to  the  other  is  a  pledge  of  the  credit 
of  the  bank.  Practically,  instead  of  being  called  a  pledge  of  credit, 
it  should  be  considered  a  transfer  of  credit,  and  should  be  regarded 
as  a  mere  matter  of  book-keeping.  It  is  true  that  the  bank  is 
bound  by  the  acceptance,  as  by  a  promise  to  pay ;  but  it  is  only 
a  promise  to  pay  a  sum  actually  left  with  it  for  the  express  pur- 
pose of  being  used  for  such  payment,  and  already  due  and  owing. 
It  is  under  a  similar  obligation  to  every  depositor  in  the  bank, 
though  the  ordinary  depositor  has  no  more  accurate  written  evi- 
dence of  the  amount  to  his  credit  than  is  furnished  by  his  bank- 
book. Before  the  acceptance  the  debt  ran  to  A.,  the  drawer; 
after  the  acceptance  to  B.,  the  holder.  There  seems  nothing 
very  objectionable  in  allowing  the  cashier  to  make  this  change. 
These  words,  therefore,  if  they  can  be  regarded  as  describing  a 
business  operation  involving  risk  and  calling  for  discretion,  are 
in  fact  seriously  deceitful.  In  many  banks,  where  cashiers  are 
not  permitted  to  certify,  they  are  accustomed,  upon  request,  to 
give  their  ''  cashier's  check",  of  which  the  practical  effect  is  not 
to  be  distinguished  from  the  result  of  certification,  and  which 
there  can  be  no  question  of  their  power  to  do.  The  real  objection 
to  the  practice  of  certification  lies  in  the  dread  of  its  being  abused 
by  careless  certification  when  there  are  no  funds,  or  an  equally 
careless  subsequent  paying  out  of  funds  on  checks  of  the  drawer, 
so  as  to  reduce  his  deposit  below  the  amount  called  for  by  the 
certified  check.  Theoretically,  certification  is  harmless;  it  is 
neglect  to  abide  by  the  theory  that  has  brought  it  into  unmerited 
disrepute. 

Even  if  this  case  ^  could  be  construed,  which  we  have  tried  to 
show  that  it  cannot,  to  support  the  view  that  usage  could  not 
confer  upon  an  officer  the  power  to  bind  the  bank  by  certification, 
yet  in  this  it  would  stand  alone  against  a  great  weight  of  contrary 
authority.  The  Pennsylvania  case,  cited  above,^  shows  that  in 
that  State  the  power  may  be  conferred,  and  will  be  upheld.  And 
though  the  reticence  of  the  judges  is  such  that  they  do  not  intimate 
how  it  should  be  conferred,  or  under  what  circumstances  it  will 
be  upheld,  yet  if  it  can  be  thus  treated  by  any  means,  even  by  the 
most  formal  vote,  it  can  also  be  sustained  by  inference  resting 

«  Mussey  v.  Eagle  Bank,  0  Met.  (Mass.)  306. 
'  Girard  Bank  i-.  Bank  of  Peun  Township,  39  Pa.  St.  92. 

341 


§  155  THE    CASUIER 

upon  proof  of  established  usage.  The  New  York  cases  are  numer- 
ous, and  united  in  sustaining  the  authority  derived  from  usage .^ 
It  would  seem  to  be  a  universal  custom  in  that  State  for  either 
the  cashier  or  the  teller  to  certify  checks.  Nothing  being  easier 
than  to  prove  this  custom,  it  was  usually  done  at  the  trial  of  all 
the  causes. 

New  York  Declares  the  Poicer  of  Certification  Inherent  in  the  Office 
of  Cashier.     So    U.  S.  C.  C. 

(f)  But  a  recent  case  declares  directly  that  the  power  of  certi- 
fication is  inherent  in  the  office  of  cashier,  and  criticises  the  Mas- 
sachusetts decision  quite  sharply,  as  being  based  upon  an  idea 
that  the  power  of  certification  was  the  creature  of  usage  or  custom. 
The  decision  is  said  to  be  twenty  years  old,  to  have  been  never 
reiterated  in  Massachusetts,  to  have  been  repudiated  in  New  York 
and  other  States,  and  not  now  properly  to  be  regarded  as  law, 
even  in  Massachusetts,  so  as  to  override  "  a  general  rule  of  con- 
struction, based  upon  the  principles  of  the  common  law  of  universal 
application."  ^  Previously  the  New  York  cases  had  not  strictly 
been  precedents  upon  the  point  of  the  inherent  character  of  the 
power ;  though  the  Massachusetts  case  had  already  been  severely 
criticised,  and  a  plain  willingness  shown  to  override  it  upon  neces- 
sary occasion. -^^ 

The  most  important  case  which  has  ever  arisen  concerning 
the  power  of  the  cashier  to  certify  is  that  of  the  Merchants'  Bank 
V.  State  Bank,!^  w^hich  was  first  tried  in  the  United  States  Circuit 
Court  for  the  first  circuit,  before  Clifford  and  Lowell,  JJ.  The 
decision  in  the  lower  court  was  against  the  validity  of  the  certified 
checks.  The  case  was  carried  to  the  Supreme  Court  of  the  United 
States,  and  this  decision  was  reversed.  It  was  there  held  that  the 
power  of  the  cashier  to  do  such  an  act  might  be  properly  inferred 
by  the  jury  from  the  facts  of  his  doing  such  cognate  acts  as  draw- 

8  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  16  N.  Y. 
125 ;  Meads  v.  Merchants'  Bank,  25  id.,  143 ;  Clarke  National  Bank  v. 
Bank  of  Albion,  52  Barb.  (N.  Y.)  592 ;  Willets  v.  Phoenix  Bank,  2  Duer 
(N.  Y.)  121 ;  and  the  New  York  cases  cited  in  the  remainder  of  this 
chapter. 

9  Cooke  V.  State  National  Bank  of  Boston,  52  N.  Y.  96,  afiBrmmg  same 
case  in  50  Barb.  (N.Y.)  339,  1  Lans.  (N.  Y.)  494. 

10  In  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  16 
N.  Y.  125. 

11 10  WaU.  604,  19  L.  ed.  1008. 

342 


POWER   TO    CERTIFY    CHECKS   INHERENT  §  155 

ing  checks  against  the  bank,  borrowing  and  lending  money,  and 
the  hke.  But  substantially  the  court  upheld  the  power  as  inherent 
in  the  office.  It  is  the  duty  of  the  cashier,  say  the  court,  "  to 
receive  all  the  funds  which  come  into  the  bank,  and  to  enter  them 
upon  its  books.  The  authority  to  receive  implies  and  carries 
with  it  authority  to  gi\'e  certificates  of  deposit  and  other  proper 
vouchers.  Where  the  money  is  in  the  bank,  he  has  the  same 
authority  to  certify  a  check  to  be  good,  charge  the  amount  to  the 
drawer,  appropriate  it  to  the  payment  of  the  check,  and  make 
the  proper  entry  on  the  books  of  the  bank.  This  he  is  authorized 
to  do  virtute  officii.  The  power  is  inherent  in  the  office."  It 
should  be  remembered  that  the  court  is  here  dealing  with  the 
cashier  of  a  bank  organized  under  the  act  of  Congress  creating 
the  national  banking  system  of  the  United  States,  which  act  ex- 
pressly allowed  the  bank  to  make  such  a  purchase  of  coin  as  that 
for  which  this  cashier  had  given  these  certified  checks.  The 
by-laws  of  the  bank  were  also  referred  to,  which  made  the  cashier 
responsible  "  for  the  moneys,  funds,  and  all  other  valuables  of 
the  bank  " ;  and  declared  that  "  all  contracts,  checks,  drafts, 
receipts,  etc.  shall  be  signed  either  by  the  cashier  or  president." 
But  no  especial  knowledge  of  these  by-laws  was  asserted  or 
shown  on  behalf  of  the  plaintiff,  nor  can  it  be  said  that  they 
confer  upon  the  cashier  any  more  extensive  or  different 
authority  than  that  naturally  and  customarily  enjoyed  and 
exercised  by  any  cashier  according  to  the  ordinary  and  well- 
knowTi  usage  and  general  manner  of  conducting  the  banking 
business. 

The  bank  may  expressly  delegate  the  power  of  certifying  to  its 
president,  its  cashier,  or  its  teller.  But  it  would  seem  that  the 
fact  that  such  power  is  so  specially  delegated  to  any  other  officer 
than  the  cashier  would  not  necessarily  be  exclusive  of  such  power 
as  inhering  in  the  cashier  also,  at  least  in  the  absence  of  actual 
notice  to  any  party  to  be  affected. ^- 

Judge  Selden  regards  the  teller  as  the  more  proper  officer,  on  the 
ground  that  of  course  the  cashier  could  certify,  but  that  the  teller's 
office  is  an  offshoot  of  the  cashier's,  and  has  appropriated  that 
peculiar  description  of  duties,  which  renders  it  more  convenient 
for  the  teller  to  assume  this  function  also.^^ 

12  Merchants'  Bank  v.  State  Bank,  10  Wall.  604,  650,  10  L.  ed.  1008. 
1'  Farmers  &   Mechanics'    Bank   v.    Butchers  &    Drovers'    Bank,    16 
N.  Y.  125 ;   Irving  Bank  v.  VVetherald,  36  N.  Y.  335. 

343 


§  155  THE    CASHIER 

Restrictions  on  Certification 

(g)  A  bank  which  allows  an  officer  to  certify  checks  can  of 
course  impose  upon  his  authority  any  restrictions  it  may  choose. 
As  usual,  these  restrictions  will  always  be  valid  as  between  the 
officer  and  the  bank.  But  if  it  should  be  decided  that  the  power 
of  certification  is  inherent  in  any  special  officer,  or  if  local  usage 
should  be  such  that  he  is  to  be  regarded  as  held  out  to  the  world  as 
possessing  the  general  power  of  certification  subject  to  no  unusual 
limitations,  notice  of  the  existence  of  such  restrictions  must  be 
brought  home  to  the  knowledge  of  any  third  persons  who  are  to 
be  affected  by  them.^*  Notice  that  a  bank  has  refused  to  become 
party  to  an  agreement  entered  into  between  other  banks  in  the 
same  city,  for  settling  clearing-house  balances  by  certified  checks, 
is  not  notice  that  the  same  bank  does  not  permit  its  cashier  to 
certify  checks  in  the  ordinary  manner  in  the  daily  course  of  business. 
The  two  things  are  not  equivalent.^^ 

Wrongful  Certification 

(h)  One  limitation,  however,  the  law  lays  down  in  all  cases. 
A  cashier  cannot  certify  the  check  of  a  drawer  who  has  not  un- 
incumbered funds  in  the  bank  sufficient  to  meet  the  check.  Any 
person  having  notice  of  the  fact  that  the  bank  had  not  enough 
of  the  drawer's  funds  on  hand  to  meet  the  check  at  the  time  of 
certification,  will  be  presumed  to  know  that  the  act  was  unauthor- 
ized and  void,  and  will  not  be  allowed  to  hold  the  bank  liable 
upon  it.^^  But  any  outside  party  is  justified  in  accepting  the 
representation  of  the  officer  as  to  the  sufficiency  of  the  drawer's 
credit,  or  in  assuming  without  special  inquiry  that  all  is  right 
solely  on  the  strength  of  the  undertaking  itself.  Knowledge 
that  the  agent  cannot  certify  without  funds,  is  not  knowledge 
that  there  are  no  funds.  This  is  an  extrinsic  matter.  A  certi- 
fication accepted  on  the  faith  of  the  cashier's  or  teller's  statement 
that  he  was  authorized  to  certify,  would  not  bind  the  bank  if  he 
was  not  so  authorized.  But  his  statement,  directly  or  by  im- 
plication, that  there  are  the  requisite  funds  in  the  bank  is  of  a 
different  nature,  and  will  bind  the  bank. 

"  Clarke  National  Bank  v.  Bank  of  Albion,  52  Barb.  (N.  Y.)  592 ; 
Merchants'  Bank  v.  State  Bank,  10  Wall.  604,  19  L.  ed.  1008. 

15  Cooke  V.  State  National  Bank  of  Boston,  52  N.  Y.  96. 

16  Ibid.,  affirming  same  case  in  50  Barb.  (N.  Y.)  339, 1  Lans.  (N.  Y.)  494. 

344 


POWER   TO    CERTIFi'    CHECKS    INHERENT  §  155 

Representations 

(0  In  general  terms,  it  may  be  said  that,  where  one  deahng 
with  an  agent  ascertains  that  the  agent's  act  corresponds  exactly 
with  the  terms  of  the  power,  he  may  take  the  agent's  representa- 
tion as  to  any  extrinsic  fact,  i)eculiarly  within  the  agent's  knowl- 
edge, and  not  ascertainable  by  a  comparison  of  the  power  with 
the  act  done  under  it.^^  "  The  certificate  of  the  cashier  of  a  bank 
that  a  check  is  '  good  '  is  a  representation  of  a  present  existing 
fact,  within  his  knowledge  as  cashier ;  and  if  that  certificate  be 
made  by  him  in  the  course  of  his  ordinary  business  as  cashier, 
it  will  bind  the  bank  in  favor  of  innocent  third  persons,  upon 
the  principle  of  estoppel  in  pais,  even  if  the  certificate  be  not 
true,  and  the  drawer  of  the  check  has  no  funds  on  deposit  in  the 
bank."  18 

Whether  banks  are  competent,  by  usage  or  express  agreement, 
to  extend  their  liability  so  as  to  include  cases  where  the  certification 
is  known  to  be  made  without  sufficient  funds  of  the  drawer,  is  a 
quoBre  in  Cooke  v.  State  National  Bank ;  ^^  though  it  is  said  that 
Selden,  J.  has  expressed  an  opinion  in  the  negative.^" 

Officer  cannot  Certify  his  own  Checks 

(j)  An  officer,  though  authorized  to  certify  generally,  yet 
cannot  legally  certify  his  own  checks.  Apparently  the  rule  covers 
equally  cases  where  he  has  and  where  he  has  not  money  to  the 
designated  amount  standing  to  his  credit  in  the  bank.  The 
principles  laid  down  in  §§  99,  125  seem  suflficiently  to  sustain 
this  position.     But  if  this  certification  is  false,  we  have  the  au- 

"  Farmers  &  Mechanics'  Bank,  etc.  v.  Butchers  &  Drovers'  Bank,  IG 
N.  Y.  125. 

18  Morse  i;.  Massachusetts  National  Bank,  1  Hohnes  (C.  C.)  209,  per 
Shepley,  J.  And  to  the  same  purport  is  Pope  v.  Bank  of  Albion,  59 
Barb.  (N.  Y.)  22(5. 

A  certified  cheek  is  valid  in  the  hands  of  a  bona  fide  holder  for  value, 
although  tlie  maker  had  no  funds  in  tlie  l)ank  when  it  was  certified  and 
even  though  a  statute  makes  such  certification  a  crime.  Union  Trust 
Co.  V.  Preston  National  Bank,  VM\  Mieh.  4G0,  99  N.  W.  399,  112  Am.  St. 
Rep.  370  (1904);  First  National  Bank  v.  Union  Trust  Co.,  158  Mich. 
94,  122  N.  W.  547,  133  Am.  St.  Rep.  3G2  (1909) ;  First  National  Bank  v. 
Currie,  147  Mich.  72,  110  N.  W.  499,  9  L.  R.  A.  (x.  s.)  098,  118  Am.  St. 
Rep.  537  (1907). 

"  52  N.  Y.  96. 

2"  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  16 
N.  Y.  125. 

345 


§  155  THE   CASHIER 

thority  of  a  thoroughly  considered  case  for  saying  that  it  is  utterly 
void  as  against  the  bank.  The  cause  of  Claflin  v.  The  Farmers  and 
Citizens'  Bank  turned  upon  the  validity  of  the  president's  false 
certification  of  his  own  check,  in  the  hands  of  a  bona  fide  holder 
for  value.  In  the  Supreme  Court  it  was  not  denied  that  the  act 
was  wrongful  and  unauthorized  as  between  the  bank  and  the  presi- 
dent. But  it  was  said  that  the  mere  identity  of  name  signed 
upon  the  check  as  drawer  with  the  president's  name  was  not 
alone  sufficient  to  charge  the  holder  with  notice  that  they  were 
one  and  the  same  person ;  and  there  being  no  other  proof  of  such 
notice,  the  bank  was  declared  liable.  But  in  the  Court  of  Appeals 
this  ingenious  evasion  of  the  wholesome  rule  was  rejected.  The 
identity  of  name  was  regarded  as  sufficient  to  put  every  one  to 
whom  it  came  upon  inquiry  as  to  whether  the  president  was  seek- 
ing to  use  his  official  character  for  his  private  benefit ;  and,  indeed, 
it  may  be  suggested  that  there  was  not  alone  identity  in  name, 
but  the  similarity  of  handwriting  in  the  two  signatures  ought 
also  to  have  been  taken  into  consideration.  In  a  final  and  very 
satisfactory  decision,  the  bank  was  declared  not  to  be  bound  by 
the  acceptance.^^ 

§  156.  Dealings  in  Bills  of  Exchange.  —  A  cashier  has  inherent 
power  to  buy  and  sell  bills  of  exchange,  and  to  make  contracts 
and  arrangements  to  secure  exchange,  and  provide  for  the  accept- 
ance of  bills  drawn  by  the  bank.  He  cannot  accept  for  the  bank 
bills  drawn  against  it,  for  accommodation,  and  whether  he  can 
accept  at  all  is  doubtful. 

The  business  of  dealing  in  bills  of  exchange  is  a  department  of 
the  general  business  of  banking.  It  may  or  may  not  be  undertaken 
by  the  corporation,  at  its  own  option.  If  it  is  undertaken,  the 
duty  of  buying  and  selling  the  bills  and  indorsing  them  over  to 
the  purchaser  is  within  the  ordinary  scope  of  the  cashier's  office.^ 

21  Claflin  V.  Farmers  &  Citizens'  Bank,  .36  Barb.  (N.  Y.)  540,  over- 
ruled in  25  N.  Y.  293.  See  Lowndes  v.  City  National  Bank,  82  Conn.  8, 
72  Atl.  150,  22  L.  R.  A.  (n.  s.)  408  (1909). 

When  a  cashier  of  a  bank  certifies  his  check  drawn  in  payment  of  his 
indebtedness  to  another  bank  the  transaction  is  illegal  and  void  ;  the  bank 
is  put  upon  inquiry  as  to  the  authority  of  the  cashier  to  so  certify  and  it 
acts  thereon  at  its  peril.  In  such  case  the  surety  on  the  cashier's  bond  is 
liable  for  the  amount  of  such  payment.  Rankin  v.  Bush,  93  App.  Div. 
181  (1904),  87  N.  Y.  S.  539;  id.,  102  App.  Div.  510  (1905),  92  N.  Y.  S. 
866. 

1  §  156.  Lafayette  Bank  v.  State  Bank,  4  McLean  208 ;  Robb  v.  Ross 
County  Bank,    41  Barb.   (N.  Y.)    586;    Marvine   v.   Hymers,   2   Kern. 

346 


DEALINGS   IN    BILLS    OF   EXCHANGE  §  156 

The  presumption  of  his  power  to  (h)  so  must,  therefore,  be  impera- 
tive in  UivoT  of  a  third  party  deahng  with  him  without  notice  to 
the  contrary.  But  whether  his  general  charge  of  this  depart- 
ment would  give  him  power  to  bind  the  bank  by  his  acceptance 
of  bills  of  exchange  drawn  against  it,  is  a  matter  scarcely  to  be 
regarded  as  beyond  a  question.  The  cashier  of  the  Bank  of  Ken- 
tucky was  declared,  in  a  State  court,  not  to  ha\-e  this  power  by 
virtue  of  hisoffice.^  In  Michigan,  however,  in  ruling  that  a  cashier 
could  not  accept  bills  for  accommodation,  it  was  said  that  such 
an  acceptance  would  be  void  in  the  hands  of  a  holder  with  notice 
of  its  character.3  From  this  it  might  perhaps  be  inferred  that  the 
cashier  could  accept  on  behalf  of  the  bank  if  it  were  for  a  bona 
fide  purpose,  not  being  accommodation.  It  is  certain  that  the 
cashier  never  has  authority  to  bind  the  bank  by  any  of  the  numer- 
ous species  of  "  accommodation  "  contracts,  which,  in  one  shape 
and  another,  are  so  common  in  business  circles,'*  though  an  in- 
nocent holder  may  have  a  right  to  hold  the  bank. 

Where  a  bill  of  exchange  is  indorsed  by  a  cashier,  though  only 
for  the  purpose  of  transmitting  it  for  collection,  he  becomes  a 
"  party  "  to  it  in  the  sense  of  a  statute  which  makes  a  notarial 
certificate  of  notice  of  presentment  and  nonpayment  to  "  parties  " 
admissible  as  evidence  of  such  notice ;  the  certificate  is  evidence 
of  notice  having  been  given  to  the  cashier,  and  therefore  to  the 
bank,  since  the  subject  matter  falls  within  the  scope  of  his 
agency.^ 

The  cashier  of  a  Kansas  City  bank  orally  agreed  with  a  firm 
which  was  its  New  York  correspondent,  that,  if  the  firm  would 
accept  certain  drafts  to  the  amount  of  S35,000  negotiated  by  the 
bank,  it  would  keep  on  deposit  wath  the  firm  until  their  maturity 
a  balance  equal  to  their  amount,  and  the  firm  have  a  lien  on  such 

(N.  Y.)  223;  Wild  v.  Bank  of  Passamaquoddy,  3  Mason  505;  Fleckner 
V.  Bank  of  United  States,  8  Wheat.  3(J0,  5  L.  ed.  G3G. 

The  cashier  of  a  bank  has  general  authority  to  discount  and  redis- 
count paper  owned  by  the  liank  and  to  sell  and  assign  paper  owned  by 
it,  for  a  valuable  consideration,  and  if  he  sells  a  note  in  good  faith  and  in 
the  ordinary  course  of  business  his  act  is  binding  on  the  bank.  First 
State  Bank's  Receiver  v.  Farmers'  Bank,  155  Ky.  093,  100  S.  W.  250 
(1913).     See  Federal  Reserve  Act,  See.  II  (b). 

=  Pendleton  c.  Bank  of  Kentucky,  1  T.  B.  Monr.  (Ky.)  179. 

3  Farmers  &  INIechanics'  Bank  t'.  Troy  City  Bank,  1  Dougl.  (Mich.) 
457. 

*  West  St.  Louis  Savings  Bank  v.  Shawnee  County  Bank,  95  U.  S. 
557,  24  L.  ed.  490. 

6  Bank  of  United  States  v.  Da\'is,  2  Hill  (N.  Y.)  451.  • 

347 


§  156  THE   CASHIER 

balance  as  security,  with  the  right  to  charge  the  account  at  any 
time  with  the  acceptances,  and  appropriate  to  their  payment  so 
much  of  the  deposit  as  necessary  therefor ;  the  firm  to  be  kept 
informed  of  the  condition  of  the  bank,  which  the  cashier  stated 
to  be  embarrassed,  but,  with  certain  expected  aid,  able  to  continue 
business.  Held,  that  this  agreement  was  not  invahd  as  against 
pubHc  pohcy,  was  not  fraudulent  as  to  the  holders  of  drafts  drawn 
on  the  firm  after  it  was  made,  and  was  within  the  power  of  the 
cashier  to  make,  both  under  his  general  authority,  and  by  virtue 
of  a  by-law  which  gave  him  supervision  of  the  bank,  with  duty 
to  "  attend  to  the  making  of  loans,  discounts,  and  other  active 
business  transactions  of  the  bank." 

§  157.  Personalty.  — The  cashier  has  full  charge  of  the  bank's 
personal  property,  except  so  far  as  withdrawn  from  his  control 
by  the  bank  or  by  the  directors." 

The  cashier  has  full  charge,  and  power  of  disposition  in  the 
regular  course  of  business,  of  all  personal  property  of  the  bank, 
whether  specie,  notes,  bills,  bonds,  securities,  valuable  papers, 
or  of  whatsoever  other  description  of  personal  property  the  bank 
may  have  in  its  possession.^ 

He  has  the  superintendence  of  its  books  of  accounts.^  Judge 
Shepley  has  given  the  following  very  good  abstract  of  the  ordinary 
duties  of  a  cashier :  "  To  keep  the  funds,  notes,  bills,  and  other 
choses  in  action  of  the  bank,  to  be  used  from  time  to  time  for  the 
exigencies  of  the  bank ;  to  receive  directly,  and  through  subor- 
dinate officers,  all  moneys  and  notes  of  the  bank;  to  surrender 
notes  and  securities  upon  payment ;  to  draw  checks ;  to  withdraw 
funds  of  the  bank  on  deposit ;  and  generally  to  transact,  as  the 
executive  officer  of  the  bank,  the  ordinary  routine  of  business. 
But  the  ordinary  duties  of  a  cashier  do  not  comprehend  the  making 
of  a  contract,  which  involves  the  payment  of  money,  without 

"  §  157.  McBoyle  v.  Union  National  Bank,  162  Cal.  277, 122  Pac.  458 
(1912). 

1  Wild  V.  Bank  of  Passamaquoddy,  3  Mason  505 ;  Franklin  Bank  v. 
Steward,  37  Me.  519 ;  Morse  v.  Massachusetts  National  Bank,  1  Holmes 
(C.  C.)  209;  Hawldns  v.  Fourth  National  Bank,  1.50  Ind.  117,  49  N.  E. 
957  (1897) ;  Davenport  v.  Prentice,  126  App.  Div.  451  (1908),  110  N.  Y.  S. 
1056. 

A  cashier  who  is  the  general  manager  of  the  hank  has  implied  power 
to  dispose  of  corporate  stock  by  converting  it  into  interest  bearing  securi- 
ties.    Johnson  v.  Bank  of  Pasco,  78  Wash.  59,  138  Pac.  295  (1914). 

-  Sturges  V.  Bank  of  Circleville,  11  Ohio  St.  153;  Baldwin  v.  Bank  of 
Newbury,  1  WaU.  234,  17  L.  ed.  534. 

348 


INDORSEMENT  §  158 

an  express  authority  from  tlie  directors,  unless  it  be  such  as  relates 
to  the  usual  customary  transactions  of  the  bank."  ^ 

§  158.  Indorsement.  —  The  cashier  has  inherent  power  to 
indorse  and  transfer  negotiable  paper  on  behalf  of  the  bank,  for 
collection,  discount  (/),  payment  of  the  bank's  debts  (e,  g),  or  by 
way  of  making  over  securities  held  by  the  bank  on  payment  of 
the  loan  (§159  fir),  or  in  any  other  case  arising  in  the  regular 
course  of  business,"  but  has  no  inherent  authority  to  indorse  for 
accommodation,  nor  to  put  the  bank's  name  on  his  own  paper, 
nor  to  give  title  to  any  other  than  negotiable  property  of  the  bank. 

Bona  Fide  Holder 

Any  indorsement  made  by  the  cashier  on  behalf  of  the  bank, 
though  wrongful,  will  bind  the  bank  in  favor  of  a  bona  fide  holder 
for  value  without  notice.**" 

Form 

Any  form  of  indorsement  will  be  good,  even  though  only  the 
name  of  the  cashier  without  his  title,  if  in  fact  the  transaction  was 
on  behalf  of  the  bank,  and  within  the  cashier's  authority.  See 
§  154  b.     These  points  will  now  be  illustrated  and  expanded. 

May  Transfer  Bank's  Negotiable  Paper,  but  not   Other   Property 

(a)  All  the  bank's  negotiable  paper  the  cashier  may  negotiate 
and  transfer  on  its  behalf,^  and  to  this  end  may  indorse  it  o\'er,  so 
as  to  bind  the  bank  like  any  ordinary  indorser  on  similar  paper. 
But  the  character  of  negotiability  is  a  strict  limitation  upon  his 
inherent  power.  He  cannot,  solely  by  virtue  of  his  office,  pass  title 
to  non-negotiable  paper  of  any  sort,  or  to  any  other  description 
of  corporate  property,  as,  for  example,  a  judgment  given  in  favor 

'  Morse  v.  Massachusetts  National  Bank,  1  Holmes  (C.  C.)  209. 

"  §  158.  If  a  cashier  loans  money  to  the  bank  and  takes  a  note  therefor, 
he  mav  indorse  the  note  and  transfer  it  to  another.  First  National 
Bank  v.  Anderson,  5  Ind.  Terr.  118,  82  S.  W.  693  (1904). 

»«  State  V.  Corning  Sa\intrs  Bank,  139  Iowa  338,  115  N.  W.  937  (1908). 
(Indorsement  by  the  president  who  was  the  bank's  executive  officer.) 

'  Wild  /'.  Bank  of  Passamaquoddy,  3  Mason  505  ;  State  Bank  v.  Wheeler, 
21  Ind.  90;  Citv  Bank  v.  Perkins,  29  N.  Y.  554;  Cooper  r.  Curtis,  30 
Me.  488;  Kimb-ill  v.  Cleveland,  4  Mich.  606;  Crocket  v.  Younj?,  1  Sm. 
&  M.  (Miss.)  241;  Everett  v.  United  States,  6  Port.  (Ala.)  KiO ;  Bri- 
denbeeker  v.  Lowell,  32  Barb.  (N.  Y.)  9;  McBoyle  v.  Union  National 
Bank,  162  Cal.  277,  122  Pac.  458  (1912). 

349 


§  158  THE   CASHIER 

of  the  bank.  His  action  in  making  transfers  of  this  latter  descrip- 
tion can  be  sustained  only  by  authority  directly  conferred  by  the 
directors,  or  arising  from  established  usage.-  Of  course  this 
power  of  transfer,  like  almost  every  power  which  an  agent  can 
possess,  may  easily  be  so  abused  by  him  as  to  render  him  liable 
to  his  principal.  It  is  very  difficult  to  say  precisely  how  much 
discretion  can  be  properly  exercised  by  the  cashier  in  trading  in 
negotiable  securities.  Clearly  he  has  no  right  to  push  it  to  that 
point  where  virtually  it  becomes  a  considerable  and  important 
branch  of  the  bank's  business,  and  is  nevertheless  conducted  solely 
by  himself.  It  was  never  contemplated,  either  by  the  legislature 
in  conferring  the  franchise  or  by  the  stockliolders  in  investing  their 
capital,  that  trading  in  negotiable  securities,  if  carried  to  such  an 
extent  as  to  become  an  essential  and  vital  element  in  the  corporate 
business  and  prosperity,  should  be  conducted  solely  upon  the  single 
discretion  of  the  cashier.  The  management  of  the  important  affairs 
of  the  institution  was  intended  to  be  the  function  of  the  directors. 
We  can  only  state  this  principle  in  general  terms.  It  would  be  a 
matter  of  infinite  difficulty  to  draw  the  boundary  line,  and  no 
adjudicated  cases  assist  us  in  so  doing.  Certainly,  in  a  well- 
ordered  bank  the  directors  would  not  allow  the  cashier  to  usurp 
their  powers  improperly  in  this  respect.  Nor  could  he  do  so 
without  their  knowledge. 

Transfer  without  Authority 

(b)  It  may  also  happen  that  a  cashier  may  wilfully  make  a 
transfer  or  indorsement  in  direct  disobedience  to  special  direc- 
torial instructions.  But  in  any  of  these  cases  of  improper  transfers 
by  the  cashier,  he  simply  renders  himself  responsible  to  the  bank 
for  the  consequences  of  his  misconduct.  The  outside  party  dealing 
wdth  him  in  good  faith,  and  without  notice  of  the  irregularity, 
holds  the  bank  as  if  the  transaction  had  been  unobjectionable 
throughout.  For  it  is  an  inherent  power  of  the  cashier,  which  he 
exercises  simply  by  virtue  of  his  office,  to  make  the  transfer,  and 
no  person  can  be  required,  in  a  case  where  no  circumstances  of 
suspicion  put  him  upon  inquiry,  to  go  behind  this  authority.  If 
the  agent  exceeds  it,  the  matter  lies  wholly  between  himself  and 
his  principal.^ 

2  Barrick  v.  Austin,  21  Barb.  (N.  Y.)  241 ;   Holt  v.  Bacon,  25  Miss.  567. 

3  City  Bank  v.  Perkins,  29  N.  Y.  554.  In  this  case  the  cashier  had 
pledged  a  note,  which  it  was  urged  he  had  no  right  to  do.     The  suit  was 

350 


INDORSEMENT  §  158 

Indorsement  for  Discount,   Collection,  etc. 

(c)  Since  the  cashier  has  the  general  power  to  indorse  over  hills 
and  notes  of  the  bank,  for  the  purpose  of  passing  title  therein,  he 
of  course  has  the  lesser  and  included  power  to  indorse  for  special 
purposes,  as  for  discount.  So  also  for  collection,  and  for  transmis- 
sion for  collection,  he  may  indorse  both  paper  jjclonging  to  the 
bank  and  paper  intrusted  to  it  for  collection,  or  given  to  it  as 
collateral  security.^  If  paper  is  indorsed  by  him  for  this  special 
and  limited  purpose,  and  is  subsequently  fraudulently  converted, 
yet  if  the  indorsement  be  general,  and  the  paper  comes  to  the  hands 
of  a  bona  fide  holder  for  value  and  without  notice,  who  i)resumes 
and  has  a  right  to  presume  from  the  style  of  the  indorsement  that 
it  was  made  in  the  ordinary  course  of  business,  and  created  a 
guaranty  on  the  part  of  the  bank,  the  bank  may  be  held  to  respond 
as  an  ordinary  indorser/'  The  risk  is  voluntarily  incurred  by  the 
bank  in  putting  its  indorsement  in  such  a  form  that  it  does  not 
convey  notice  of  its  true  character  when  an  attempt  is  made  to  use 
it  fraudulently.  It  has  been  specially  held  that  a  cashier  has 
powder  to  indorse  over  negotiable  paper  in  payment  of  debts  of 
the  bank ;  ^  also  as  preliminary  to  demand  and  notice,  and  to  the 
institution  of  a  suit  upon  it.^  But  these  limited  powers  are  of 
course  included  in  the  general  authority  which  is  amply  supported 
by  abundance  of  judicial  decisions,  and  which  may  be  stated  in 
the  broadest  terms  :  — 

General  Inlierent  Authority  to  Indorse  Negotiable  Paper 

(d)  That  the  cashier,  by  his  indorsement  of  negotiable  paper 
on  behalf  of  the  bank  will  always  bind  the  bank  to  the  full  extent 

brought  against  the  maker  by  a  bona  fide  holder  for  vahie  and  witliout 
notice,  claiming  under  the  cashier's  indorsement.  The  court  did  not 
pass  upon  the  cashier's  authority,  holding  that,  whether  he  had  it  or  not, 
yet  the  plaintiff  had  a  sufficient  title  to  protect  the  maker  in  paying  to 
him,  and  could  oblige  him  to  do  so.  Gillett  v.  Phillips,  3  Kern.  (N.  Y.) 
1 14 :  transfer  by  cashier  of  notes  to  an  amount  in  excess  of  what  he  may 
legally  transfer  is  void,  except  as  to  bona  fide  holder  without  notice.  St. 
Louis  Perpetual  Ins.  Co.  v.  Cohen,  9  Mo.  4121  :  transfer  in  bad  faith  binds 
in  favor  of  bona  fide  holder  for  value  and  without  notice. 

^  Elliott  V.  Abbott,  12  N.  H.  549;  Corser  v.  Paul,  41  id.,  24;  Potter  v. 
Merchants'  Bank,  28  N.  Y.  641. 

5  Robb  P.  Ross  County  Bank,  41  Barb.  (N.  Y.)  586;  First  National 
Bank  v.  Stone,  106  Mich.  367,  64  N.  W.  487. 

6  Crocket  v.  Young,  1  Sm.  &  M.  (^liss.)  241. 
">  Hartford  Bank  v.  Barry,  17  Mass.  94. 

351 


§158 


THE   CASHIER 


that  any  individual  indorser  of  like  paper  and  in  like  form  would 
be  bound,  unless  the  holder  for  value  of  the  indorsed  paper  took  it 
with  actual  notice  of  some  fact  rendering  the  indorsement  irregular 
and  invalid.  Many  of  the  cases  cited  supra  in  this  section  assert 
that  the  consideration  for  the  transfer  need  not  appear  upon  the 
instrument,  but  will  be  presumed.  The  presumption  is  open  to  re- 
buttal by  proof  that  no  consideration,  or  only  an  inadequate  one, 
passed.  But  rebutting  evidence  of  this  description  can  be  used 
only  against  the  original  transferee,  or  against  a  subsequent  holder 
with  notice.'^" 

A  cashier  may,  in  the  regular  course  of  business,  assign  and 
indorse  notes  belonging  to  the  bank,  and  whether  negotiable  paper 
has  or  has  not  been  authorized  by  the  discount  committee  will  not 
affect  bona  fide  indorsees  before  maturity.* 

Power  to  Pay  Deposit  with  Negotiable  Bills  Doubted 

(e)  A  cashier  cannot  assign  discounted  bills  and  notes  to  a 
depositor  in  payment  of  his  deposit.^  Assigning  mortgages,  or 
disposing  of  the  bank's  property,  such  as  discounted  bills,  is  a 
part  of  the  management,  and  belongs  to  the  directors.^'' 

Rediscount  Held  Good 

(/)  The  cashier  has  a  general  power  to  indorse,  and  if  he  has 
procured  a  bona  fide  rediscount,  it  will  be  good  as  within  his  unplied 

7«  Where  P.,  the  cashier  of  A.  bank,  got  the  M.  bank  to  discount  a 
note  payable  to  himself  and  indorsed  by  himself  individually,  and  by  the 
A.  bank,  by  himself,  as  cashier,  the  fact  that  he  was  the  first  indorser, 
and  that  he  personally  received  the  avails  of  the  note,  did  not  amount  to 
notice  to  the  M.  Bank.  Merchants'  National  Bank  v.  McNeir,  51  Minn. 
123,  53  N.  W.  178. 

Where  the  general  authority  of  a  cashier  of  a  bank  to  transfer  and 
indorse  negotiable  paper  held  by  the  bank  is  limited  by  a  certain  by-law, 
and  the  transferee  has  notice  of  such  by-law,  the  transfer  is  void.  In  re 
Assignment  Bank  of  Oregon,  32  Or.  84,  51  Pac.  87  (1897). 

8  Blair  v.  First  National  Bank  of  Mansfield,  2  Flippin  111  (1877). 
It  is  presumed  that  the  sale  of  a  note  by  the  cashier  was  authorized  or 
ratified  by  the  board  of  directors.  Hawkins  v.  Fourth  National  Bank, 
150  Ind.  117,  49  N.  E.  957  (1897). 

9  Lamb  v.  Cecil,  25  W.  Va.  288  (1883) ;  28  id.,  659.  Where  a  cashier 
paid  a  depositor  by  transferring  notes  to  him  it  was  held  that  the  depos- 
itor held  the  notes  and  their  proceeds  in  trust  for  the  bank  when  garnished 
by  its  creditors.     Schneitman  v.  Noble,  75  Iowa  120,  39  N.  W.  224. 

i"  Hoyt  V.  Thompson,  1  Seld.  (N.  Y.)  320.     See  §  14. 

352 


INDORSEMENT  §  158 

power,^""  but  he  cannot  bind  his  bank  as  an  accommodation 
indorser  of  his  own  promissory  note :  sucli  a  transaction  bears 
on  its  face  notice  of  possible  want  of  power." 

General  Power  to  Discharge  the  Bank's  Obligations  with  its 
Negotiable  Paper  Affirmed 

(g)  The  cashier  of  a  bank  is  usually  intrusted  with  all  the  funds 
of  the  bank  in  cash,  notes,  bills,  and  other  choses  in  action,  to  be 
used  from  time  to  time  for  the  ordinary  and  extraordinary  exi- 
gencies of  the  bank.  He  is  accustomed  to  receive  directly,  or 
through  the  subordinate  officers,  all  money  and  notes  of  the  bank ; 
to  deliver  up  all  discounted  notes  and  other  securities  and  property, 
when  payment  of  the  dues  for  which  they  are  given  have  been 
made  ;  and  to  draw  checks  from  time  to  time  for  money,  wherever 
the  bank  has  deposits  and  pecuniary  funds.  In  short,  he  is  con- 
sidered as  the  executive  officer  through  whom  and  by  whom  the 
whole  moneyed  transactions  of  the  bank  in  paying  or  receiving 
debts,  and  discharging  or  transferring  securities,  are  to  be  con- 
ducted. It  does  not  seem,  therefore,  too  much  to  infer,  in  the 
absence  of  all  known  and  positive  restrictions,  that  he  possesses 
the  incidental  authority,  and  indeed  that  it  is  his  duty,  to  apply  the 
negotiable  funds,  as  well  as  the  moneyed  capital  of  the  bank,  to 
discharge  its  debts  and  obligations. ^^ 

Forms  of  Indorsement 

Hence,  it  seems  to  be  a  natural  conclusion  that,  prima  facie, 
the  cashier  of  a  bank  possesses  the  incidental  authority  to  indorse 
the  negotiable  securities  held  by  the  bank,  in  order  to  supply  the 
wants  and  to  promote  the  interests  of  the  bank,  and  any  restric- 
tion upon  such  authority  must  be  established  by  competent  proofs, 
and  will  not  be  presumed  to  exist. ^^ 

i»»  Davenport  v.  Stone,  104  Mich.  521,  62  N.  W.  722.     See  §  156,  note. 

11  West  St.  Louis  Savings  Bank  v.  Shawnee,  95  U.  S.  557,  24  L.  ed.  490. 

12  Fleckner  v.  Bank  of  United  States,  8  Wheat.  360,  361,  5  L.  ed.  636; 
Cocheeho  National  Bank  v.  Haskell,  51  N.  H.  116;  Merchants'  Bank  v. 
State  Bank,  10  Wall.  604,  19  L.  ed.  1008.  See  Powers  v.  Woolfolk.  132 
Mo.  App.  354,  HI  S.  W.  1187  (1908),  holding  that  "the  law  is  well  settled 
that  a  cashier  ha\'ing  the  general  charge  and  management  of  a  bank  has 
authority  to  transfer  the  bank's  paper  as  collateral  security  for  the  bank's 
debts." 

1'  Wild  V.  Bank  of  Passamaquoddy,  3  Mason  505.     See  also  Folger  v. 
Chase,  18  Pick.  (Mass.)  63;    Spear  v.  Ladd,  11  Mass.  94;    Northampton 
VOL.  1  —  23  35,3 


§158 


THE    CASHIER 


(h)  The  various  forms  of  indorsement  which  have  been  em- 
ployed by  cashiers  have  given  rise  to  important  questions  concern- 
ing their  respective  vaHdity.     The  possible  divergence  seems  to  be 

limited  substantially  to  four  different  methods,  viz. :  " Bank, 

by  A.  B.,  cashier  "  ;  "  A.  B.,  cashier  of  the Bank  "  ;  "  A.  B., 

cashier  " ;  or,  finally,  simply  the  name  of  "  A,  B."  without  any 
other  words  whatsoever.  These  are  the  four  cardinal  forms  which 
alone  call  for  consideration.     Others  are  only  slight  modifications 

of  these,  such  as  "  For  the Bank,  by  A.  B.,  cashier  ",  or  verbal 

variations  by  the  use  of  simple  abbreviations,  as  "  Cash.",  "  Cas.", 
or  "  Cr."  Such  will  be  easily  recognized  as  substantially  identical 
with  one  or  other  of  these  four,  and  will  be  governed  by  the  same 
rules  respectively. 

The  Best  Form.     Second  and   TJiird  Form 

It  is  obvious  at  once  that  the  first  of  these  forms  is  the  tech- 
nically proper  one.  It  alone  accords  with  the  old  established  rule 
of  the  common  law  of  agency,  that,  where  a  contract  is  made 
through  an  agent,  the  principal  must  be  directly  named  as  the 
contracting  party,  properly  with  the  addition  of  further  words 
sufficiently  indicating  that  the  principal  in  this  particular  case  is 
contracting  through  the  instrumentality  of  A.  B.,  authorized 
agent,  and  the  signature  must  be  in  like  manner  of  the  name  of  the 
principal,  with  the  additional  intimation  that  it  is  written  by  his 
agent  on  his  behalf.^^  But  though  it  is  safest  and  wisest  always 
to  indorse  in  this  manner,  and  so  to  obtain  the  full  protection  of 
the  ancient  and  general  principle,  yet  special  decisions  have  de- 
clared other  forms,  theoretically  less  correct,  to  be  sufficient.  So 
it  can  no  longer  be  questioned  that  the  second  and  third  forms  will 
bind  the  bank.^^     The  words  appended  in  those  to  the  cashier's 

Bank  v.  Pepoon,  11  Mass.  288  ;  Corser  v.  Paul,  41  N.  H.  24  ;  Fay  v.  Noble, 
12  Cush.  (Mass.)  1 ;  Elliott  v.  Abbott,  12  N.  H.  549. 

"  Spear  v.  Ladd,  11  Mass.  94. 

15  State  Bank  v.  Fox,  3  Blatchf.  431 ;  Bank  of  Genesee  v.  Patchin  Bank, 
3  Kern.  (N.  Y.)  309 ;  Northampton  Bank  v.  Pepoon,  11  Mass.  288  ;  Folger 
V.  Chase,  18  Pick.  (Mass.)  63  ;  Robb.  v.  Ross  County  Bank,  41  Barb.  (N.  Y.) 
586 ;  Bank  of  the  State  of  New  York  v.  Muskingum  Branch  of  Bank  of 
State  of  Ohio,  29  N.  Y.  632  ;  Mechanics'  Banking  Association  v.  New  York 
&  Saugerties  White  Lead  Co.,  ,35  N.  Y.  505;  Elwell  v.  Dodge,  33  Barb. 
(N.  Y.)  336.  In  this  case  it  was  held  that  the  indorsement  of  "A.  B., 
president",  should  be  construed  as  the  indorsement  of  the  corporation 
upon  proof  furnished  of  the  uniform  usage  of  the  corporation  to  indorse 
thus  through  its  president.     Ordinarily,  the  president  has  no  authority  to 

354 


INDORSEMEXT  §   158 

name  certainly  signify  very  clearly  that  he  was  indorsing  offic-ialiy, 
and  on  behalf  of  the  bank,  and  that  the  contemporaneous  intention 
and  understanding  of  both  parties  was  that  the  bank  should  be 
bound  by  the  indorsement.  As  a  matter  of  fact,  probably,  in  all 
such  cases  that  ever  occurred,  the  undertaking  was  really  that  of 
the  bank,  and  the  law,  with  its  usual  flexibility  in  such  circum- 
stances, found  little  difficulty  both  in  sustaining  it  as  such,  and 
at  the  same  time  in  adroitly  saving  the  integrity  of  the  ancient 
theory.  It  was  declared,  as  appears  by  the  cases  cited  in  the  last 
note,  that,  since  the  intent  was  to  be  regarded  as  sufficiently 
certain  upon  the  face  of  the  instrument,  the  holder  was  authorized 

to  write  above  the  signature  the  phrase  "  For  the Bank",  or 

"  The  Bank,  by",  etc.,  or  any  other  words  that  might  be 

necessary  fully  to  express  and  to  carry  out  the  intent ;  also,  that 
he  might  strike  out  any  superfluous  or  inconsistent  words  originally 
written.  The  authorities  which  adopt  this  theory,  and  support 
the  legality  of  indorsements  made  in  the  described  forms,  are  ample 
to  put  the  matter  beyond  the  possibility  of  any  future  doubt. 
The  only  contrary  decision  to  be  found  in  the  reports  is  one  ren- 
dered by  the  Supreme  Court  of  the  State  of  New  York,  and  this 
was  very  brusquely  disposed  of  by  a  judge  upon  the  same  bench  a 
short  time  after  it  had  been  given.  His  language  was  as  follows : 
"  The  decision  in  the  Bank  of  the  State  of  New  York  v.  Farmers' 
Branch  of  the  State  Bank  of  Ohio,  36  Barb.  332,  is  not  a  controlling 
authority- ;  for  I  understand  it  has  been  reversed  by  the  Court 
of  Ai)i)eals ;  and  ice  must  presume  that  the  court,  in  giving  that 
decision,  were  not  aware  that  the  point  had  been  often  decided  the 
other  icay."  It  is  not  to  be  supposed  that  any  learned  justice  will 
ever  again  lay  himself  open  to  such  imputations  upon  his  profes- 
sional knowledge.  It  is  going  a  good  way,  certainly,  to  uphold 
the  third  form,  Avhercin  the  name  of  the  corporate  principal  does 
not  appear  at  all.  The  fact  of  what  bank  the  indorser  was  cashier, 
and  consequently  what  corporation  was  bound  by  his  signature, 
must  be  shown  by  extrinsic  evidence,  and  may  well  have  been 
unknown  to  some  even  of  the  holders  of  the  paper,  if  it  has  been 

indorse  on  the  corporate  behalf.  Marine  Bank  v.  Clements,  3  Bos.  (N.  Y.) 
600.  The  principle  in  this  case  is  identical  with  that  illustrated  by  the 
other  citations.  It  has  been  held  in  Wisconsin,  that,  though  the  indorse- 
ment "G.  B.,  Cas.",  be  made  for  accommodation  (and  therefore  wrong- 
fully), it  will  yet  bind  the  bank  as  towards  a  bona  fide  holder  for  value 
without  notice.  Houghton  v.  First  National  Bank  of  Elkhorn,  2G  Wis. 
CG3. 

355 


§  158  THE    CASHIER 

widely  negotiated.  But  the  adjudicated  cases  support  both  forms 
without  partiality.  Indeed,  they  almost  uniformly  discuss  only 
this  third  form.  It  seems  as  though  the  second  form  had  always 
been  tacitly  admitted  to  be  good,  and  only  the  third  had  held  out 
hopes  enough  of  invalidity  to  encourage  litigation. 

Fourth  Form 

But  far  as  the  courts  have  gone  in  declaring  the  indorsement  in 
the  third  form  to  be  binding  as  the  indorsement  of  the  corporation, 
they  have  yet  much  further  to  go  if  they  are  resolved  to  sustain 
the  validity  of  the  fourth  form  as  a  corporate  undertaking.  We 
find  no  adjudicated  case  which  directly  settles  this  point.  But 
Judge  Denio,  in  the  case  above  cited,  of  Bank  of  Genesee  v.  Patchin 
Bank,^^  declared  that  it  was  "  essential  to  the  operation  of  the 
rule  "  (to  wit,  that  the  holder  might  supply,  in  the  second  and 
third  forms,  the  name  of  the  bank  in  such  shape  as  to  make  it  a 
principal  indorser),  "  that  the  authority  of  the  indorser  to  indorse 
for  the  corporation  and  to  bind  it,  in  full  and  due  form,  should 
positively  appear."  By  the  rule  of  §  154  h,  it  is  enough  if  the 
facts  make  this  authority  "  appear",  whether  the  document  indi- 
cates it  or  not. 

(i)  Countersigning,  as  for  example  of  the  bills  and  notes  of  the 
bank  intended  for  circulation,  may  unquestionably  be  properly 
done  by  the  cashier  in  the  third  form.  If  the  marks  of  an  official 
character,  in  whatsoever  shape  they  may  be,  predominate  upon 
the  instrument,  as  they  must  upon  these  bills  or  notes,  they  are 
sufficient  notice  to  third  parties.  Especially  if  the  word  "  coun- 
tersigned "  be  written  or  engraved  in  connection  with  such  signa- 
ture, it  will  be  enough.^^ 

§  159.  Collection  of  Debts.  —  A  cashier  has  authority  virtute 
officii  to  collect  debts  due  the  bank,  and  as  incidental  thereto  he 
may  receive  payment  (though  not  in  anything  but  money  unless  by 
authority  other  than  is  inherent),  deliver  securities,  pledges,  and 
evidences  of  the  debt  paid,  or  discharge  a  mortgage,  give  the  debtor 
a  release  or  receipt,  indorse  and  transmit  notes  to  the  place  where 
they  are  payable,  see  that  protest  is  made  if  necessary,  and  proper 
notice  sent,  and  employ  an  attorney  to  sue  for  the  debt.  But  has 
no  inherent  power  to  compromise  a  claim. 

IS  Bank  of  Utiea  v.  Magher,  18  Johns.  (N.  Y.)  341 ;  citing  Mechanics' 
Bank  v.  Bank  of  Columbia,  5  Wheat.  334,  5  L.  ed.  103. 

356 


COLLECTION    OF   DEBTS  §   159 


May  Give,  Release,  or  Return  Security,  or  Discharge  Mortgage 

It  is  the  duty  of  the  cashier  to  superintend  the  collection  of 
debts  owing  to  the  bank,  and  to  make  up  the  accounts  of  the  sums 
due.  Payment  of  them  is  properly  made  to  him  in  his  official 
capacity,  and  discharges  the  debtor,  even  though  the  cashier  sub- 
sequently misappropriates  the  money,  and  fails  to  bring  it  to 
account  in  the  bank.  Upon  the  receipt  of  payment,  the  cashier 
may  deliver  up  the  evidences  of  indebtedness  held  by  the  bank, 
may  execute  an  acknowledgment,  release,  or  acquittance  to  the 
debtor  if  need  be,  and  may  deliver  and  transfer  back  to  him  any 
pledge  or  collateral  security  given  by  him  to  the  bank.' 

(a)  It  has  even  been  held  that,  where  the  borrower  had  given  a 
mortgage  of  real  estate  to  the  bank,  the  cashier  might  legally 
discharge  the  same  by  virtue  of  his  ordinary  authority.  Or,  if  the 
bank  has  bought  the  mortgaged  property  at  sheriff's  sale,  the 
cashier  may  assign  the  certificate  of  sale.  It  makes  no  difierence 
though  the  instrument  may  require  to  be  executed  under  the  cor- 
porate seal.  The  party  who  has  made  the  payment  is  entitled 
to  the  discharge  or  assignment.  In  seeking  to  obtain  it,  he  is 
justified  in  dealing  with  the  principal  business  officer  of  the  bank.^ 
After  all,  it  is  a  mere  formal  act,  and  though  the  corporate  seal 
may  be  required,  yet  the  ordinary  assumption  of  the  importance 
and  high  character  of  sealed  instruments  can  hardly  be  said  to 
attach  to  these  proceedings.  It  was  also  suggested  in  the  Bank 
of  Vergennes  case,  that,  if  the  directors  alone  could  act  in  the  mat- 
ter, they  might  practically  rob  the  payer  of  his  legal  rights,  either 
by  refusing  to  meet  at  all,  or  by  neglecting  to  take  action  in  the 
premises. 

This  power  of  the  cashier  is  based  upon  the  fact  that  he  is  the 
officer  having  the  responsi])le  charge  and  control  of  the  entire 
personalty  of  the  bank  for  all  ordinary  executive  purposes ; 
though  if  any  portion  of  the  personalty  has  been  withdrawn  from 

1  §  159.  Concord  v.  Concord  Bank,  1(3  N.  H.  2G ;  Badger  v.  Bank  of 
Cumberland,  26  Me.  428;  United  States  v.  City  Bank  of  Columbus,  21 
How.  356.  16  L.  ed.  130. 

A  cashier  has  authority  to  take  collateral  security  for  notes  held  by 
the  bank.  First  National  Bank  ;•.  Sinf?  Sing  Mfg.  Co.,  120  App-  Div. 
542  (1907),  104  N.  Y.  S.  1040,  affirmed  in  194  N.  Y.  580,  88  N.  E.  1119; 
Bank  of  Houston  v.  Kirkman,  156  Mo.  App.  309,  137  S.  W.  38  (1911). 

2  Ryan  v.  Dunlap,  17  111.  40 ;  Bank  of  Vergennes  v.  Warren,  7  Hill 
(N.  Y.)  91. 

357 


§   159  THE    CASHIER 

his  charge  and  control,  and  devoted  to  any  special  use  by  the  govern- 
ment, as  where  the  directors  had  deposited  a  mortgage  in  pledge 
with  the  State  authorities,  the  power  and  responsibility  of  the  cashier 
cease  in  respect  of  the  portion  thus  appropriated  by  his  superiors  in 
control.^ 

Indorsement  and   Transmission  of  Notes  for  Payment 

(b)  Whatever  preliminaries  are  necessary  to  precede  a  valid 
demand  for  payment  of  money  owing  to  the  bank  should  be  at- 
tended to  and  performed  in  due  shape  and  season  by  the  cashier. 
Such  are  the  indorsement  of  notes  payable  to  the  order  of  the  bank, 
and  the  transmission  of  them  to  proper  agents  in  time  for  demand 
if  they  are  payable  at  any  distant  place.  The  indorsement  must 
be  made  in  form  according  to  the  orders  of  the  directors  or  the 
established  usage  of  the  bank  in  its  dealings  with  the  agent  to 
whom  the  note  is  to  be  sent.  Thus,  it  may  be  an  indorsement  in 
blank,  an  order  to  pay  to  the  agent,  or  to  the  agent  or  his  order,  or 
to  the  agent  for  collection,  or  to  the  agent  or  his  order  for  collection. 
If  the  cashier,  whose  duty  and  authority  it  is  to  make  the  indorse- 
ment in  a  certain  one  of  these  forms,  makes  it  in  another,  as  between 
himself  and  the  bank,  it  is  a  breach  of  his  official  duty ;  and,  if  any 
injury  result  therefrom,  he  may  be  held  liable  in  damages. 

Protest 

(c)  If  the  note  is  not  promptly  paid,  so  that  the  formalities  of 
protest  become  necessary,  it  is  the  duty  of  the  cashier  to  see  that 
the  note  is  duly  sent  to  the  notary  with  proper  instructions.^  The 
cashier  himself  may  act  as  notary,  and  his  authority  is  not  lessened 
even  although  he  is  the  maker  of  the  note.^" 

3  Mitchell  V.  Cook,  29  Barb.  (N.  Y.)  243. 

*  Hartford  Bank  v.  Barry,  17  Mass.  94. 

It  is  usually  the  duty  of  the  cashier  to  see  that  notice  of  dishonor  of 
paper  is  given  to  the  persons  entitled  thereto.  But  the  vice  president 
by  virtue  of  his  office  is  not  charged  with  such  duty  or  in  any  manner 
liable  if  he  fails  to  do  so.  First  National  Bank  v.  Bickel,  154  Ky.  11, 
156  S.  W.  856  (191.3).  And  notice  of  dishonor  must  be  given  to  an  officer 
of  a  bank  the  same  as  to  any  other  person  unless  it  was  his  duty  to  give 
notice.  First  National  Bank  v.  Bickel,  supra ;  Frazee  v.  Phoenix  National 
Bank,  161  Kv.  175,  170  S.  W.  532  (1914) ;  Ennis  v.  Reynolds,  127  Ga. 
112,  56  S.  E.  104  (1906). 

^«  Dykman  v.  Northridge,  1  App.  Div.  26,  36  N.  Y.  S.  962. 

358 


COLLECTION    OF   DEBTS  §  159 


Authorized  Suit 


(d)  The  cashier  may  also,  it  has  been  said,  deUver  notes  to  an 
attorney  for  collection,  authorizing  the  institution  of  suits  upon 
them,  if  it  be  necessary.^  In  this  case  the  court  finally  proj)i)e(l  the 
decision,  which  it  at  first  inclined  to  render  upon  general  principles, 
by  stating  that  the  particular  cashier  had  been  shown  to  have  done 
the  same  thing  before,  and  always  with  the  knowledge  and  sanction 
of  the  corporation  when  it  became  notified  of  his  action.  But 
other- decisions  make  it  undoubted  law  that  a  cashier  may  employ 
an  attorney  to  collect  a  claim  without  any  resolution  of  the  board, 
although  that  board  has  appointed  counsel  to  attend  to  the  bank's 
legal  affairs.  The  power  and  duty  to  collect  a  debt  necessarily 
include  authority  to  set  the  legal  machinery  in  motion  to  accom- 
plish that  result.  For  many  purposes  the  officers  and  agents  of  a 
bank  may  employ  persons  to  perform  services  for  the  bank,  in  the 
sphere  of  business  that  belongs  to  the  agent,  and  it  has  been  often 
declared  that  a  managing  officer  or  cashier  may,  without  a  vote  of 
the  directors,  employ  counsel.® 

The  cashier  cannot  appear  and  defend  suits  on  behalf  of  the  bank. 
Though  he  is  the  financial  officer,  and  in  charge  of  the  books,  and 
so  might  be  supposed  to  have  a  peculiar  knowledge  in  the  matter, 
he  cannot  answer  even  where  the  bank  is  summoned  as  garnishee.'' 
The  only  case  where  he  has  been  allowed  to  take  any  part  whatso- 
ever in  legal  proceedings  is  one  which  was  decided  in  Illinois, 
wherein  his  appeal  was  allowed  to  be  good  on  behalf  of  the  bank.* 
This  single  case  is  so  utterly  at  variance  with  the  general  and 
uniform  current  of  opinions  upon  the  subject  that  it  might  very 
probably  be  expected  to  be  overruled.  Yet  it  does  not  seem  un- 
reasonable to  sustain  the  views  of  the  Xew  Hampshire  bench. ^ 

■>  Eastman  v.  Coos  Bank,  1  N.  H.  23;  Young  v.  Hudson,  99  Mo.  102, 
12  S.  W.  G32.     But  he  cannot  authorize  an  attorney  to  assign  chiims. 

•  Root  V.  Oleott,  42  Hun  (N.  Y.)  538  (1886) ;  Taylor  on  Private  Cor- 
porations having  Capital  Stock,  §  202.  To  the  same  effect,  see  American 
Ins.  Co.  V.  Oaklev,  9  Paige  (N.  Y.)  496;  Peterson  v.  The  Mayor.  17 
N.  Y.  449;  Mumford  v.  Hawkins.  5  Denio  (N.  Y.)  355,  359  (1848); 
Bristol  Bank  v.  Keavy,  128  Mass.  298  ;  Frost  v.  Domestic  Sewing  Machine 
Co.,  133  Mass.  563  ;  Western  Bank  v.  Gilstrap,  45  Mo.  419 ;  Southgate  v. 
Atlantic  &  Pacific  Railroad,  61  id.,  89,  94. 

^  Branch  Bank  v.  Poe,  1  Ala.  396. 

*  Moreland  v.  State  Bank,  1  Breese  (111.)  205. 


359 


§  159  THE    CASHIER 

May  Compromise  in  Collection  of  Debt  so  far  as  Usage  Sanctions 
his  Course,  hut  the  Poiver  is  not  Inherent 

(e)  It  has  been  said,  that,  in  the  course  of  his  fulfilment  of  his 
duty  in  taking  all  proper  measures  for  securing  the  eventual 
collection  of  the  debt,  he  may  act  about  it  by  way  of  compromise.* 
In  the  New  York  case,  wide  discretionary  power  is  restricted  by  the 
addition  of  the  requisition  that  his  action  should  accord  with  usage 
and  the  course  of  business.  Unless  the  same  restriction  is  added 
in  the  Pennsylvania  case,  it  must  be  said  that  that  case  is  at  vari- 
ance with  general  principles,  which  it  cannot  be  potent  to  alter  so 
materially.  Without  these  words  it  must  be  simply  impossible  to 
reconcile  these  decisions  with  those  which  have  been  already  cited 
as  conferring  upon  the  directors  the  power  of  compromising  claims 
of  the  bank.  Evidently  the  power  is  discretionary,  and  one  which 
in  its  exercise  may  often  call  for  considerable  reflection  and  a  high 
degree  of  judgment.  It  is  strictly  a  sacrifice  at  least  of  nominal 
property  of  the  bank.  Clearly  it  should  be  a  function  of  the  board, 
and  not  of  the  executive  officer.  The  cited  decisions  must  be  con- 
strued simply  to  intend  that  this  function,  though  properly  direc- 
torial, is  nevertheless  not  inalienably  so,  and  may  therefore  be 
delegated  to  the  cashier ;  and  that  such  delegation  may  be  con- 
clusively presumed  as  against  the  bank,  upon  proof  that  the  usage 
and  ordinary  course  of  business  in  the  bank  is  to  that  effect. 
Strictly  speaking,  this  is  all  that  the  cases  really  decide,  and  it  is 
obvious  that  they  should  not  be  carelessly  stretched,  as  if  they 
announced  the  general  doctrine  that  it  is  an  inherent  element  of 
the  cashier's  general  authority  to  compromise  on  behalf  of  the 
bank  any  of  its  debts  or  demands. 

In  a  later  case  the  New  York  Supreme  Court  said  that  a  cashier 
has  no  inherent  power  to  compromise  or  release  a  claim  of  the 
bank ;  such  business  calls  for  the  discretion  which  belongs  inher- 
ently only  to  the  board  of  directors.^" 

9  Bridenbeeker  v.  Lowell,  32  Barb.  (N.  Y.)  9;  Bank  of  Pennsylvania 
V.  Reed,  1  Watts  &  S.  (Pa.)  101. 

10  Chemical  National  Bank  v.  Kohner,  58  How.  Pr.  (N.  Y.)  267. 

In  Michigan  a  cashier  has  no  authority  to  release  an  indorser  or  to 
compromise  a  claim  unless  such  authority  is  directly  or  impliedly  conferred 
upon  him.  Farmers'  etc.  Bank  v.  Clancy,  163  Mich.  586,  128  N.  W.  752 
(1910). 


360 


BORROWING  §  160 


No   Inherent  Authority  to    Take  Anything  hut  Money 

(f)  The  cashier  has  no  authority  to  settle  an  account  by  taking 
private  notes  and  drafts,  and  giving  a  receipt  in  full.  That  involves 
a  discretion  belonging  to  the  board.  Parties  claiming  a  discharge 
otherwise  than  by  payment  must  show  the  cashier's  authority  to 
settle  with  them.^^ 

May    Transfer  Stock  Held  as  Collateral 

(g)  It  is  within  the  general  authority  of  the  cashier  of  a  bank 
to  sign,  in  its  behalf,  a  blank  transfer  upon  a  certificate  of  stock  in 
the  name  of  the  bank,  held  by  it  as  collateral  security  for  a  loan, 
and  deliver  the  certificate  to  the  pledgor  on  payment  of  the  loan.'^ 

§  160.  Borrowing.  —  The  cashier  has  inherent  i)ower  to  borrow 
money  in  the  regular  course  of  the  business  of  the  bank,  and  may 
secure  the  loan  by  note  or  pledge  of  the  bank's  property." 

"  Sandy  River  Bank  v.  Merchants'  Bank,  1  Bissell  146.  The  cashier 
cannot,  without  express  authority,  take,  in  payment  of  a  note  held  by  the 
bank,  a  verbal  assignment  of  an  interest  in  another  note  already  held  by 
another  bank  as  collateral  security.  Piedmont  Bank  v.  Wilson,  124  N.  C. 
561,  32  S.  E.  889  (1899).  Nor  can  he  accept  in  payment  of  a  debt  due 
the  bank,  certificates  of  the  capital  stock  of  an  insurance  company.  Bank 
of  Commerce  v.  Hart,  37  Neb.  197,  55  N.  W.  631  (1893) ;  Merchants' 
Bank  v.  Rudolf,  5  Neb.  527. 

No  officer  of  a  national  bank  has  any  authority  to  agree  to  receive 
anything  but  money  in  payment  of  a  non-negotiable  note  indorsed  to 
it ;  so  a  bank  is  not  bound  to  receive  work  in  payment  of  a  note.  First 
National  Bank  v.  Alexander,  152  Ala.  585,  44  So.  866  (1907):  it  is  the 
duty  of  the  cashier  to  pay  his  own  obligations  in  cash,  and  so,  without 
the  consent  or  approval  of  the  governing  board,  he  cannot  pay  his 
obligations  by  accepting,  as  cashier,  the  note  of  a  third  person.  First 
National  Bank  v.  Gunhus,  133  Iowa  409,  110  N.  W.  611,  9  L.  R.  A.  (k.  s.) 
471,  n.  (1907). 

12  Matthews  v.  Massachusetts  National  Bank,  1  Holmes  (C.  C.)  396 
(1874).  . 

When  a  cashier  is  given  authority  to  do  what  is  necessary  in  the 
management  of  the  business  of  the  bank"  he  has  authority  to  sell  stock 
which  the  bank  has  taken  as  security  for  a  loan.  McBoyle  v.  Union 
National  Bank,  162  Cal.  277,  122  Pac.  458  (1912). 

0  §  160.  Citizens'  Bank  v.  Bank  of  Waddy,  126  Ky.  169,  103  S.  W. 
249, 128  Am.  St.  Rep.  282,  11  L.  R.  A.  (n.  s.)  598,  n.  (1907) ;  Commercial 
Banking  etc.  Co.  v.  Citizens'  Trust  etc.  Co.,  153  Ky.  566,  156  S.  W.  160, 
1915C  Ann.  Cas.  166,  n. 

Executive  officers  of  a  national  bank  may,  in  the  usual  course  of  business 
and  without  special  authority  from  the  directors,  rediscount  their  own 
discounts  or  otherwise  borrow  money  for  the  bank's  use.  Cherry  t;. 
City  National  Bank,  144  Fed.  587  (1906). 

361 


§  160  THE    CASHIER 

Ij  the  Directors  Restrict  Him,  they  must  Notify  the  Public.  The 
Cashier^s  Poiver  only  Covers  Loans  to  his  Bank  in  Course  of 
Business 

The  cashier  may  borrow  money  on  behalf  of  the  bank,  and  may 
bind  the  bank  by  a  promissory  note  executed  therefor.^  Such  is 
the  usage  of  the  banking  business ;  though,  if  in  any  individual 
institution  any  other  officer  is  selected  for  this  duty,  the  cashier 
could  no  longer  bind  the  bank  to  any  lender  who  was  aware  of  the 
variation.  The  right  of  borrowing  is  a  function  of  which  he  will 
be  wholly  deprived  by  the  act  of  the  directors  in  selecting  any  other 
person  as  their  general  borrowing  agent.  But  the  usage  to  allow 
him  to  borrow  is  so  universal,  that  notice  of  the  deprivation  must 
he  brought  home  to  any  person  loho  is  to  he  affected  by  it.  Otherwise 
the  public  are  warranted  in  dealing  with  him  on  the  assumption 
that  he  possesses  it.  The  power  extends  only  to  borrowing  in  the 
ordinary  course  of  the  daily  business  of  the  bank.  For  example, 
if  the  bank  be  behindhand  at  the  clearing-house,  the  cashier  may 
properly  borrow^  of  any  bank  which  has  a  surplus,  giving  in  return 
his  check  or  memorandum  for  the  amount,  and  agreeing  to  pay 
the  customary  rate  of  interest.  But  he  cannot  borrow  simply  for 
the  purpose  of  increasing  the  available  funds  of  the  bank,  so  that  in 
effect  its  disposable  working  capital  shall  be  increased.  This  is 
exercising  a  discretionary  control  over  its  affairs  which  none  but 

1  Barnes  v.  Ontario  Bank,  19  N.  Y.  152 ;  Ballston  Spa.  Bank  v.  Marine 
Bank,  16  Wis.  120;  Sturges  v.  Bank  of  Cireleville,  11  Ohio  St.  153; 
Ridgway  v.  Farmers'  Bank,  12  Serg.  &  R.  (Pa.)  256;  City  National 
Bank  v.  Chemical  National  Bank,  80  Fed.  8.59  (1897). 

The  power  of  borrowing  money  is  not  prohibited  by  Missouri  Rev. 
Sts.  1899,  §  1294.  And  the  fact  that  the  cashier  had  no  authority  to  ex- 
ecute collateral  or  even  had  no  authority  to  execute  a  note  without  the 
consent  of  the  board  of  directors  would  not  be  a  defence  to  the  loan  even 
though  there  could  be  no  recovery  on  the  note.  Union  National  Bank  v. 
Lyons,  220  Mo.  5.38,  119  S.  W.  540  (1909).  Neither  would  a  void  guar- 
anty be  a  defence  for  money  had  and  received.  Third  National  Bank 
V.  St.  Charles  Saving  Bank,  244  Mo.  5.54,  149  S.  W.  495  (1912).  But  if 
the  loan  is  made  by  plaintiff  to  a  bank's  cashier  and  the  assets  turned 
over  to  defendant  bank  this  does  not  make  the  defendant  liable.  Gate 
City  National  Bank  v.  Miners'  etc.  Bank,  259  Mo.  551,  168  S.  W.  725 
(1914).  The  judge  in  the  concurring  opinion  says  that  this  case  in  principle 
overrules  in  toto  Third  National  Bank  v.  St.  Charles  Saving  Bank,  supra. 

Where  a  loan  is  actually  made  the  borrowing  bank  is  not  relieved 
from  its  Uability  because  it  gives  a  note  signed  by  its  cashier  personally 
and  indorsed  by  itself  when  such  is  done  to  avoid  disclosing  an  excessive 
loan.  First  National  Bank  v.  State  Bank,  15  N.  D.  594,  109  N.  W.  61 
(1906). 

362 


DEPOSITS  §   101 

the  directors  possess.     Neither  in  any  case  can  he  borrow  money 
to  use  for  other  than  strictly  banking  purposes. 

May  Borrow  on   Time,   if  Usage  Justifies  It 

(a)  A.  borrowed  money  in  the  bank's  name,  he  being  cashier, 
and  appropriated  it  to  his  own  use.  The  bank  denied  his  authority, 
and  the  hokler  of  the  note  introduced  evidence  of  the  custom  of 
bankers  in  the  vicinity  to  borrow  money  on  time,  which  was  ad- 
mitted, thereby  bringing  the  act  within  the  cashier's  inherent 
powers,  as  being  a  part  of  the  ordinary  routine  of  business.  Evi- 
dence of  other  fraudulent  drafts  drawn  by  the  cashier  on  other 
banks  was  held  not  admissible,  unless  the  payee  knew  of  them 
before  making  the  loan  in  question,  as    otherwise   he   was   not 

misled  thereby.^ 

Pledge 

(b)  A  cashier  having  power  to  effect  a  loan  may  (in  the  absence 
of  statutory  restraint  and)  in  the  ordinary  course  of  business  secure 
the  loan  by  pledge  of  the  property  of  funds  of  the  bank.^  And  a 
creditor  whose  own  debt  against  the  bank  does  not  exceed  the  limit 
that  the  bank  is  allowed  by  statute  to  borrow  is  not  affected  by 
the  fact  that  there  are  other  debts  of  which  he  has  no  notice  which, 
added  to  his  own,  make  an  aggregate  indebtedness  greater  than  the 
bank  can  legally  receive;  and  if  the  cashier  of  the  bank  obtains 
from  the  maker  of  the  note  a  renewal  note  without  surrendering 
the  old  one  and  pledges  them  to  different  banks  as  collateral 
security  for  a  loan  the  maker  is  liable  to  both  banks.  However,  in 
such  case  each  bank  must  first  exhaust  its  other  collateral.^ 

§161.  Deposits.  —  The  cashier  is  the  proper  officer  to 
receive   deposits,"   and    give   certificates    of   deposit   or   "  other 

2  Grain  v.  First  National  Bank  of  Jacksonville,  114  111.  516,  2  N.  E. 
486  (1885). 

3  Coats  V.  Donnell,  94  N.  Y.  176. 

*  Citizens'  Bank  v.  Bank  of  Waddy,  126  Kv.  169,  103  S.  W.  249,  128 
Am.  St.  Rep.  282,  11  L.  R.  A.  (n.  s.)  598,  n.  (1907). 

"§  101.  But  if  another  than  the  cashier  has  the  apparent  or  ostensible 
authority  to  receive  the  money  the  bank  is  estopped  to  sliow  that  he  has 
no  such  authority.  Burnell  v.  San  Francisco  Savings  Union,  136  Cal. 
499,  09  Pac.  144  "(1902). 

Wlien  a  casliier  makes  a  contract  with  a  woman  to  receive  her  de- 
posit in  a  bank  and  substitutes  his  personal  check  in  place  of  a  certificate 
of  deposit,  her  retention  of  the  check  for  several  months  without  de- 
manding payment  or  making  examination  thereof  does  not  estop  her  from 
claiming  that  the  transaction  was  a  deposit  and  not  a  loan  from  the  cashier. 
Costello  V.  Citizens'  State  Bank,  140  Wis.  275,  122  N.  W.  769. 

363 


§  161  THE   CASHIER 

vouchers."  ^  And  in  him  rests  the  power  to  accept  or  refuse 
the  account  of  one  who  wishes  to  become  a  depositor,^  though 
his  decision  may  be  overruled  by  action  of  the  directors. 

§  162.  The  Correspondence  of  the  Bank.  —  The  cashier  has 
charge  of  the  correspondence  of  the  bank.  Letters  on  corporate 
business  are  properly  addressed  to  him,  and  whatever  statements 
or  information  are  contained  in  them  will,  in  law,  affect  the  bank 
with  notice.  If  the  subject  written  about  is  one  in  which  he  has 
no  authority  to  act,  or  no  duty  to  perform,  it  is  nevertheless  his 
duty  to  communicate  the  contents  of  the  letter  to  the  officials 
within  whose  province  the  subject  matter  falls.  It  is  his  duty  to 
see  that  the  information  contained  in  the  letter  is  promptly  laid 
before  the  proper  person.  A  cashier  has  no  power  to  contract 
for  the  bank,  but  if  the  negotiations  concerning  a  proposed  con- 
tract are  conducted  by  letters,  he  properly  writes  and  receives 
these,  and  the  assent  of  the  third  party  to  the  propositions  of  the 
bank,  expressed  by  him  in  a  letter  written  to  the  cashier,  affects 
the  bank,  and  completes  the  legal  contract.^ 

§  163.  Transfer  of  Shares.  —  The  cashier  properly  makes  or 
superintends  the  transfer  of  shares.  Any  person  showing  prima 
facie  a  legal  right  to  demand  a  transfer  to  himself,  may  demand  it 
from  the  cashier,  or  from  any  other  principal  officer  left  in  general 
charge  and  superintendence  of  the  business  of  the  banking-house. 
Any  officer  who  can  properly  make  the  transfer  at  all  will  be  pro- 

1  Merchants'  Bank  v.  State  Bank,  10  Wall.  604,  19  L.  ed.  1008 ;  L'Her- 
bette  V.  Pittsfield  National  Bank,  162  Mass.  137,  38  N.  E.  368  (1894) ; 
White  V.  Franklin  Bank,  22  Pick.  (Mass.)  181 ;  Atlas  Bank  v.  Nahant 
Bank,  3  Met.  (Mass.)  581 ;  Dill  v.  Wareham,  7  Met.  (Mass.)  438 ;  Morville 
V.  American  Tract  Society,  123  Mass.  129;  Davis  v.  Old  Colony  Rail- 
road, 131  Mass.  258 ;  Ellerbe  v.  National  Exchange  Bank,  109  Mo.  445 ; 
Ellis  V.  First  National  Bank,  22  R.  1.565,  48  Atl.  936  (1901) ;  Rhinehart 
V.  People's  Bank,  89  Mo.  App.  511  (1901);  Abbott  v.  Jack,  136  Cal. 
510,  69  Pac.  257  (1902) ;  Musgrove  v.  Macon  County  Bank,  187  Mo. 
App.  483,  174  S.  W.  171  (1915). 

If  the  cashier  knows  or  assumes  to  know  the  source  from  which  the 
deposit  arose  he  may  include  such  a  fact  in  his  certificate  if  the  customer 
consents  or  the  business  of  the  bank  would  be  thereby  subserved ;  and 
if  by  means  of  false  statements  therein  another  is  directly  injured  the 
bank  is  liable  in  tort.  Hindman  v.  First  National  Bank,  112  Fed.  931 
(1902). 

The  cashier  is  the  proper  officer  to  execute  a  bond  in  the  bank's  behalf 
for  the  security  of  public  funds.  Johnson  County  v.  Chamberlain  Banking 
House,  80  Neb.  96,  113  N.  W.  1055  (1907). 

2  Thatcher  v.  Bank  of  State  of  New  York,  5  Sandf.  (N.  Y.)  121. 

1  §  162.  New  Hope  &  Delaware  Bridge  Co.  v.  Phcenix  Bank,  3  Comst. 
(X.  Y.)  166;  Branch  Bank  v.  Stjjie,  10  Ala.  915. 

364 


SPECIAL    AUTHORITY  §  1G5 

tected  in  making  it,  without  goinj:^  behind  the  apparent  legality  and 
propriety  of  the  demandant's  right,  in  order  to  determine  whether 
or  not  there  is  any  hidden  cause  for  objecting  to  it.^  A  prima  facie 
title  is  enough.  As,  if  one  who  has  bought  shares  sold  by  the  State 
assessor  for  taxes  asks  for  a  certificate  for  them,  the  cashier  is  not 
only  justified  in  giving  it,  but  it  is  even  his  duty  to  do  so,  and  the 
bank  cannot  subsequently  be  held  liable  on  the  ground  of  any 
original  irregularity  which  should  have  altogether  prevented  the 
making  of  the  sale. 

§  1G4.  Government  Bonds.  —  Cashier  may  agree  for  the  bank 
to  buy  government  bonds.  In  all  transactions  in  which  the  banlc 
may  lawfully  engage,  the  cashier  is  the  executive  agent,  and  a 
verbal  understanding  of  the  directors  will  not  limit  his  authority 
as  between  the  bank  and  third  persons,  when  his  acts  over  the 
counter  are  of  a  public  character,  and  numerous  and  long  continued. 

If  the  directors,  through  inattention  or  otherwise,  suffer  the 
cashier  to  pursue  a  line  of  conduct  for  a  considerable  period  with- 
out objection,  the  bank  is  bound. ^ 

§  1G5.  Special  Authority.  —  Beyond  his  inherent  powers  the 
cashier  may  be  authorized  to  act  for  the  bank,  by  the  organic  law, 
b}'  action  of  the  stockholders,  by  vote  of  the  board  or  their  verbal 
order,  by  usage  and  tacit  approval,  and  by  necessity  or  emergency 
calling  for  action  manifestly  to  the  interest  of  the  bank. 

The  last  section  closes  the  list  of  the  powers  and  duties  which  the 
cashier  may  exercise  simply  by  virtue  of  his  office,  and  within  the 
scope  of  which  he  may  bind  the  bank  by  reason  of  his  being  held 
out  to  the  world  as  cashier,  and  as  entitled  to  fulfil  all  the  ordinary 
and  inherent  functions  of  that  office.  Outside  those  limits,  how- 
ever, there  are  great  numbers  of  acts  which  are  frequently  under- 
taken by  cashiers,  which  are  strictly  consistent  with  the  nature  of 
their  office,  and  which  are  properly  allotted  to  them  for  performance. 
Within  this  wide  classification  may  be  included  everything  of  an 
executive  character,  and  many  matters  partially  discretionary,  or 
discretionary  within  certain  limits,  so  that  in  delegating  power 
over  them  the  directors  do  not  in  fact  part  with  any  governmental 
authority,  or  divest  themselves  of  the  performance  of  any  inalien- 
able duty. 

'  §  1G3.  Smith  v.  Northampton  Bank,  4  Cush.  (Mass.)  1 ;  Commer- 
cial Bank  of  BuiTaio  v.  Kortright,  22  Wend.  (N.  Y.)  348. 

1  §  164.  Caldwell  v.  National  Mohawk  Vallov  Bank,  04  Barb.  (N.  Y.) 
333 ;  Pensacolaetc.  Bank  v.  National  Bank,  59  Fla.  347,  52  So.  294  (1910). 

365 


§  165  THE    CASHIER 

Exercise  of  Discretion 

(a)  That  corporate  agents,  especially  agents  having  such  large 
and  important  general  powers  as  are  enjoyed  by  bank  cashiers, 
should  be  allowed  some  degree  of  latitude  of  discretion  is  inevit- 
able, and,  within  reasonable  limits,  is  desirable.^  But  the  power 
to  exercise  discretion,  except  in  comparatively  unimportant 
matters  of  routine,  should  be  distinctly  conferred  by  the  directors, 
or  very  clearly  proved  by  custom.  Even  if  it  be  thus  conferred 
or  proved,  it  will  be  upheld  only  upon  the  condition  that  it  is  not 
a  material  encroachment  or  usurpation  upon  the  governmental 
province.  It  has  already  been  seen  that  of  their  obligations  and 
responsibilities  of  this  high  nature  the  directors  cannot  strip  them- 
selves if  they  would.  They  are  entitled  to  abdicate  only  by  means 
of  a  direct  and  formal  resignation. 

The  Law  Presumes  Regularity 

(b)  But  if  the  act  which  the  cashier  assumes  to  perform  is  one 
intrinsically  perfectly  proper  to  be  committed  to  his  charge,  the 
law  will  presume  in  favor  of  a  third  party  dealing  with  him  that 
he  was  duly  authorized  to  perform  it.  The  presumption  is  not 
conclusive,  and  may  be  rebutted.  The  third  party  simply  makes 
out  a  prima  facie  case,  which  the  bank  may  destroy  by  showing 
that  neither  a  directorial  resolution  nor  any  usage  had  justified 
the  cashier  in  his  assumption  of  power .^  In  fact,  the  third  party 
relies  upon  the  character  of  the  cashier,  and  trusts  that  that  officer, 
doing  an  act  which  he  may  fairly  be  supposed  to  be  enabled  to  do, 
is  in  truth  acting  regularly  and  under  authority  of  some  sufficient 
description.  If  he  is  deceived  in  this  his  trust,  it  can  only  be  said 
that  he  voluntarily  ran  a  risk  in  relying  solely  on  the  cashier's 
assumption,  and  that  he  must  suffer  the  consequences  of  having 
neglected  to  assure  himself  from  more  accurate  sources.  The 
tendency  of  the  courts  is  always,  where  an  innocent  party  has  been 

1  §  165.     Stamford  Bank  v.  Benedict,  15  Conn.  437. 

estate  V.  Commercial  Bank,  G  Sm.  &  M.  (Miss.)  218;  Commercial 
Bank  of  Buffalo  v.  Kortright,  22  Wend.  (N.  Y.)  348;  Lovett  v.  Steam 
Saw  Mill  Association,  6  Paige  (N.  Y.)  54;  Payne  v.  Commercial  Bank, 
6  Sm.  &  M.  (Miss.)  24;  Bank  of  Vergennes  v.  Warren,  7  Hill  (N.  Y.) 
91 ;  Harper  v.  Calhoun,  7  How.  (Miss.)  203.  In  fact,  it  may  be  said  that 
a  very  large  proportion  of  all  the  eases  cited  in  discussing  the  powers  and 
duties  of  cashiers  indirectly  support  this  point.  Regularity  and  legality 
are  always  assumed. 

366 


SPECIAL   AUTHORITY  §105 

deceived  by  a  cashier,  to  sustain  the  favorable  presumption  of 
the  law,  if  it  can  be  done ;  but  they  cannot  disregard  or  overrule 
positive  proof  against  it. 

Authority  by   Vote,   Verbal  Order,    Usage,   or  Quiescence 

ic)  Power  may  be  conferred  upon  the  cashier  by  a  resolution, 
general  in  its  terms,  and  not  requiring  to  be  repeated  when  each 
specific  occasion  for  the  exercise  of  the  power  comes  up.^  But 
proof  that  no  resolution  was  ever  passed  by  the  board  in  the  prem- 
ises does  not  suffice  to  rebut  the  presumption  aforesaid.  This 
is  only  one  of  the  props  on  which  it  is  assumed  to  rest.  Verbal 
directions  from  the  board  are  amply  sufficient.  Usage  and  tacit 
approval  still  remain  as  possible  or  probable  supports.^  All  these 
must  be  negatively  disproved  before  the  burden  is  shifted  upon 
the  shoulders  of  the  innocent  dealer  or  contractor.^  Neither  need 
the  usage  be  specific  in  its  character,  nor  confined  to  acts  of  pre- 
cisely the  same  description  as  the  one  in  question.  If  the  directors 
have  for  many  years  allowed  the  cashier  to  do,  without  interference, 
all  the  business  of  the  bank,  they  are  held  thereby  to  have  conferred 
upon  him  authority  to  do  anything  and  everything  on  the  c()ri)orate 
behalf  which  the  charter  or  law  does  not  absolutely  prohibit  and 
forbid  a  cashier  to  do,  and  so  render  illegal  under  all  circumstances.^" 
If  the  cashier  has  a  power  so  wide  and  liberal  as  this,  it  is  need- 
less to  prove  a  usage  to  do  any  particular  act  which  he  may  have 
undertaken.  If  the  act  does  not  fall  within  the  limits  of  unavoid- 
able and  inherent  illegality,  it  is  valid,  and  binds  the  bank,  though 
a  precisely  similar  act  may  never  before  have  been  undertaken  by 
the  cashier  since  the  creation  of  the  institution.^    This  doctrine 

3  Elwell  V.  Dodge,  33  Barb.  (N.  Y.)  336 ;  Howland  v.  ISIyer,  3  Comst. 
(N.  Y.)  290  ;  Gillett  v.  Campbell,  1  Den.  (N.  Y.)  520  ;  Bank  of  Vergennes 
V.  Warren,  7  Hill  (N.  Y.)  91. 

^  Caldwell  v.  National  Mohawk  Valley  Bank,  64  Barb.  (N.  Y.)  333; 
Whitney  r.  Foster,  117  Mich.  643,  76  N.  W.  114  (1898).  Where  the 
cashier,  in  addition  to  his  usual  duties,  is,  in  the  absence  of  the  president, 
running  the  liank  under  the  ad\ice  of  the  executiv^e  committee,  he  has 
authority  to  bind  the  l)ank  by  a  contract  to  renew  notes,  in  consideration 
of  the  release,  by  the  indorser,  of  a  lien  on  the  maker's  property.  Bank 
of  Commerce  v.  Bright,  77  Fed.  949  (1S9()). 

5  Bank  of  Vergennes  v.  Warren,  7  Hill  (N.  Y.)  91 ;  Stamford  Bank  v. 
Benedict,  15  Conn.  437. 

5"  Sherwood  v.  Home  SaAings  Bank,  131  Iowa  528,  109  N.  W.  9  (1906). 

«  City  Bank  ;•.  Perkins,  4  Bosw.  420 ;   29  N.  Y.  .5.54. 

Where  the  cashier  seems  to  have  had  the  complete  control  of  the  bank's 
business  relations  with  other  banks,  of  its  mail  and  of  its  bookkeeping, 

367 


§  165  THE   CASHIER 

is  certainly  a  liberal  one  towards  innocent  outsiders.  One  case, 
and  only  one  case,  appears  to  have  gone  farther.  In  Pennsylvania/ 
the  court  were  discussing  the  power  of  the  cashier  in  relation  to 
the  collection  of  debts  owing  to  the  bank.  They  declared  that 
he  had  power  to  compromise,  —  a  ruling  which  has  been  already 
discussed,  and  which  certainly  was  going  pretty  far. 

Authority  by  Necessity 

(d)  They  then  laid  down  this  remarkable  position,  that  in 
particular  cases  his  authority  may  be  extended  by  the  nature  of  his 
agency  and  by  implication  arising  therefrom,  according  to  the 
pressure  of  circumstances  in  the  business  in  hand ;  and,  in  refer- 
ence to  the  facts  under  consideration,  they  were  of  opinion  that 
the  "  necessity  "  of  doing  the  act  conferred  upon  the  cashier  the 
power  to  do  it,  which  otherwise  he  would  not  have  possessed. 
There  is  certainly  sound  reason,  and  probably  sound  law,  in  the 
doctrine  that  stringent  necessity  growing  out  of  the  unmistakable 
interests  of  the  bank  may  sometimes  justify  a  cashier  in  doing  on 
its  behalf  some  act  which,  in  the  absence  of  the  emergency,  he 
could  not  properly  do ;  provided  —  and  it  is  an  essential  pro- 
viso —  the  act  be  strictly  consistent  with  "  the  nature  of  his 
agency."  If  the  language  of  the  court  is  to  be  construed  as  ad- 
vancing only  the  principle  that  extraordinary  cases  may  arise  in 
which  the  courts  will  sustain  the  cashier  in  an  act  dictated  by  an 
obvious  and  imperative  necessity,  which  he  could  legally  perform 
under  the  authority  of  a  usage  or  a  directorial  vote,  and  which,  it 
must  be  presumed,  the  directors  would  unquestionably  have 
authorized  him  to  perform  had  they  had  warning  of  the  need,  and 
therefore  had  opportunity  to  act,  — ■  if  this  is  what  is  intended,  the 
doctrine  is  in  the  interest  of  justice  and  common  sense,  and  may 
well  be  adopted  into  the  body  of  legal  principles.  But  if  the 
theory  was  advanced  that  whatever  seems  necessary,  in  the  liberal 
interpretation  of  that  flexible  word,  to  be  done,  may  be  legally 
done  by  a  cashier  simply  by  virtue  of  that  necessity,  that  the  power 
grows  out  of  the  circumstances  of  the  particular  case,  it  is  bad  in 

if  lie  uses  the  latitude  thus  given  him  to  the  prejudice  of  his  bank  it  is 
unjust  to  make  the  bank  with  which  he  deals  pay  for  the  negligence  of 
the  directors  of  his  bank.  Pensacola  etc.  Bank  v.  National  Bank,  59  Fla. 
347,  52  So.  294  (1910). 

'  Bank  of  Pennsylvania  v.  Reed,  1  Watts  &  S.  (Pa.)  101.     See  National 
Bank  v.  Equitable  Trust  Co.,  223  Pa.  St.  328,  72  Atl.  794  (1909). 

368 


NOTICE   TO    AND    KNOWLEDGE    OF   CASHIER  §  IGO 

law  and  mischievous  in  fact.  No  decision  of  any  other  bench,  no 
language  of  any  other  judge,  recognizes  the  existence  of  any  such 
shifting  and  utterly  indefinite  test  of  the  powers  of  a  cashier.  To 
admit  it  would  simi)Iy  be  to  introduce  complete  uncertainty,  and 
to  encourage  litigation.  Few  men  would  abandon  without  an 
effort  the  chance  of  persuading  a  jury  that  it  was  in  fact  quite 
*'  necessary  "  for  the  cashier  to  deal  as  in  fact  he  had  dealt. 

Rediscount  Justified  by  Necessity 

"  It  is  the  practice  for  the  cashier  of  a  bank  in  pressing  emergen- 
cies to  rediscount  the  bills  and  notes  of  the  bank,  to  raise  money 
to  pay  depositors  and  meet  other  demands  of  the  bank.  But  this 
is  only  done  on  extraordinary  occasions,  and  when  the  require- 
ments are  such  as  do  not  admit  of  delay.  It  is  customary,  wher- 
ever it  can  be  done,  to  consult  the  directors,  and  obtain  their  con- 
sent to  make  such  rediscounts.  It  is  a  matter  which  does  not 
come  within  the  ordinary  duties  of  the  cashier,  and  is  not  one  of 
his  inherent  powers ;  but  inasmuch  as  it  is  a  power  which  is  exer- 
cised by  him  under  some  circumstances,  a  transfer  of  such  bills 
and  notes  made  by  him  in  the  usual  course  of  the  business  of  the 
bank  to  a  person  who  has  no  right  to  doubt  the  propriety  of  the 
transfer,  or  to  question  its  good  faith,  will  be  iirima  facie  \'alid, 
and  vest  a  good  title  in  the  transferee.  The  validity  of  the  trans- 
fer in  such  case  will  be  sustained  upon  the  ground  that  the  trans- 
feree had  a  right  to  presume  that  the  cashier  had,  from  the  board 
of  directors,  either  an  express  or  implied  authority  to  make  the 
transfer,  and  not  because  he  had,  by  virtue  of  his  office,  inherent 
power  to  do  so."  ^ 

§  1()6.  Notice  to  and  Knowledge  of  Cashier.  —  Notice  to  the 
cashier  that  stock  pledged  is  trust  property  is  notice  to  the  bank.^ 
Where  a  loan  was  made  by  the  bank  to  a  trustee,  who  furnished 
collateral  securities  which  the  cashier  at  the  time  knew  to  belong 
to  the  trust  funds,  it  was  held  that  the  bank  was  chargeable  with 
the  knowledge  of  the  cashier,  and  was  put  upon  its  inquiry  as  to 
w^hether  the  trustee  had  authority  to  make  this  use  of  these  securi- 
ties.- 

sHoyt  V.  Thompson,  1  Seld.  (N.  Y.)  320;  Hartford  Bank  v.  Barry, 
17  Mass.  97 ;  Smith  v.  Lawson,  18  W.  Va.  212 ;  Lamb  i'.  Cecil,  28  W. 
Va.  059,  6G0. 

1  §  166.     Duncan  r.  Jaudon,  15  Wall.  165,  21  L.  ed.  142. 

^  Loring  r.  Brodie,  134  Mass.  453. 

VOL.  I  —  24  369 


§  166  THE    CASHIER 

Notice  received  or  knowledge  acquired  by  the  cashier  of  a  bank 
while  engaged  in  the  transaction  of  business  according  to  the  usage 
and  practice  of  banking  institutions,  is  notice  to  and  knowledge 
of  the  bank.^ 

3  Birmingliam  Trust  Co.  v.  Louisiana  National  Bank,  99  Ala.  379,  1.3 
So.  112  (1892);  Br.  Bank  v.  Steele,  10  Ala.  91.5;  Bank  v.  Penland,  lOL 
Tenn.  44.5,  47  S.  W.  693  (1898) ;  National  Bank  v.  Stever,  169  Pa.  St. 
574,  32  Atl.  603;  Niblack  v.  Cosier,  74  Fed.  1000;  Witters  v.  Sowles, 
32  Fed.  762 ;  Third  National  Bank  v.  St.  Charles  Saving  Bank,  244  Mo. 
5.54,  149  S.  W.  495  (1912) ;  Rhinehart  v.  People's  Bank,  89  Mo.  App. 
511  (1901) ;  Citizens'  State  Bank  v.  Garceau,  22  N.  D.  576,  134  N.  W. 
882  (1912). 

The  knowledge  of  a  cashier  who  is  manager  of  a  bank  and  is  in  control 
of  its  property  by  authority  of  the  board  of  directors  that  the  bank  is 
insolvent  as  a  result  of  overdrafts  by  himself  and  vice  president  on  a 
series  of  worthless  notes  is  knowledge  of  the  bank.  Orme  v.  Baker,  74 
Ohio  St.  337,  78  N.  E.  439,  113  Am.  St.  Rep.  968  (1906). 

Where  the  cashier  of  a  bank,  which  holds  a  note  against  third  parties, 
is  also  trustee  for  such  third  parties,  he  is  charged,  as  cashier,  with  knowl- 
edge of  instructions  received  by  him  as  such  trustee,  and  liis  knowledge 
as  cashier  is  the  knowledge  of  the  bank.  Stebbins  v.  Lardner,  2  S.  D. 
127,  48  N.  W.  847  (1891). 

When  a  cashier  executes  a  note  in  favor  of  lessees  of  a  mill,  one  of  whom 
is  himself,  the  bank  is  charged  with  his  knowledge.  Skillern  v.  Arkansas 
Woolen  MiUs,  77  Ark.  172,  91  S.  W.  303  (1905). 

But  the  mere  fact  that  the  cashier  of  a  bank  is  a  stockholder  and  secre- 
tary of  a  corporation  which  is  the  payee  of  a  note  transferred  to  the  bank 
is  not  sufficient  to  charge  the  bank  with  constructive  notice  of  a  defence 
to  the  note.  Iowa  National  Bank  v.  Sherman,  17  S.  D.  396,  97  N.  W.  12, 
106  Am.  St.  Rep.  778  (1903). 

Where  the  cashier  represents  in  a  transaction,  not  only  the  bank,  but 
a  third  party,  for  whom  he  is  agent,  the  bank  is  impressed  with  all  the 
knowledge  of  the  cashier  as  to  .the  mala  fides  of  the  transaction.  Leon- 
ard V.  Latimer,  67  Mo.  App.  138. 

When  the  bank  by  retaining  money  ratifies  the  act  of  its  cashier  in 
receiving  the  money  it  necessarily  assumes  the  knowledge  of  the  cashier 
that  the  money  which  he  was  receiving  was  fraudulently  obtained.  Fair- 
field V.  Southport  National  Bank,  80  Conn.  92,  67  Atl.  471  (1907). 

Where  the  cashier  has  notice  that  a  person  with  whom  the  bank  does 
business  is  incompetent,  his  knowledge  binds  the  bank  even  though  the 
notice  did  not  come  to  the  cashier  while  engaged  in  his  duties.  Brothers 
V.  Bank,  84  Wis.  381,  54  N.  W.  786;  Walker  v.  Grand  Rapids  Co.,  70 
Wis.  92,  35  N.  W.  332;  Dresser  v.  Norwood,  17  C.  B.  n.  s.  466;  The 
DistiUed  Spirits,  11  WaU.  356,  20  L.  ed.  167;  Hovey  v.  Blanchard,  13 
N.  H.  145;  Patten  v.  Merchants'  Ins.  Co.,  40  N.  H.  375;  Hart  v.  Bank, 
33  Vt.  252 ;  Holden  v.  N.  Y.  Bank,  72  N.  Y.  286 ;  Fulton  Bank  v.  N.  Y. 
&S.  C.  Co.,4Paige  127. 

Whatever  knowledge  the  cashier  had,  although  acquired  in  his  in- 
dividual capacity,  he,  under  the  circumstances,  carried  over  with  him  into 
the  exercise  of  his  duties  and  powers  as  cashier.  He  carried  it  with  him 
into  every  transaction  in  which  the  bank  participated  through  him. 
Lowndes  v.  City  National  Bank,  82  Conn.  8,  72  Atl.  150,  22  L.  R.  A. 

370 


NOTICE    TO    AND    KNOWLEDGE    OF    CASHIER  §  IGG 

But  the  cashier's  knowledge  of  his  own  intention  to  commit 
fraud  cannot  be  imputed  to  the  bank/ 

(n.  s.)  408  (1909).  In  this  case  the  cashier  as  administrator  opened  a  deposit 
account  in  the  name  of  the  estate.  He  drew  checks  on  the  account  and 
gave  them  to  the  teller  and  bookkeeper  to  substitute  for  worthless  checks 
drawn  by  a  company  in  which  he  was  interested. 

Where  a  cashier  has  notice  that  a  check  taken  by  the  bank  has  ])ccn 
obtained  by  fraud,  the  Vmnk  is  chargeal)le  with  his  knowledge.  IVIer- 
chants'  National  Bank  v.  Tracy,  77  Hun  (N.  Y.)  443. 

Where  the  cashier  who  is  authorized  to  collect  the  liabilities  of  the  bank 
has  knowledge  of  bankruptcj^  proceedings  of  the  bank's  debtor  and  the 
bank  does  not  file  its  claim  the  knowledge  of  the  cashier  is  sufficient  to 
impute  knowledge  to  the  bank.  Perry  Navel  Stores  v.  Caswell,  03  Fla. 
552,  57  So.  060  (1912). 

When  a  cashier  is  in  general  charge  of  all  the  affairs  of  the  bank  with 
full  power  to  control  and  manage  the  same  in  process  of  liquidation  his 
knowledge  is  imputable  to  the  bank.  Metzger  v.  Southern  Bank,  98  Miss. 
108,  54  So.  241  (1910). 

When  a  cashier  who  is  managing  agent  of  the  bank  takes  a  note  to  the 
bank  as  paj^ee  the  bank  is  chargeable  with  his  knowledge  that  the  note 
was  taken  without  consideration.  McCarthy  v.  Kepreta,  24  N.  D.  395, 
139  N.  W.  992,  1915A  Ann.  Cas.  834,  n. 

When  a  borrower  of  money  from  a  bank  protests  to  the  cashier  that  the 
interest  he  is  obliged  to  pay  is  excessive  the  notice  to  the  cashier  that  the 
transaction  is  usurious  is  notice  to  the  bank.  MacRackan  v.  Bank  of 
Columbus,  164  N.  C.  24,  80  S.  E.  184, 1915D  Ann.  Cas.  105,  n.,  49  L.  R.  A. 
(n.  s.)  1043,  n. 

When  one  in  an  indi\-idual  capacity  sells  paper  to  oneself  as  cashier 
one's  knowledge,  as  cashier,  of  the  infirmity  in  his  title  to  the  paper  is  im- 
puted to  the  bank.    Grebe  v.  Swords,  28  n!  D.  330,  149  N.  W.  126  (1914). 

The  knowledge  of  tlxp  cashier  in  purchasing  certificates  of  stock  must 
be  imputed  to  the  bank.  Farmers'  etc.  Bank  v.  Loyd,  89  Mo.  App.  262 
(1901). 

The  knowledge  of  a  cashier  in  extending  the  time  of  payment  is  imputed 
to  the  bank.  Citizens'  Bank  v.  Douglas,  178  Mo.  App.  664,  161  S.  W. 
601  (1913). 

'  Indian  Head  National  Bank  v.  Clark,  166  Mass.  27,  43  N.  E..  912 
(1896);  Bank  of  Overton  r.  Thompson,  118  Fed.  798  (1902);  State 
Bank  v.  Forsyth,  41  Mont.  249,  108  Pac.  914,  28  L.  R.  A.  (n.  s.)  501,  n. 
(1909). 

But  a  cashier's  knowledge  that  a  })ank  is  insolvent  as  a  result  of  his 
defalcations  is  imputed  to  the  bank.  Pennington  i'.  Third  National  Bank, 
114  Va.  674,  77  S.  E.  455,  45  L.  R.  A.  (x.  s.)  781,  n.  (1913) ;  :\Iillion  v. 
Commercial  Bank,  159  Mo.  App.  601,  141  S.  W.  453  (1911). 

The  cashier's  fraud  in  procuring  a  note  is  imputed  to  the  bank  in  its 
action  on  the  note;  his  knowledge  is  presumptively  that  of  the  bank, 
and  it  makes  no  difference  that  he  took  some  personal  benefit  from  the 
fraud.     Williams  v.  Hasshagen,  166  Cal.  386,  137  Pac.  9  (1913). 

When  a  cashier  of  a  bank  who  has  its  entire  management  and  control 
draws  a  check  on  an  elevator  company  of  which  he  is  treasurer,  payable 
to  the  bank,  presents  them  to  himself  as  cashier  and  misappropriates  the 
funds  received  therefrom,  the  knowledge  of  his  fraudulent  purposes  at  the 
time  of  presenting  the  checks  will  be  imputed  to  the  bank.     Emerado 

371 


§  166  THE    CASHIER 

When  a  cashier  acquired  knowledge  outside  of  his  oflBcial  duties 
which  it  is  in  his  interest  to  conceal  his  knowledge  will  not  be 
imputed  to  the  bank.^ 

If  the  cashier  is  acting  in  his  personal  capacity  either  in  dealing 
with  the  bank  or  in  dealing  with  a  third  party  the  bank  is  not 
bound  by  any  knowledge  which  he  may  acquire.^ 

If  one  who  is  a  partner  deals  with  himself  as  cashier  of  the  bank 
his  knowledge  is  imputed  to  the  bank,  but  if  he  deals  with  others 
representing  the  bank  his  knowledge  is  not  so  imputed.'^ 

§  167.  Declarations  and  Admissions.  —  A  cashier  has  no  power 
by  his  representations  to  raise  any  obligation  that  would  amount 
to  a  contract  which  it  is  beyond  his  authority  to  make  directly  and 
formally.  He  cannot  alter  the  effect  of  an  enforcement  by  a  repre- 
sentation that  the  indorser  will  not  be  looked  to,  nor  bind  the  bank 
in  any  way  by  a  declaration  which  would  not  bind  him  if  he  was 
the  principal  instead  of  an  agent  in  the  matter.  Nor  can  he  estab- 
lish the  extent  of  his  authority  to  do  business  by  his  own  represen- 
tations. 

But  so  far  as  he  is  expressly  authorized  by  the  bank  or  the  board 
to  make  representations,  and  so  far  as  his  declarations  are  made 
in  the  course  of,  and  pertain  to,  business  in  which  his  acts  are  the 
acts  of  the  bank,  so  far  his  declarations  and  admissions  (under  the 
principles  of  §  103)  are  the  acts  of  the  bank,  and  have  the  same 
effect  as  if  made  by  the  principal  under  the  same  circumstances. 

The  cashier  can  bind  the  bank  by  his  declarations  or  admissions 
only  when  his  power  to  do  so  is  a  direct  and  necessary  implication 
from  the  other  powers  confided  to  him  by  the  bank.''  His  author- 
ity to  declare  or  admit  is  strictly  incidental,  never  original.  When, 
however,  the  statements  satisfy  these  requirements,  they  may  be 
given  in  evidence  for  or  against  the  bank  with  the  like  effect  as 
the  authorized  admissions  or  declarations  of  any  other  agent  may 
be  given  for  or  against  his  principal ;   and  they  will  be  conclusive, 

Farmers'  Elevator  Co.  v.  Farmers'  Bank,  20  N.  D.  270,  127  N.  W.  522, 
20  L.  R.  A.  (N.  s.)  577  (1910). 

5  City  Bank  of  Wheeling  v.  Bryan,  72  W.  Va.  29,  78  S.  E.  400  (1913) ; 
Hilliard  v.  Lyons,  180  Fed.  685  (.1910). 

«  Pueblo  Savings  Bank  v.  Richardson,  39  Colo.  319,  89  Pac.  799  (1907) ; 
Melton  V.  Pensaeola  Bank,  190  Fed.  126  (1911). 

7  Taylor  v.  Felder,  3  Ga.  App.  287,  59  S.  E.  844  (1907). 

"§  167.  The  statements  or  admissions  of  a  cashier  may  be  taken  as 
the  statements  or  admissions  of  tlae  bank  only  when  he  is  acting  within  the 
scope  of  his  power  or  duty  as  the  bank's  agent  or  officer.  Harrison 
County  V.  State  Savings  Bank,  127  Iowa  242,  103  N.  W.  121  (1905). 

372 


DECLARATIONS   AND   ADMISSIONS  §  107 

or  open  to  explanation  or  to  rebuttal,  according  to  the  same  general 
rules.  It  is  likewise  necessary,  not  only  that,  so  far  as  the  intrinsic 
nature  of  the  admission  or  declaration  is  concerned,  the  cashier 
might  bind  the  bank  by  it,  but  also  that  he  should  make  it  officially, 
and  with  the  expressed  or  obvious  intent  actually  to  bind  the 
bank  by  it.  Thus  he  may  bind  the  bank  by  statements  officially 
made  in  relation  to  the  sale  of  bills  of  exchange  or  drafts,^  the  busi- 
ness of  selling  and  negotiating  them  being  within  his  province. 
His  declaration  that  stock  pledged  with  the  bank  is  held  in  trust 
for  a  third  person  may  be  given  in  evidence  against  the  bank  to 
prove  notice  of  the  trust ;  ^  it  being  his  duty  to  take  charge  of  all 
the  property  belonging  or  pledged  to  the  bank,  to  know  by  what 
title  and  in  what  capacity  the  bank  holds  the  various  items,  and 
to  keep  them  duly  ear-marked.^" 

On  the  other  hand,  it  can  never  be  pretended  that  he  has  any 
incidental  powers  to  bind  the  bank  by  declarations  or  admissions 
which  are  made  beyond  the  scope  of  his  duties.^*  Thus,  his 
statement  or  promise  given  to  a  person  w^ho  is  about  to  put  his 
name  as  indorser  upon  a  note  which  the  bank  has  agreed  to  dis- 
count, to  the  effect  that  such  person  will  not  be  held  liable,  or  shall 
not  be  looked  to  by  the  bank,  is  altogether  inoperative  and  void 
as  an  undertaking  of  the  bank.  For  so  far  as  the  business  of  dis- 
counting is  concerned,  the  cashier's  sole  power  and  function  is  to 
pay  over  the  money  upon  the  discounted  notes.  Collateral  con- 
tracts or  agreements  of  any  nature  are  altogether  beyond  the 
range  of  his  employment.  Declarations  or  admissions  in  the 
nature  of  such  contracts  are  equally  beyond  his  province,  and 
consequently  equally  valueless  with  the  contracts  themselves.^ 

1  Sturges  V.  Bank  of  Circle^^lle,  11  Ohio  St.  153. 

2  Harrisburg  Bank  v.  Tyler,  3  Watts  &  S.  (Pa.)  373. 

2"  When  a  cashier  has  authority  to  employ  one  to  find  a  customer  to 
purchase  certain  lands  his  representations  that  such  lands  belong  to  the 
bank  is  conclusive  upon  the  bank  as  to  his  authority  to  make  the  contract. 
Arnold  v.  National  Bank,  126  Wis.  362,  105  N.  W.  828,  3  L.  R.  A.  (n.  s.) 
580  (1905). 

^  When  a  cashier  informs  sureties  on  a  note  held  by  a  bank,  who  are 
about  to  proceed  against  the  principal  that  they  need  proceed  no  farther 
and  that  the  bank  would  sue  and  protect  them  his  statement  is  without 
the  apparent  scope  of  his  authority  and  the  sureties  are  released  on  the  note 
to  the  e.xtent  they  suffer  loss  from  relying  on  the  cashier's  statements. 
Security  Savings  Bank  v.  Smith,  144  Iowa  203,  122  X.  W.  825  (1909). 

3  Bank  of  the  MetropoHs  v.  Jones,  8  Pet.  12,  8  L.  ed.  850 ;  Bank  of  the 
United  States  v.  Dunn,  6  vl,  51 ;  Harrisburg  Bank  v.  Tyler,  3  Watts  & 
S.  (Pa.)  373;  Merchants'  Bank  r.  Marine  Bank,  3  Gill  (Md.)  96;  Co- 
checho  National  Bank  v.  Haskell,  51  N.  11.  116  ;  Goodbar  v.  National  Bank, 


§167 


THE    CASHIER 


No  Authority  to  Ansicer  Questions  as  to  the  Genuineness  of 
Paper,  except  by  the  Acts  of  Payment  or  Certification 

(a)  Payment  made  by  the  cashier  upon  a  check  bearing  the  forged 
name  of  a  depositor,  or  by  way  of  redeeming  bills  or  notes  falsely 
purporting  to  be  those  of  the  bank,  is  the  payment  of  the  bank. 
It  is  an  act  within  the  scope  of  the  cashier's  authority,  and  cannot 
subsequently  be  either  recalled  or  repudiated.  He  is  intrusted 
by  the  bank  with  the  duty  of  deciding  upon  the  genuineness  of 
such  paper  when  it  is  presented  for  payment  or  redemption.  But 
if  such  paper  is  shown  to  him,  not  for  the  purpose  of  demanding 
payment  thereon,  but  simply  to  inquire  whether  or  not  it  be  genu- 
ine, his  erroneous  answer  that  it  is  so  will  not  bind  the  bank  as  an 
admission.  For  it  is  not  his  function  to  give  such  information. 
The  bank  does  not  intend  that  he  should  do  so,  or  hold  him  out 
as  competent  to  do  so.  When  payment  is  demanded,  it  is  an  in- 
evitable necessity  that  some  officer  should  decide  whether  or  not 
the  paper  is  what  it  purports  to  be,  and  this  necessity  the  bank 
can  in  no  way  avoid,  without  destroying  the  possibility  of  banking 
business.  But  to  answer  all  questions  which  may  be  put  con- 
cerning the  genuineness  of  the  paper  is  quite  another  thing.  The 
same  necessity  does  not  exist  for  this,  and  the  bank  is  accordingly 
presumed  to  refuse  altogether  to  assume  gratuitously  a  task  of 
such  dangerous  responsibility.  Therefore,  if  the  cashier  undertakes 
to  answer  such  interrogatories,  his  act  is  wholly  beyond  the  scope 
of  any  authority  given  him  by  the  bank,  and  ought  to  be  known 
by  all  persons  to  be  so.  The  declaration  is  impotent  to  conclude 
the  bank.  Practically,  if  it  were  allowed  binding  force,  it  would 
amount  to  allowing  the  cashier  to  give  a  valid  promise  on  behalf 
of  the  bank  to  pay  what  the  bank  does  not  in  fact  owe ;  a  power 
which  even  the  directors  could  rightfully  exercise  only  in  extraor- 
dinary cases,  if  ever.  The  difference  between  a  payment  actually 
made,  though  by  mistake,  and  an  executory  agreement  to  pay,  or 
acknowledgment  of  the  sufficiency  of  the  order  calling  for  payment, 
made  under  the  same  mistake,  is  certainly  wide  enough  to  admit 

78  Tex.  461,  14  S.  W.  851  (1890) ;  First  National  Bank?;.  Lowther-Kauf- 
man  Co.,  66  W.  Va.  505,  66  S.  E.  713,  28  L.  R.  A.  (n.  s.)  511,  n.  (1910) ; 
Mutual  Trust  Co.  v.  Stern,  235  Pa.  St.  202,  83  Atl.  614  (1912). 

He  has  no  authority  to  promise  one  who  makes  a  note  to  be  substituted 
for  the  cashier's  own  note  in  the  bank,  that  he  will  not  be  looked  to  for 
payment  of  the  note.  State  Bank  v.  Forsyth,  41  Mont.  249,  108  Pae. 
914,  28  L.  R.  A.  (n.  s.)  501,  n.  (1909). 

374 


DECLARATIONS    AND    ADMISSIONS  §  1G7 

of  this  corresponding  difference  in  tlie  respective  validity  of  the 
two  acts.'' 

Representation  as  to  Genuineness  Held  Binding.      U.  S.  S.  C. 

(6)  If  a  ])arty  presents  a  check  drawn  on  a  bank  to  its  cashier 
for  information,  and  the  cashier  says  it  is  "  good  ",  the  bank  is 
bound  by  such  answer  as  to  the  genuineness  of  the  drawer's  signa- 
ture, and  as  to  the  sufficiency  of  his  funds,  but  not  as  to  the  genu- 
ineness of  the  fining  in.^ 

And  it  is  bound  in  spite  of  the  fact  that  the  cashier  knew  there 
were  no  funds,  if  the  party  to  whom  he  makes  the  assertion  has 
no  notice  of  its  falsity.^  It  is  part  of  the  cashier's  business  to  give 
information  to  chcckholders  as  to  the  funds  of  the  drawer.  And 
the  admission  by  a  cashier  that  there  are  funds  in  the  bank  suffi- 
cient to  pay  a  check  is  })inding  on  the  bank.^" 

Statements  as  to  a  Past  Transaction  are  Mere  Courtesies,  nnless 
they  Bear  on  a  Present  or  Future  Dealing  in  ichich  the  Bank 
is  a  Factor 

(c)  In  the  case  of  Frankhn  Bank  v.  Stewart ,''  an  interesting 
point  in  this  subject  is  discussed,  which  cannot  be  better  ehicidated 
than  by  presenting  a  brief  summary  of  the  remarks  of  the  court. 
Statements,  it  was  said,  concerning  a  past  transaction  are  given 
purely  as  a  matter  of  courtesy.  No  one  has  a  legal  right  to  de- 
mand them.  Consequently,  a  cashier  in  making  them  does  not 
make  them  in  an  official  character,  or  as  an  agent  of  the  bank 
authorized  to  bind  it  by  them.  The  most  that  can  be  said  is  that 
the  bank  does  not  forbid  him  to  do  an  act  of  ordinary  courtesy ; 

<Bank  of  the  United  States  v.  Bank  of  Georgia,  10  Wheat.  333,  6 
L.  ed.  334;  Salem  Bank  v.  Gloucester  Dank,  17  Mass.  1;  ISIerchants' 
Bank  v.  Marine  Bank,  3  Gill  (^Sld.)  9G ;  Farmers  &  Mechanics'  Bank  i-, 
Troy  City  Bank,  1  Dougl.  (Mich.)  457. 

6  Epsy  V.  Bank  of  Cincinnati,  18  Wall.  004,  21  L.  ed.  947. 

6  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  16  N.  Y. 
125;   Credit  Co.  v.  Howe  Co.,  54  Conn.  357  (1887). 

«"  Simmons  v.  Bank,  41  S.  C.  177,  19  S.  E.  502  (1893). 

But  where  the  cashier  states  it  as  his  opinion  that  the  bank  will  honor 
a  check,  drawn  by  one  who  in  fact  has  no  funds  in  the  bank,  it  is  not 
such  an  unconditional  promise  as  to  lead  one  to  accept  the  check  from 
the  maker.  And,  the  maker  having  no  funds  in  the  bank,  it  is  a  promise 
to  pay  the  debt  of  another,  which,  being  oral,  is  void  -sWthin  the  Statute 
of  Frauds.     Nichols  v.  Bank,  55  Mo.  App.  81. 

'  37  Me.  519. 

375 


§  167  THE   CASHIER 

but  it  is  equally  far  from  empowering  him  to  impress  upon  that  act 
any  other  and  more  serious  character.  In  Bank  of  Monroe  v. 
Field,^  admissions  as  to  the  fact  of  payment  having  been  made 
upon  a  note,  were  held  admissible  as  constituting  a  part  of  the 
res  gestoB,  but  upon  the  express  ground  that  they  were  shown  to 
have  been  made  upon,  and  as  the  result  of,  a  contemporaneous 
examination  of  the  books  of  the  bank  undertaken  for  this  very 
purpose.  But  if  the  statement,  though  it  concern  a  past  trans- 
action, is  connected  with  a  present  dealing,  the  reason  of  the  rule 
fails,  and  the  rule  itself  shifts  to  the  opposite  doctrine.  The  test 
is  well  given  in  the  following  remark  of  Sir  William  Grant,  in  the 
cause  of  Fairlie  v.  Hastings :  ^  "  Unless  the  agent's  statements 
constitute  the  actual  agreement  of  the  principal,  or  are  the  founda- 
tion of  or  inducement  to  that  agreement,  they  are  mere  naked 
assertions,  not  proofs,  of  the  fact ;  and  being  such,  they  amount  to 
nothing."  The  facts  of  Franklin  Bank  v.  Stewart  were  these  :  A 
messenger  was  sent  to  the  bank  to  inquire  whether  a  certain  note 
had  been  paid.  He  did  not  tell  the  cashier  that  he  was  asking  on 
behalf  of  any  party  to  the  note  ;  it  did  not  appear  that  the  cashier 
examined  the  file  of  notes,  or  any  of  the  books  of  the  bank.  But 
he  answered  that  it  had  been  paid.  In  truth  it  had  never  been 
paid,  and  at  that  moment  still  lay  among  the  uncancelled  notes  of 
the  bank.  Upon  the  strength  of  the  principles  above  propounded, 
the  court  held  that  the  bank  was  not  bound  by  this  statement  of 
its  cashier,  and  this  even  though  it  was  shown  that  a  surety  on  the 
note,  relying  on  that  statement,  had  given  up  security  which  he 
held  from  the  principal  promisor.  The  surety  had  taken  imper- 
fect means  to  acquire  the  knowledge  he  desired,  and  his  loss  was 
only  a  natural  result  of  his  insufficient  thoroughness  in  the  trans- 
action. The  opinion  delivered  by  Shepley,  C.  J.,  is  learned  and 
able,  but  two  members  of  the  bench  found  reasons  for  dissenting 
from  the  decision  of  their  comrades. 

In  any  suit  between  the  bank  and  that  surety  on  that  note,  the 
plain  principles  of  justice  would  estop  the  bank,  and  make  it 
responsible  for  all  loss  occasioned  to  the  surety  by  such  a  repre- 
sentation. The  cashier  has  charge  of  the  collection  of  notes ;  he 
receives  payments;  and  on  what  could  the  surety  rely,  or  any 
person  having  dealings  with  a  bank,  if  not  on  such  a  declaration 

8  2  Hill  (N.  Y.)  445. 

9  10  Ves.  123.  To  the  same  point,  see  Lime  Rock  Bank  v.  Hewett, 
52  Me.  531.  . 

376 


DECLARATION'S    AND    ADMISSIONS  §   1G7 

as  this?     The  followhig  cases  seem  far  nearer  the  true  doctrnie. 
See  also  Certification. 

In  Nebraska  it  has  been  held  that,  where  a  surety  on  a  note 
is  erroneously  told  by  the  cashier  at  the  bank  that  the  note  has 
been  paid,  and  upon  the  strength  of  this  statement  becomes 
surety  upon  another  note  of  the  same  maker,  the  bank  will 
not  be  able  to  recover  on  this  second  note.  It  does  not 
appear  in  this  case  that  the  cashier  knew  the  precise  object 
with  which  the  inquiries  were  made;  but  he  obviously  had 
reason  to  suppose  that  they  were  not  made  altogether  idly, 
or  without  purpose.^" 

Representation  as  to  Payment  of  Note  may  Bind  Bank,  even  though 
the  Officer  had  an  Adverse  Interest,  if  this  is  Unknown  to  the 
Third  Party 

(d)  The  bank  must  answer  for  loss  resulting  from  declarations 
of  its  cashier  to  an  indorsee  as  to  payment  of  a  note  held  by  the 
bank,  and  the  fact  that  the  cashier  was  also  an  indorser  does  not 
alter  the  case.  The  cashier's  declarations  in  the  business  of  the 
bank  and  pertinent  to  it  are  admissible  against  it.  The  bank 
claimed  that,  as  the  cashier  was  an  indorser,  his  interest  was 
adverse  to  that  of  the  bank,  and  therefore  his  representations  did 
not  bind  it ;  but  the  court  said  that  releasing  an  indorser  by  his 
statement  was  exactly  contrary  to  his  own  interest  as  an  indorser, 
as  it  destroyed  his  right  of  contribution  from  such  person,  and, 
even  if  his  interest  were  antagonistic  to  that  of  the  bank  in  the 
matter,  the  bank  would  still  have  been  liable ;  for  the  directors 
knew,  or  were  bound  to  know,  who  were  the  parties  on  the  note, 
and  if  they  allowed  the  cashier  to  stand  where  he  had  an  interest 
to,  and  where  he  could  and  did,  cause  loss  by  false  statements 
about  the  note,  it  would  seem  no  reason  to  throw  the  loss  on  the 
innocent  misled  indorser.^^ 

Representations  aside  from  the  Cashier's  Scope  of  Duty 

(/)  The  cashier  wrote  to  the  Secretary  of  the  Treasury  that  the 
bearer  was  authorized  to  contract  for  the  transfer  of  money  ;  such 
a  contract  was  beyond  the  scope  of  a  cashier's  office,  and  therefore 

10  Merchants'  Bank  v.  Rudolf,  5  Neb.  527. 
"  Grant  v.  Cropsey,  8  Neb.  205  (1879). 

377 


§  167  THE   CASHIER 

his  representations  did  not  bind  the  bank,  and  it  did  not  have  to 
make  good  the  money  advanced  to  the  "  bearer."  ^^ 

A.,  the  cashier  of  a  bank,  was  asked  by  C.  about  the  solvency 
of  a  certain  firm,  F. ;  he  rephed  favorably.  C.  bought  large 
amounts  of  the  bills  and  acceptances  of  F.  F.  failed,  and  C.  sued 
A.  and  the  bank.  The  court  said  that  the  bank  could  not  be  held, 
for  it  was  no  part  of  the  cashier's  business  to  give  such  information ; 
and  the  cashier  was  not  liable,  for  it  was  only  the  statement  of 
honest  opinion,  and  not  a  guaranty.^^ 

§  168.  Of  Limitations  of  Time  and  Place  upon  the  Cashier's 
Powers.  —  The  place  where  and  the  time  when  a  cashier  is  called 
upon  to  do,  or  undertakes  to  do,  acts  on  behalf  of  the  bank,  are 
often  circumstances  materially  affecting  his  powers  in  the  premises. 
For  some  purposes  he  is  clothed  with  his  official  character  only 
at  the  banking-house  and  in  banking  hours;  for  other  purposes 
he  remains  clothed  with  it  at  all  times  and  places.  No  better  rule 
for  discriminating  between  these  two  classes  presents  itself  than 
to  say,  thatj  as  there  are  some  acts  which  can  only  be  properly 
performed  at  the  office  of  the  corporation  and  during  the  hours 
ordinarily  devoted  to  public  business,  so  there  are  other  matters 
which  may  be  transacted  equally  well  at  all  times  and  places. 
The  distinction  is  a  purely  practical  one,  arising  from  the  intrinsic 
character  of  the  transaction  itself  regarded  from  a  business  point 
of  view. 

The  Test 

(a)  A  test,  which  is  perhaps  as  accurate  as  any  that  could  be 
suggested,  is  furnished  by  the  question  whether  for  the  due  per- 
formance of  the  business  there  are  requisite  any  knowledge  or 
appliances  which  can  only  be  satisfactorily  and  fully  possessed 
by  the  cashier  when  he  is  at  the  banking-rooms.     It  is  easy  to 

12  U.  S.  V.  City  Bank,  21  How.  356,  16  L.  ed.  130. 

A  promise  by  a  cashier  of  a  bank  made,  without  consideration  to  the 
drawer  of  a  draft,  to  pay  the  same  out  of  the  funds  of  a  customer  on  whom 
the  draft  is  drawn  and  who  has  been  credited  with  the  proceeds  of  nego- 
tiable paper  which  he,  as  owner,  transferred  to  the  bank,  is  not  enforceable 
against  the  bank  unless  the  customer  assents  that  the  bank  shall  make  an 
apphcation  of  the  funds  so  placed  to  his  credit.  Ballard  Bros.  v.  Bank 
of  Madison,  121  Ga.  527,  49  S.  E.  615  (1904). 

i^Horrigan  v.  First  National  Bank,  10  Chic.  Leg.  News  112  (Tenn.) ; 
Crawford  v.  Boston  Store  Mercantile  Co.,  67  Mo.  App.  39;  Hadden  v. 
Dooley,  92  Fed.  274  (1899) ;  First  National  Bank  v.  Marshall  Bank,  82 
Fed.  725  (1897) ;  Taylor  v.  Commercial  Bank,  174  N.  Y.  181,  66  N.  E. 
726,  95  Am.  St.  Rep.  564  (1903). 

378 


LIMITATIONS    OF   TIME    AND    PLACE    UPON    CASIIIER's    POWERS      §  IGS 

point  this  rule  with  examples  which  will  be  serviceable  in  illus- 
trating its  precise  significance. 

May  Draw  Checks  away  from  Bank 

(b)  Thus  it  cannot  be  pretended  that  any  sound  reason  could 
restrict  the  power  of  the  cashier  to  tlraw  checks  to  a  power  to 
draw  and  sign  them  only  in  the  office  of  his  own  bank  and  in  the 
ordinary  business  hours.  Even  prudence  might  sometimes  induce 
him  to  draw  them  elsewhere,  as  at  the  rooms  of  the  drawee  bank, 
to  avoid  danger  of  loss  or  fraud. 

Indorsement  away  from  Bank  Held  Good 

(c)  So  an  indorsement  may  be  made  away  from  the  bank. 
Irwin,  cashier  of  a  bank,  was  asked  to  discount  a  draft  i)ayable 
to  his  bank.  He  could  not,  so  j\I.,  the  cashier  of  another  l^ank, 
at  the  request  of  Irwin,  discounted  the  bill  on  the  street,  Irwin 
indorsing  it.     Irwin's  bank  was  held  by  the  indorsement.^ 

Cashier  may  Receive  Notice  away  from  Bank,  hut  may  not  give 
Information,  as  a  Rule,  Elsewhere 

So,  if  any  person  wishes  to  impart  information  so  as  to  warn  the 
bank  or  to  affect  it  with  notice,  it  would  be  absurd  to  say  that  he 
could  do  so  effectually  only  if  he  should  make  his  communication 
to  the  cashier  actually  within  the  walls  of  the  banking-house,  and 
before  it  was  closed  to  the  public  for  the  day.  There  would  be  no 
reason  in  such  restrictions,  and  there  is  no  law  in  their  support. 
But  if  information  be  sought  from  the  cashier,  it  should  be  sought 
at  the  banking-rooms,  where  he  can  have  access  to  the  books, 
papers,  and  records.^ 

May  Pay  or  Certify  Checks 

(d)  But,  on  the  other  hand,  it  is  obvious  that  a  cashier  ought 
not  to  make  a  payment  upon,  or  to  certify  or  accept,  a  check  or 
draft  when  he  is  away  from  the  bank.  He  may  have  been  absent 
from  the  bank  but  very  few  minutes,  and  it  may  be  that  the  check, 
if  presented  when  he  left,  would  have  been  jiroperly  ])aid  or  cer- 
tified or  accepted.  Still,  even  in  that  short  interval,  the  drawer's 
account  may  have  undergone  so  material  a  change  by  reason  of 

1  §  168.     Bissell  r.  First  National  Bank  of  Franklin,  69  Pa.  St.  415. 
*  Merchants'  Bank  v.  Rudolf,  5  Neb.  527. 

379 


§  1G8  THE    CASHIER 

payments  made  or  drafts  accepted  on  his  account,  or  perhaps  by 
force  of  garnishee  process  served  upon  his  funds  in  the  bank,  that 
his  checks  could  no  longer  be  honored.  In  that  case  the  payment, 
certification,  or  acceptance  having  been  wrongfully  made  by  the 
cashier,  would  become  his  own  individual  loss,  and  he  would  be 
obliged  to  reimburse  the  amount  to  the  bank,  if  the  bank  should 
see  fit  to  accept  and  ratify,  instead  of  repudiating,  the  proceeding. 
Clearly  the  same  must  also  be  the  case  if  later  in  actual  time  than 
the  payment,  certification,  or  acceptance  by  the  cashier,  but  still 
prior  to  his  return  to  the  bank  and  entering  or  noting  the  transac- 
tion to  the  debit  of  the  drawer,  or  informing  the  proper  officers  of 
its  having  been  made,  any  other  disposition  had  been  legally  made 
of,  or  any  other  valid  lien  had  attached  upon,  the  drawer's  funds  or 
credit.  Otherwise  a  loss  would  be  inflicted  upon  the  bank  solely 
and  wholly  by  reason  of  improper  conduct  on  the  part  of  its  officer. 
In  fact,  it  may  fairly  be  argued  that,  in  the  supposed  case  of  the 
payment  made  in  this  manner,  the  cashier  practically  renders 
himself  the  agent  of  the  drawer  for  the  presentment  and  collection 
of  the  check ;  and,  in  expectation  that  w4ien  he  can  arrive  at  the 
bank  and  present  it  there  will  be  no  obstacle  to  its  full  payment, 
he  ventures  to  advance  upon  it  to  the  drawer  its  full  face  value. 
The  risk  of  intermediate  transactions  diminishing  or  destroying 
the  security  is  his  own  private  risk;  the  loss,  if  any,  is  his  own 
private  loss.  The  same  reasons  might  make  the  certification  or 
acceptance  binding  against  him  personally.  His  acceptance  thus 
made  on  behalf  of  the  bank  can  be  repudiated  absolutely  by  the 
bank,  if  events  transpiring  before  his  return  to  the  office  and  entry 
or  report  of  the  transaction  would  render  the  making  of  the  accep- 
tance at  the  time  of  the  return  and  entry  or  report  improper.  This 
would  at  least  be  the  case  so  long  as  the  acceptance  remained  in 
the  hands  of  the  party  obtaining  it,  or  of  any  other  party  having 
notice  of  the  circumstances  attendant  upon  its  making,  for  these 
persons  would  be  affected  with  a  presumed  knowledge  of  the  rule 
of  law  rendering  this  undertaking  of  the  cashier  irregular.^ 

Bona  Fide  Holder  can  Hold  the  Bank 

(e)  But  since  the  instrument  would  probably  be  perfectly  regular 
on  its  face  as  the  acceptance  of  the  bank,  and  would  in  fact  have 

3  Bullard  v.  Randall,  1  Gray  (Mass.)  605.  The  opinion  in  tliis  ease 
was  delivered  by  Chief  Justice  Shaw,  and  has  always  been  relied  upoa  as 
a  thoroughly  satisfactory  and  conclusive  authority. 

380 


LIMITATIONS   OF   TIME   AND    PL.A.CE    UPON    CASIIIEu's    POWERS      §  168 

been  executed  and  issued  solely  throu^di  the  iini)r()per  exercise  of  a 
power  really  lodged  in  the  officer  of  the  bank,  a  buna  fide  holder  for 
value  and  without  notice  would  be  allowed  to  enforce  it  against 
the  corporation.^"  Whether  the  bank  could  be  held  by  the  accep- 
tance, if  the  cashier  on  his  return  failed  to  report  it,  the  drawer 
having  then  funds  enough,  is  a  difficult  question.  It  cannot  be 
said,  that,  in  making  the  acceptance,  as  in  making  the  payment, 
the  cashier  assumed  a  position  in  any  degree  resembling  that  of  an 
agent  for  the  holder.  On  the  contrary,  his  act  assumed  to  be  and 
could  be  throughout  only  purel\-  official.  Upon  his  return  to  the 
bank  it  was  his  duty  to  report  it  and  have  it  duly  entered.  This 
must  perhaps  be  regarded  as  his  official  duty.  Accordingly,  it 
may  be  argued  that  his  neglect  of  it  would  leave  the  bank  still 
bound  to  the  third  party,  though  entitled  to  hold  the  cashier  lial)le 
to  make  good  any  damage  to  itself.  On  the  other  hand,  this 
position  can  be  assailed  by  urging  that  the  transaction  was  from 
the  outset  void  as  an  undertaking  of  the  bank,  or,  if  not  actually 
void,  yet  so  far  irregular  and  invalid  as  against  the  bank  that  it 
can  be  made  good  against  it  only  by  a  thorough  reperformance  in 
full  of  all  essential  acts.  The  party  dealing  with  the  cashier  may 
well  be  held  to  take  the  risk  of  the  cashier's  faithful  conduct  in 
these  particulars ;  which  the  bank  cannot  possibly  be  regarded  as 
warranting,  since  the  whole  proceeding,  ah  initio,  was  directly  in 
contravention  of  the  principles  of  the  agency  which  it  had  estab- 
lished. 

Deposits  must  he  Received  at  the  Bank.      Until  actually  Put  in 
Bank's  Possession,  the  Cashier  is  Agent  of  the  Depositor 

(/)  An  interesting  and  important  question,  similar,  but  not 
quite  identical,  is  raised  where  the  cashier  receives  payments  of 
money  for  credit  on  an  ordinary  deposit  account,  when  lie  is 
away  from  the  bank.  This  limitation  is  annexed  to  the  simple 
word  "  payment",  because  perhaps  the  case  of  receiving  payment 
of  a  debt  due  to  the  bank  might  be  different.  In  many  cases  the 
law  requires  the  creditor  to  make  demand  upon  his  debtor.  And 
unquestionably  a  cashier  may  follow  up  a  delinquent  or  doubtful 
debtor  of  the  bank,  and  exact  payment  from  him  at  any  time  and 
place  when  and  where  he  may  be  able  to  do  so.  But  where  money 
is  offered  for  credit  on  a  deposit  account  it  is  clear  that  it  shoukl 

3"  See  Ultra  vires,  §  722. 

381 


§  168  THE   CASHIER 

not  be  accepted  away  from  the  bank.     The  bank  does  not  con- 
template any  such  method  of  receivmg  deposits,  but  has  provided  an 
entirely  different  system.     Clearly,  therefore,  it  does  not  empower 
its  cashier  thus  to  receive  them.    He  cannot  bring  them  instantly  to 
account  in  the  bank,  nor  secure  them  with  the  safeguards  always 
provided  in  banks  for  the  preservation  of  their  funds.     But  if  he 
does  so  receive  them,  and  then  loses  or  misapplies  them  before  he 
has  actually  transferred  them  into  the  corporate  possession,  the 
question  arises,  Can  the  payer  hold  the  bank  to  make  good  the 
amount  ?     Clearly,  we  say,  he  cannot.     Even  though  the  cashier 
may  have  had  the  identical  money  in  his  pocket  at  and  after  the 
time  of  his  return  to  the  bank,  nothing  short  of  his  actual  transfer 
over  and  bringing  it  to  account  in  the  bank  can  make  the  bank 
liable.     The  transaction,  even  in  this  form,  differs  materially  from 
the  case  of  an  acceptance  or  certification  previously  supposed. 
In  that  case  the  cashier  was  acting  strictly  as  an  agent  of  the  bank. 
He  could  possibly  do  the  act  in  no  other  capacity.    Whereas  in 
taking  the  money  it  must  be  held  that  he  was  acting  as  agent  for 
the  party  paying  it ;  the  trust  and  object  of  his  agency  being  that 
he  should  make  the  payment  into  the  bank  to  the  credit  of  the 
payer's  deposit  account.     He  was  the  agent  of  the  payer  for  this 
purpose,  selected  as  a  convenient  agent  because  he  was  also  an 
agent  of  the  bank.     The  money  was  paid  to  him  doubtless  because 
he  was  cashier,  but  it  was  not  paid  to  him  as  cashier.     The  latter 
character  could  not  be  given  to  the  transaction,  even  if  both  parties 
sought  to  do  so ;   for  they  must  both  be  affected  with  knowledge 
of  the  rule  of  law  which  renders  a  pajment  made  under  such  cir- 
cumstances irregular  and  improper,  and  so  invalid  as  against  the 
bank.     It  is  fair  then  to  say  that  in  no  part  of  the  transaction  can 
it  be  admitted  that  the  cashier  was  acting  officially,  even  though 
irregularly  so.     His  act  should  be  regarded,  not  as  irregularly 
official,  but  as  absolutely  unofficial.      Therefore   the  obligation 
which  he  owed  to  pay  the  money  into  the  bank  ran  to  the  party 
paying  it  to  him  for  that  purpose,  not  to  the  bank ;  his  breach  of 
it  would  make  him  liable  to  that  party,  not  to  the  bank ;  the  loss 
arising  from  the  breach  must  be  borne  by  that  party,  who  was  in 
fact  his  principal  in  the  agency,  not  by  the  bank,  which  was  known 
to  all  concerned  to  have  strictly  excluded  any  such  function  from 
the  scope  of  his  official  agency. 

The  three  instances  adduced    differ  very  considerably  in  the 
force  of  the  arguments  which  can  be  brought  to  make  them  respec- 
382  , 


LIMITATIONS    OF   TIME    AND    PL.\CE    UPON    CASUIER's    POWERS       §   IGS 

tively  acts  upon  which  a  habihty  of  tlie  bank  can  be  based.  But 
it  seems  that  in  all  alike  the  non-liability  of  the  bank  is  undeniable. 
Though  the  cashier  ought  on  his  return  to  the  bank  to  report  the 
acceptance  he  has  made  on  its  behalf,  or  to  i)ay  over  the  mcjiicy 
he  has  received  on  its  behalf,  and  though,  if  he  should  then  promptly 
report  and  enter  the  acceptance,  the  drawer's  account  might  make 
it  good  ;  or  though  he  may  have  the  identical  funds  paid  over  to 
him  still  in  his  pocket ;  yet  in  both  cases  it  is  clear  that  the  person 
dealing  with  him  knew,  or  was  at  law  bound  to  know,  that  the 
dealing  was,  under  the  circumstances,  irregular,  improper,  and 
beyond  the  scope  of  the  cashier's  agency.  The  transaction  might 
be  capable  of  being  made  right  in  the  future,  when  the  cashier 
should  return  to  the  bank.  But  until  that  time,  and  until,  as  a 
matter  of  strict  fact,  it  had  actually  been  so  made  right,  it  must  be 
invalid  as  against  the  bank.  That  it  should  not  be  made  right  at 
all  is  a  chance  which  may  come  to  pass,  either  through  the  mistake, 
the  negligence,  the  innocent  loss,  or  the  fraud  of  the  cashier.  Now 
clearly  the  third  party  takes  the  chance  of  the  mistake  or  the  loss, 
and  why  not  equally  of  the  negligence  and  the  fraud  ?  He  trusts 
that  everything  will  go  right,  that  the  cashier  will  be  careful  and 
honest.  But  the  sufficiency  of  both  the  care  and  the  honesty  is 
his  own  risk ;  for  he  has  confided  in  them  of  his  own  independent 
motion,  not  under  the  invitation  or  holding  out  of  the  bank,  but  in 
fact  with  the  express  knowledge,  either  actual  or  conclusively 
inferred  at  law,  that  the  bank  warrants  neither  when  they  are  relied 
upon  under  such  circumstances.^'' 

Bank  may  Adopt  Cashier's  Act  away  from  Bank 

(g)  The  decision  in  Pendleton  v.  The  Bank  of  Kentucky  *  does 
not  at  all  interfere  with  the  above  doctrine.  The  court  certainly 
remark  in  that  case  that  the  cashier  holds  his  oflice  at  every  time 
and  place.  But  the  point  of  view  from  which  they  make  that 
remark  explains  its  intended  significance.  They  were  discussing 
the  question  of  whether  the  cashier's  conversion  of  money  improp- 
erly received  by  him  when  away  from  the  bank  was  a  default  which 
would  sustain  a  suit  upon  his  official  bond,  and  it  was  in  the  course 
of  declaring  that  it  would,  that  they  made  the  above  remark.     It 

'^  Quoted  in  Demarest  v.  Holdeman,  34  Ind.  App.  GS5,  73  X.  E.  714 
.  (1904). 

<  1  T.  B.  Monr.  (Ky.)  171. 

383 


§  168  THE   CASHIER 

cannot  be  questioned  that,  if  the  bank  has  waived  the  irregularity, 
and  adopted  or  ratified  the  improper  act,  if  it  has  fulfilled  the 
obligation  which  its  agent  attempted  to  impose  upon  it,  it  has 
done  simply  what  it  had  a  right  to  do,  and  what  neither  the  officer 
nor  his  sureties  can  object  to.  There  is  nothing  originally  void 
about  the  act,  nothing  which  prevents  the  bank  from  subse- 
quently accepting  and  ratifying  it.  It  is  unauthorized  and  there- 
fore voidable,  but  it  is  no  more  than  this.  On  the  other  hand,  if 
the  bank  exercises  its  privilege  of  repudiating  the  transaction,  the 
right  of  action  against  its  cashier  cannot  accrue  to  it,  for  it  cannot  be 
allowed  to  take  the  two  inconsistent  positions  of  repudiating  the 
responsibility,  and  yet  claiming  damages  for  a  loss  which  it  could 
only  suffer  if  it  were  responsible. 


A  Representation  away  from  Bank  may  Bind 

(h)  Where  a  cashier  had  wrongfully  indorsed  a  note  "  G.  B., 
Cas.",  and  inquiry  was  made  from  him  at  a  distance  from  the 
bank  concerning  the  note,  and  he  replied  that  it  was  "  all  right",  the 
court  said  that  the  force  and  effect  of  this  statement,  as  against 
the  bank,  were  nowise  affected  by  the  consideration  of  the  place 
where  the  conversation  took  place.^  The  element  of  place  was 
evidently,  under  the  especial  circumstances,  of  no  consequence 
whatsoever.  An  inquiry  and  reply  as  to  any  other  note,  where 
the  cashier  might  be  supposed  to  speak  from  memory  and  without 
access  to  the  books,  papers,  and  memoranda  of  the  bank,  might 
not  improbably  be  differently  regarded. 

§  169.  No  Power.  —  Cannot  Pledge  Bank's  Property  for  Ante- 
cedent Debt.  Though  the  cashier  may  dispose  of  the  bank's  ne- 
gotiable securities  in  the  regular  course  of  business,  he  cannot 
pledge  its  assets  for  the  payment  of  an  antecedent  debt.^ 

Nor  has  the  cashier  power  to  bind  the  bank  to  pay  a  draft,  to  be 
drawn  on  a  future  day  by  a  third  person  on  one  of  its  customers, 

5  Houghton  V.  First  National  Bank  of  Elkhorn,  26  Wis.  663.  See 
Kennedy  v.  Otoe  County  National  Bank,  7  Neb.  59. 

1  §  169.  State  of  Tennessee  v.  Davis,  50  How.  (N.  Y.)  447;  Mont- 
gomery Bank  v.  Walker,  181  Ala.  368,  61  So.  951  (1913) ;  Dycus  v.  Traders' 
Bank,  52  Tex.  Civ.  App.  175,  113  S.  W.  329  (1908).  Cashier  cannot  give 
mortgages  on  the  bank's  property  or  transfer  its  assets,  95  Miss.  742, 
50  So.  65,  1912A  Ann.  Cas.  93,  n. ;  nor  assign  the  assets  of  the  bank  for 
the  benefit  of  a  part  of  the  creditors  to  the  exclusion  of  others.  Ledger- 
Wood  V.  DashieU,  177  S.  W.  1010  (Tex.  Civ.  App.)  (1915). 

384 


NO    POWER  §   169 

even  where  the  bank  expects  to  have  a  deposit  from  the  customer 
sufficient  to  cover  the  draft.'" 

Agreement  to   Indemnify  SJieriff 

Where  a  claim  of  the  l)ank  has  f)een  pushed  to  judf^ment  and 
execution,thecashierdeUvering  the  execution  to  the  sheriff  t(^  levy 
has  not  authority  to  bind  the  bank  by  any  undertaking  to  in- 
demnify the  officer.  His  agreement  to  this  effect,  tlioiigh  purport- 
ing to  be  made  by  him  in  his  official  capacity,  will  be  invalid  as 
against  the  bank,  though  it  may  operate  to  hold  him  personally  .- 

It  has  been  said  that  the  cashier  has  charge  of  all  promissory 
notes  due  to  the  bank.  But  though  he  thus  has  actual  manual 
possession  and  control  of  them,  yet  he  has  not  that  legal  possession 
which  will  enable  him  to  bring  a  suit  upon  them  in  his  own  name. 
His  possession  is  in  fact  only  custody  which  the  court  will  not 
recognize  as  an  absolute,  but  only  as  a  qualified  possession,  not 
carrying  with  it  the  presumption  of  title  or  the  right  to  sue.^ 

A  cashier  cannot  virtute  officii  release  a  surety  upon  a  note  held 
by  the  bank,  even  though  the  bank  holds  other  security  to  which  it 
might  resort.    Special  authority  is  necessary  to  justify  such  release.^ 

A  cashier  cannot  virtute  officii  bind  the  bank  by  representations 
as  to  the  solvency  of  a  customer.^"  Nor  has  he  authority  to  release 
the  maker  ^"^  or  indorser."*"* 

A  purchase  of  boots  and  shoes  in  the  name  of  a  bank,  by  its 

i"  Flannagan  v.  California  National  Bank,  56  Fed.  959. 

2  Watson  V.  Bennett,  12  Barb.  (N.  Y.)  196. 

3  Oleott  V.  Rathbone,  5  Wend.  (N.  Y.)  490. 

*  jVIerehants'  Bank  v.  Rudolf,  5  Neb.  527 ;  Coeheeo  National  Bank 
V.  Haskell,  51  N.  H.  116;  Daviess  County  Sa\angs  Ass.  v.  Sailor,  63  Mo. 
24  (1876);  Gray  ;-.  Farmers'  Bank,  81  Md.  631,  32  Atl.  518 ;  Milliard  v. 
Lyons,  180  Fed.  685  (1910) ;  F'irst  National  Bank  v.  Lowther-Kaufman 
Oil  etc.  Co.,  66  W.  Va.  505,  66  S.  E.  713,  28  L.  R.  A.  (x.  s.)  511  (1910). 

The  cashier  of  a  national  bank  which  holds  the  paper  of  a  firm  of 
which  the  cashier  is  a  member,  has  no  power  to  bind  tlie  liank  by  an 
agreement  that  there  shall  bo  no  liability  upon  an  accommodation  note 
procured  by  him  to  be  substituted,  for  a  special  purpose,  for  the  indebted- 
ness of  his  fii'm.  Allen  v.  First  National  Bank,  127  Pa.  St.  51,  17  Atl. 
886. 

*"  Taylor  v.  Commercial  Bank,  174  N.  Y.  181,  66  N.  E.  726,  95  Am. 
St.  Rep.  564  (1903). 

^o"  First  National  Bank  r.  Lennon,  170  N.  C.  10,  86  S.  E.  715  (1915)  ; 
Ravenswood  Bank  ;-.  Wetzel,  58  W.  Va.  1,  50  S.  E.  886,  70  L.  R.  A.  305 
(1905);  Gillis  v.  First  National  Bank,  148  Pac.  994  (1915)  (Okla.) ; 
Packers'  National  Baidc  ;-.  Rushart,  9.S  Neli.  3.")4.  l.')2  N.  W.  789  (1915). 

^"f-  Farmers'  etc.  Bank  v.  Clancy,  163  Mich.  586,  128  N.  W.  752  (1910) 

VOL.  1  —  25  385 


§  169  THE    CASHIER 

cashier  and  general  manager  for  the  benefit  of  a  third  person,  will 
not  make  the  bank  liable  for  the  amount  of  the  purchase,  in  the 
absence  of  its  knowledge,  at  the  time  of  purchase  or  subsequent 
ratification/" 

In  Missouri  a  casliier  is  prohibited  by  statute  from  indorsing  a 
note  without  first  having  been  authorized  by  the  board  of  directors 
to  do  so,  and  the  cashier's  indorsement  without  such  permission 
is  void.^*  But  the  statute  is  for  the  protection  of  the  bank  against 
the  acts  of  the  cashier  and  an  indorsement  of  a  note  in  blank  by 
the  cashier  in  his  settlement  with  the  bank,  known  and  assented 
to  by  the  bank,  cannot  be  questioned  by  the  cashier.^" 

A  cashier  even  though  he  is  the  manager  or  executive  ofiicer  of  a 
bank  has  no  authority  to  release  the  claims  of  the  bank,  or  to  pay 
a  check  or  deposit  when  the  bank  is  notoriously  insolvent  and  the 
check  is  drawn  by  the  assignee  for  the  purpose  of  thwarting  claims 
for  liens.'*'' 

A  cashier  cannot  delegate  to  an  officer  of  another  bank  authority 
to  certify  checks  in  such  cashier's  name.^* 

The  cashier  of  a  bank  has  no  authority  to  make  any  false  repre- 
sentations on  behalf  of  the  bank  as  to  the  solvency  of  a  customer 
who  is  one  of  its  debtors.^''^ 

The  cashier  cannot  make  a  deed  to  himself,  and  in  the  absence 
of  evidence  of  authority  to  do  so  such  deed  is  presumptively 
void  .4" 

The  cashier  has  no  power  or  apparent  authority  to  obligate  the 
bank  as  surety  on  a  replevin  undertaking  in  an  action  between 
third  parties  in  which  the  bank  to  all  outward  appearances  has  no 
interest.'*^ 

A  cashier  has  no  authority  to  agree  to  receive  anything  but 

4«  U.  S.  Boot  and  Shoe  Co.  v.  Stebbins,  2  S.  D.  74,  48  S.  W.  833  (1891). 

^*Long  V.  Long,  167  Mo.  App.  79,  150  S.  W.  1135  (1912);  Miles 
V.  Macon  County  Bank,  187  Mo.  App.  230,  173  S.  W.  713  (1914) ;  Mus- 
grove  V.  Macon  County  Bank,  187  Mo.  App.  483,  174  S.  W.  171  (1915). 

4<=  CantreU  v.  Davidson,  180  Mo.  App.  410,  168  S.  W.  271  (1914). 

^•i  Ellis  V.  First  National  Bank,  22  R.  I.  565,  48  Atl.  936  (1901). 

*«  United  States  National  Bank  v.  First  etc.  Savings  Bank,  60  Or.  266, 
llOPac.  343  (1911). 

^f  Taylor  v.  Commercial  Bank,  174  N.  Y.  181,  66  N.  E.  726,  62  L.  R.  A. 
783,  95  Am.  St.  Rep.  564  (1903) ;  reversing  68  App.  Div.  458,  73  N.  Y.  S. 
924. 

'"'  Northwestern  etc.  Ins.  Co.  v.  Lough,  13  N.  D.  601,  102  N.  W.  160 
(1904). 

4''  Sturdevant  Bros.  v.  Farmers'  etc.  Bank,  69  Neb.  220,  95  N.  W.  819 
(1903). 

38G 


NO    POWER  §   1G9 

money  in  payment  of  a  non-negotiable  promissory  note  indorsed 
to  it.^* 

A  cashier  has  no  implied  authority  by  virtue  of  his  office  to 
extend  tlie  time  of  ])aynient  of  a  note  without  the  knowledj^^e  or 
consent  of  the  bank  when  the  efl'ect  would  be  the  release  of  a 
surety.""  In  Kansas,  however,  such  authority  is  assumed,  where 
additional  security  is  taken.''* 

A  cashier  cannot  lease  property  of  the  bank,  or  lease  premises  of 
others  for  the  bank,  or  accept  the  surrender  of  a  leasehold  term.^' 

Xo   Inherent   Power  to  Buy  or  Sell  Realty  for  Bank 

(a)  A  bank  is  not  bound  by  the  cashier's  contract  with  a  broker 
for  sale  or  purchase  of  real  estate,  unless  previous  authority  be 
shown,  or  unless  estopped  by  a  line  of  conduct  recognizing  such 
acts.^ 

No  Power  to   Indorse  Bank's  Name  on   Own   Paper 

The  cashier  of  a  bank  is  not,  by  reason  of  his  official  position, 
presumed  to  have  the  power  to  bind  it  as  an  accommodation  indorser 
on  his  individual  note ;  and  the  payee  who  fails  to  prove  that  the 
cashier,  as  such,  had  authority  to  make  the  indorsement,  cannot 
recover  against  the  bank.  The  very  form  of  the  paper  carries 
notice  to  a  purchaser  of  a  possible  want  of  authority  to  make  the 
indorsement,  sufficient  to  put  him  on  his  inquiry.^ 

A  cashier  has  no  right  or  authority  as  such  to  loan  to  himself 
as  an  individual,  or  to  use  in  any  manner  for  himself  the  funds  of 
ihe  bank.     Such  a  loan  can  only  be  sustained  by  showing  express 

^'  First  National  Bank  v.  Alexander,  152  Ala.  585,  44  So.  866  (1907). 

«■  Vandeford  v.  Farmers'  etc.  Bank,  105  Md.  104,  OG  Atl.  47,  10  L.  R.  A. 
(n.  s.)  129,  n.  (1907).  But  see  Wakefield  Bank  v.  Trusedale,  55  Barb. 
(N.  Y.)  602. 

'*  First  National  Bank  v.  Livermore,  90  Kan.  395,  133  Pae.  734,  47 
L.  R.  A.  (n.  s.)  274,  n.  (1913). 

•"  People's  Bank  v.  Bennett,  159  Mo.  App.  1,  139  S.  W.  219  (1911). 

*  Winsor  v.  Lafayette  County  Bank,  18  Mo.  App.  605 ;  Spongberg  v. 
First  National  Bank,  18  Idaho  524,  110  Pae.  710,  1912A  Ann.  Cas.  95, 
n.  Nor  is  a  bank  whoso  cliarter  provides  tliat  its  business  shall  bo 
managed  by  the  directors  bound  by  tlie  cashier's  act  of  changing  a 
lease  executed  by  the  bank.  Dvcus  v.  Traders'  Bank,  52  Tex.  Civ.  App. 
175,  113  S.  W.  ,329  (1908);  People's  Bank  v.  Bennett,  159  Mo.  App.  1, 
139  S.  W.  219  (1911). 

8  West  St.  Louis  Savings  Bank  v.  Shawnee  Co.  Bank,  95  U.  S.  557, 
24  L.  ed.  490  (1877) ;  State  National  Bank  r.  Newton  National  Bank, 
66  Fed.  691. 

387 


§  169  THE   CASUIER 

authority  or  ratification."  It  is  immaterial  that  the  cashier  is  a 
partner  and  manager  of  the  bank7" 

Of  course  if  the  bank  has  no  authority  through  its  directors  to 
make  a  contract,  the  cashier  can  have  no  such  authority.''' 

Where  the  cashier,  acting  for  the  bank,  discounts  an  accom- 
modation note  he  has  no  authority  to  induce  the  payee  to  apply 
the  proceeds  of  the  note  to  the  payment  of  premiums  in  a  cer- 
tain insurance  company  in  which  the  cashier  has  an  interest,  and 
such  act  of  the  cashier  is  no  defence  to  the  note  in  the  hands  of 
the  bank.^ 

7  Iowa  State  Bank  v.  Black,  91  Iowa  490,  59  N.  W.  283 ;  Wallace 
V.  Lincoln  Savings  Bank,  89  Tenn.  646,  15  S.  W.  448  (1890) ;  Barth  v. 
Koetting,  99  Wis.  242,  75  N.  ¥/.  395  (1898) ;  St.  Charles  Savings  Bank  v. 
Orthweim  Investment  Co.,  160  Mo.  App.  369,  140  S.  W.  921  (1911); 
Iron  City  National  Bank  v.  Fifth  National  Bank,  31  Tex.  Civ.  App.  308, 
71  S.  W.  612  (1903) ;  Campbell  v.  Upton,  66  App.  Div.  434  (1901),  73 
N.  Y.  S.  1084 ;  Campbell  v.  Manufacturers'  National  Bank,  67  N.  J.  L. 
301,  51  Atl.  497,  91  Am.  St.  Rep.  438  (1902) ;  McGregor  v.  Witham,  126 
Ga.  707,  56  S.  E.  55  (1906) ;  Langlois  v.  Gragnon,  123  La.  453,  49  So. 
18,  22  L.  R.  A.  (n.  s.)  414  (1909) ;  Home  Savings  Bank  v.  Otterbach, 
135  Iowa  1.57,  112  N.  W.  769,  124  Am.  St.  Rep.  267  (1907) ;  Berens  v. 
Poetker,  175  Ind.  504,  92  N.  E.  339  (1910) ;  Mentz's  Assignee  v.  Mahoney, 
150  Ky.  409,  150  S.  W.  503  (1912) ;  German  Savings  Bank  v.  Des  Moines 
National  Bank,  122  Iowa  737,  98  N.  W.  606  (1904);  St.  Charles  Savings 
Bank  v.  Edwards,  243  Mo.  553,  147  S.  W.  978  (1912) ;  Supreme  Tent 
Knights  V.  Port  Huron  Savings  Bank,  137  Mich.  627,  100  N.  W.  898, 
109  Am.  St.  Rep.  690  (1904) ;  Hier  v.  Miller,  68  Kan.  258,  75  Pac.  77, 
63  L.  R.  A.  (n.  s.)  9.52  (1904) ;  Cobe  v.  CoughUn  Hardware  Co.,  83 
Kan.  522,  111  Pac.  458,  31  L.  R.  A.  (n.  s.)  1126,  n.  (1910);  Mendel  v. 
Boyd  71  Neb.  6.57,  99  N.  W.  493  (1904);  Kitchens  v.  Teasdale  Com. 
Co.,  105  Mo.  App.  463,  79  S.  W.  1177  (1904);  State  ?;.  Miller,  47  Or. 
562,  85  Pac.  81,  6  L.  R.  A.  (n.  s.)  365,  n.  (1906) ;  Davenport  v.  Walker, 
132  App.  Div.  96,  (1909)  116  N.  Y.  S.  411 ;  Campbell  v.  National  Broad- 
way Bank,  130  Fed.  699  (1904). 

But  when  a  cashier  who  has  power  to  sign  drafts  drawn  in  behalf  of 
the  bank  on  a  correspondent  and  is  allowed  to  obtain  drafts  for  his  own 
use  and  to  overdraw  his  personal  account,  pays  for  property  purchased 
by  him  with  a  draft  fraudulently  drawn  upon  the  correspondent  bank 
payable  to  the  order  of  the  vendor  the  bank  is  not  entitled  to  recover  the 
same  from  the  payee  of  the  draft  even  though  the  cashier  paid  nothing 
for  the  draft.  Campbell  v.  Upton,  66  App.  Div.  590  (1901),  73  N.  Y.  S. 
1084. 

'«  Blake  v.  Third  National  Bank,  219  Mo.  644,  118  S.  W.  641  (1909). 

■'^  SwindeU  v.  Bainbridge  State  Bank,  3  Ga.  App.  364,  60  S.  E.  13 
(1907). 

8  Moreland's  Assignee  v.  Citizens'  Savings  Bank,  97  Ky.  211,  30  S.  W. 
637  (1895). 

When  a  cashier  of  a  bank  presents  to  his  own  institution  for  discount, 
before  maturity,  a  note  made  by  himself  and  indorsed  by  the  payee,  and 
the  payee  and  indorser  is  a  depositor  of  the  bank  who  has  been  in  the 

388 


INSTRUMENTS    EXECUTED    IN    FORM    TO   THE    CASHIER       §  170 

§  170.  Instruments  executed  in  Form  to  the  Cashier.  —  I iiirnt 
of  the  yartles  governs.  The  converse  of  those  cases  in  which  tliinl 
parties  seek  to  hold  the  bank  upon  the  signature  of  the  cashier  is 
to  be  found  in  those  cases  in  which  the  bank  seeks  to  hold  third 
parties  liable  to  itself  upon  instruments  running  nominally  to  the 
cashier.  Here  the  general  rule  is  simple  enough.  If,  in  fact,  the 
contemporaneous  intent  and  understanding  at  the  time  of  entering 
into  the  contract  or  obligation  was  that  it  ran  from  the  third 
person  to  the  bank,  or  to  the  cashier  on  behalf  of  the  bank,  or  to 
him  in  his  official  character,  then  the  bank  is  entitled  to  the  per- 
formance and  benefit  thereof,  and  may  enforce  this  right  at  law 
precisely  as  if  it  were  corporately  named  as  the  party  in  th.e  trans- 
action, instead  of  only  its  cashier.  That  words  are  added  to  the 
name  of  the  cashier,  more  or  less  fully  descriptive  of  his  office,  is  a 
circumstance  which  is  properly  adduced  in  evidence  to  prove  the 
fact  of  intent  and  understanding ;  and  though  it  cannot  perhaps 
be  said  that  the  addition  of  such  words  is  absolutely  conclusive  of 
the  corporate  character  of  the  transaction,  since  a  cashier  might 
be  described  as  such  for  purposes  of  identification,  yet  it  is  clearly 
very  strong  evidence  to  this  effect,  and  might  perhaps,  if  nothing 
repugnant  appeared  in  the  rest  of  the  transaction,  be  regarded  as 
making  out  a  prima  facie  case  of  a  corporate  dealing.  Thus,  a  bill 
or  note  indorsed  over  to,  or  made  payable  to,  "  A.  B.,  Cashier", 
may  be  sued  upon  by  the  bank  in  its  corporate  name  and  capacity, 
and  the  defect  in  the  description  in  failing  to  name  the  bank  of 
which  he  is  cashier  may  be  supplied  by  parol  evidence  of  that  fact.^ 

habit  of  doing  business  with  it,  the  possession  of  the  note  by  the  cashier 
raises  no  presumption  that  he  is  the  owner  of  the  paper,  but  rather  that  it 
has  been  handed  to  him  for  the  purpose  of  discount  for  the  depositor's 
credit.     First  National  Bank  v.  Gerli,  232  Pa.  St.  4().5,  81  Atl.  540  (1911). 

1  §  170.  Stamford  Bank  v.  Ferris,  17  Conn.  2.50  ;  Barney  v.  Xewcomb, 
9  Cush.  (Mass.)  46;  Wright  v.  Boyd,  3  Barb.  (N.  Y.)  523;  Johnson  v. 
Catlin,  1  Williams  (Vt.)  87 ;  Erwin  v.  Branch  Bank  at  Mobile,  14  Ala. 
307 ;  Baldwin  v.  Bank  of  Newbury,  1  Wall.  234,  17  L.  ed.  534.  We 
cannot  do  better  than  refer  the  reader  especially  to  the  opinion  in  the 
last-named  ease.  It  is  conclusive  of  the  whole  question  ;  and  its  array  and 
discussion  of  the  authorities  are  exhaustive.  See  also  Nave  v.  Hadley, 
74  Ind.  1.55  (1881) ;  Darby  v.  Berney  National  Bank,  07  Ala.  G43,  11  So. 
881  (1802) ;  Alston  v.  Heartman,  2  Ala.  (iOO ;  Hazard  v.  Planters  and 
Merchants'  Bank,  2  Ala.  200 ;  Hobbs  r.  Chemical  National  Bank.  07  Ga. 
524,25  S.  E.  348  (1805);  First  National  Bank  v.  Johnson,  133  Mich. 
700!  05  N.  W.  975,  103  Am.  St.  Rep.  4(58  (1903) ;  Fades  v.  Muhlenberg 
Co.  Savings  Bank,  157  Ky.  416,  163  S.  W.  494  (1914). 

A  note  payable  to  "Wes.  Lane,  Cashier  First  National  Bank  of  Leb- 
anon", is  payable  to  the  bank,  and  the  bank  can  maintain  suit  thereon 

389 


§  170  THE   CASHIER 

Contract  in  Cashier's  Name,  Bank  Held 

A  bank  ordered  goods  for  C,  who  was  unable  to  pay  at  the 
time ;  the  cashier  took  C.'s  paper  and  sent  the  vendor  a  certificate 
of  deposit  signed  in  his  own  name  alone,  and  not  as  cashier.  Held, 
that  this  was  in  the  ordinary  course  of  business ;  the  cashier  did 
not  exceed  his  authority  and  the  bank  was  liable.^ 

A  bond  of  a  bank  as  depositary  of  county  funds,  in  which  "  H., 
cashier  of  M.  Bank",  is  named  as  principal,  which  is  signed  "  H., 
cashier  ",  and  in  which  the  bank  is  referred  to  as  the  "  above 
bounden,  the  M.  Bank",  is  the  bond  of  the  bank  as  principal.^ 

§  171.  When  the  Cashier  binds  the  Bank.°  —  We  speak  here 
only  of  obligations  in  the  nature  of  contract. 

(a)  Those  acts  which  constitute  the  ordinary  and  customary 
functions  of  cashiers,  and  which  he  has  inherent  power  to  do,  bind 
the  bank  as  its  own  acts  in  favor  of  any  person  dealing  with  the 
bank  and  having  no  notice  of  any  restriction  upon  the  cashier. 

la  its  own  name  without  indorsement.  Nave  v.  First  National  Bank  of 
Lebanon,  87  Ind.  204  (1882). 

But  a  deed  of  real  estate  to  "  E.  H.  PuUen,  Vice  President  of  the  National 
Bank  of  the  Republic  of  the  city  of  New  York"  is  a  deed  to  E.  H.  Pullen 
in  his  individual  capacity  and  the  power  of  sale  in  the  deed  cannot  be 
exercised  by  the  cashier.  Greenfield  v.  Stout,  122  Ga.  303,  50  S.  E.  Ill 
(1905). 

In  Iowa,  by  statute,  when  an  instrument  is  drawn  or  indorsed  to  a 
person  as  "cashier"  of  a  bank  it  is  deemed  prima  facie  payable  to  the  bank 
and  a  bona  fide  holder  of  a  certificate  of  deposit  made  out  to  L.  Cashier 
and  indorsed  by  S.  as  cashier  may  show  that  S.  was  the  cashier  of  the  bank 
and  so  recover  from  the  bank.  Johnson  v.  Buffalo  Center  Bank,  134 
Iowa  731,  112  N.  W.  1G5  (1907). 

2  Crvstal  Plate  Glass  Co.  v.  First  National  Bank,  6  Mont.  303,  12  Pac. 
678. 

Whether  evidence  can  be  introduced  to  show  a  usage  to  transfer  to  the 
cashier  with  the  design  that  the  transfer  shall  operate  in  fact  as  a  transfer 
for  the  use  of  the  bank,  must  be  regarded  as  still  unsettled.  If  intro- 
duced, it  would  be  for  the  purpose  not  of  varjdng  the  contract,  but  of 
interpreting  it :  not  of  controlling  any  rule  of  law,  but  of  explaining  the 
intention  of  the  parties.  On  this  ground  it  has  been  held  admissible  in 
Connecticut,  but  by  a  divided  court.  Stamford  Bank  v.  Ferris,  17  Conn. 
259.  In  Massachusetts  a  contrary  opinion  was  intimated,  though  not 
directly  laid  down.  New  England  Mar.  Ins.  Co.  v.  Chandler,  16  Mass. 
275,  278  (per  Parker,  C.  J.). 

3  Board  of  Countv  Commissioners  v.  Manufacturers'  Bank,  69  Minn. 
421,  72  N.  W.  701  (1897). 

"  §  171.  There  is  no  reason  which  is  founded  on  principle  that  can  be 
given  for  not  applying  the  same  rule  of  agency  to  a  cashier  as  to  other 
persons  occiipving  fiduciarv  relations.  Campbell  v.  Manufacturers'  Na- 
tional Bank,  67  N.  J.  L.  301,  51  Atl.  497,  91  Am.  St.  Rep.  438  (1902). 

390 


WHEN   THE    CASHIER    BINDS   THE    BANK  §  1~1 

(6)  Acts  beyond  this  line  of  inherent  power  are  the  acts  of  tlie 
bank  only  by  reason  of  express  authority  given  by  the  organic 
law,  the  stockholders,  or  the  board  of  directors,  or  by  reason  of  the 
conduct  uf  the  bank  or  its  management,  in  allowing  the  cashier  to 
continue  an  open  course  of  conduct  without  objection,  or  recei\ing 
the  benefits  of  his  act  with  knowledge  of  the  facts,  or  otherwise 
ratifying  his  doings. 

This  distinction  should  be  kept  ever  in  mind  ;  it  is  not  the  act 
of  the  agent  that  can  give  him  authority,  it  must  arise  by  actual 
gift  of  his  principal,  or  the  conduct  of  the  principal  must  be  such 
as  to  base  a  proper  inference,  such  as  a  prudent  business  man 
would  draw,  that  the  agent  acts  with  the  approval  of  the  bank. 

(c)  But  when  upon  this  principle  it  is  decided  that,  as  between 
the  bank  and  the  third  party,  C,  the  act  is  that  of  the  bank,  and 
not  the  cashier's  individual  act,  the  further  question  arises.  Is  the 
bank  bound?  It  does  not  follow,  because  an  act  is  that  of  the 
bank,  that  it  is  necessarily  bound  by  it,  for,  like  an  infant,  a  bank 
is  incompetent  to  do  some  acts,  and  some  contracts  are  utterly 
void,  no  matter  who  makes  them,  as  those  that  are  immoral  or 
against  public  policy. 

If  the  act  is  that  of  the  bank  and  iiitra  vires,  i.e.  such  as  the  bank 
has  power  to  do,  and  is  in  proper  form,  it  is  binding.''" 

O"  A  cashier  has  at  least  prima  facie  authority  to  extend  the  time  of 
payment  of  the  bank's  negotiable  paper,  and  it  is  immaterial  that  he 
spent  the  greater  part  of  his  time  in  another  city,  especially  where  he  kept 
in  communication  with  the  bank  directing  its  most  important  affairs; 
and  an  instruction  that  a  cashier  could  not  release  the  principal  on  a  note 
and  accept  another  in  his  place  was  declared  to  be  erroneous  under  the 
facts  in  evidence.  Citizens'  Bank  v.  Douglass,  178  Mo.  App.  004,  101 
S.  W.  001  (1913).  First  National  Bank  v.  Greenville  Oil  etc.  Co.,  24 
Tex.  Civ.  App.  04.5,  00  S.  W.  828  (1901). 

A  cashier  lias  authority  to  receive  notes  and  make  collections  thereon, 
and  the  bank  is  responsible  when  moneys  so  received  are  stolen  or  em- 
bezzled bv  its  cashier  or  other  officer.  Lemon  v.  Sigourney  Savings  Bank, 
131  Iowa>9,  108  N.  W.  104  (1900). 

A  cashier  is  empowered  to  draw  on  the  bank's  funds  and  if  by  a  false 
check  he  convert  to  his  own  use  money  on  deposit,  the  bank  must  suffer 
the  loss.     First  National  Bank  v.  Peck,  180  Ind.  049,  103  N.  E.  043  (1913). 

If  a  depositor,  who  is  about  to  draw  his  money  from  a  bank  and  deposit 
it  in  a  certain  trust  company,  is  induced  by  the  cashier  to  deposit  it  in 
another  trust  company  and  he  executes  a  check  in  the  form  of  a  receipt 
and  delivers  it  to  the  cashier  with,  instructions  to  deposit  the  amount 
named  ^vith  the  trust  company  suggested,  and  the  cashier  makes  no  re- 
mittance but  uses  the  draft  to  cover  up  his  embezzlement  the  bank  is 
liable  for  the  amount  of  the  check.  Goshorn  v.  People's  National  Bank, 
32  Ind.  App.  428,  69  N.  E.  185  (1902). 

391 


I  171  THE    CASHIER 

But  if  the  transaction,  though  that  of  the  bank  under  the  above 
principles,  is  informal,  or  is  ultra  vires,  i.e.  an  act  beyond  its  charter 
powers  and  their  incidents,  the  bank  may  or  may  not  be  bound. 
See  §  722. 

If  the  act  is  not  that  of  the  bank,  and  is  not  ratified  or  adopted 
by  the  bank,  it  is  not  bound.  For  example,  if  a  loan  is  contracted 
by  the  cashier  in  such  a  manner  that  it  does  not  bind  the  bank,  it 
cannot  be  considered  that  the  mere  circumstance  of  his  turning 
the  money  into  the  mass  of  the  bank  funds,  and  allowing  it  to 
remain  there,  and  to  be  used  as  part  of  the  floating  assets,  will 
suffice  to  render  the  bank  liable  upon  it  as  a  corporate  debt.  The 
fact  and  nature  of  the  transaction  must  in  some  way  be  brought 
sufficiently  home  to  the  official  knowledge  of  the  directors,  so  that 
their  failure  to  repudiate  and  undo  it  must  be  construed  to  amount 
to  an  acceptance  and  ratification  of  it  on  behalf  of  the  corporation.^ 
We  will  now  notice  the  cases  on  these  points. 

Certain  Inherent  Poivers  and  Duties 

(d)  There  are  certain  functions  which  it  is  the  duty  of  a  cashier 
to  perform,  and  certain  acts  which  he  has  the  right  to  do  on  behalf 
of  the  bank,  simply  by  virtue  of  his  induction  into  the  office.  They 
are  inherent  in  it,  and  taken  together  they  constitute  the  com- 
ponent parts  which  go  to  make  it  up.  Others  may  be  added,  but 
these  are  essential.  Publicly  to  call  a  person  by  the  title  of  cashier 
is  to  invest  him  with  the  power,  as  towards  the  public,  of  binding 
the  bank  by  his  action  in  pursuance  or  fulfilment  of  any  and  all 
these  inherent  powers  and  duties.  It  is  in  fact  a  declaration  of  his 
agency.  If  the  bank  nominates  and  holds  out  A.  B.  as  its 
"cashier",  it  in  effect  says  to  the  world  that  A.  B.  is  duly  authorized 
to  transact  on  its  behalf  all  business  which  judicial  decisions  or 
banking  usages  have  rendered  inherent  functions  of  the  office 
designated  by  this  name.  Any  act  done  by  him  within  this  scope 
and  on  behalf  of  the  bank  is  the  act  of  the  bank.^ 

It  would  seem  almost  a  work  of  supererogation  to  make  this 
statement,  but  we  have  been  led  to  do  so  by  noticing  in  the  argu- 
ment made  lately  by  very  eminent  counsel  in  an  important  case, 

1  Ballston  Spa  Bank  v.  Marine  Bank,  IG  Wis.  120. 

If  a  cashier  appropriates  to  his  own  use  a  gratuitous  special  deposit 
in  the  bank  the  bank  is  not  chargeable  with  the  loss.  Sherwood  v.  Home 
Savings  Bank,  131  Iowa  528,  109  N.  W.  9  (1906). 

2  Burnham  v.  Webster,  19  Me.  232. 

392 


WHEN    THE    CASHIER    BINDS    THE    BANK  §  171 

that  where  the  bank  charter  or  the  general  banking  act  under 
which  the  corporation  was  estabhshed  gave  to  the  directors  the 
power  to  define  or  Hmit  or  prescribe  the  powers  and  duties  of  the 
cashier,  their  neglect  so  to  do  left  the  cashier  without  either  powers 
or  duties.  The  position  is  novel,  perhaps  ingenious,  but  certainly 
utterly  untenable,  and  has  since  been  so  held  by  the  court.'  The 
conference  upon  any  person  of  the  name  and  official  position  of 
cashier  carries  with  it,  by  a  necessar}'  and  a  strictly  legal  implication, 
certain  duties  and  certain  powers,  towards  both  the  bank  and  the 
public,  of  the  nature  above  described.  Again  and  again  has  this 
fact  been  recognized  in  judicial  decisions,  equally  where  the  direc- 
tors were  and  where  they  were  not  endowed  by  the  law  originating 
the  corporate  being  with  authority  to  define  or  prescribe  the  powers 
and  duties  of  the  officers ;  equally  where  they  had  and  where  they 
had  not  undertaken  to  exercise  this  authority.  These  are  the 
functions  ordinarily  appurtenant  to  the  oSice  itself.  They  in  no 
case  require  to  have  their  existence  affirmatively  established,  but, 
on  the  other  hand,  demand  strong  negative  testimony  to  contro- 
vert the  legal  presumption  of  their  universal  force.  The  great 
bulk  of  the  cases  which  will  be  cited  in  illustration  of  the  present 
topic  proceed  upon  the  tacit  recognition  of  this  doctrine ;  but 
in  the  foot-note  are  cited  a  few  of  those  wlierein  the  language  more 
distinctly  asserts  it.^  In  the  case  of  The  United  States  v.  The  City 
Bank  of  Columbus,  jMr.  Justice  Wayne  said  that,  "  though  the 
directors  had  power  under  the  act  of  incorporation  to  fix  the  duties 
of  the  cashier,  and  though  whether  they  had  done  so  or  not  did 
not  appear  ",  yet  "  the  acts  of  the  cashier  done  in  the  ordinary 
course  of  the  business  actually  confided  to  svch  an  officer  may 
well  be  deemed  prima  facie  evidence  that  they  fell  within  the  scope 
of  his  duty."  As  a  matter  of  fact,  directors  seem  seldom  to  have 
cared  to  draw  up  regulations  for  the  government  of  their  cashiers, 
and  when  they  have  done  so  their  regulations  have  been  so  general 
in  phraseology,  or  have  so  accurately  followed  the  principles  which 
the  law  itself  lays  down  in  the  absence  of  such  directorial  action, 
that  they  appear  seldom,  if  ever,  to  have  affected  the  decision  in 

3  Merchants'  Bank  v.  State  Bank,  10  Wall.  604,  19  L.  ed.  1008. 

*  Sturges  V.  Bank  of  Cireleville,  11  Ohio  St.  153;  Minor  v.  Mechan- 
ics' Bank  of  Alexandria,  1  Pet.  46,  7  L.  ed.  47  ;  Wild  v.  Bank  of  Passama- 
quoddy,  3  jNIason  .505;  Bank  of  Pennsylvania  r.  Reed,  1  Watts  &  S. 
(Pa.)  101;  Baldw-in  v.  Bank  of  Newbury,  1  Wall.  234,  17  L.  ed.  534; 
United  States  v.  City  Bank  of  Columbus,  21  How.  356,  16  L.  ed.  130 ; 
Badger  v.  Bank  of  Cumberland,  26  Me.  428. 

30.3 


§   171  THE    CASHIER 

any  reported  cause.  That  the  power  given  to  directors  to  define, 
etc.  the  powers  and  duties  of  a  cashier,  does  not  enable  them  to 
deprive  him  of  ordinary  powers  which  by  virtue  either  of  judicial 
decisions  or  of  banking  usages  the  public  are  entitled  to  regard  as 
inherent  in  his  office,  or  at  least  that  their  action  to  this  effect 
would  not  be  binding  as  towards  any  third  party  who  had  not  been 
expressly  notified  of  it,  is  a  principle  which  has  been  discussed  in 
a  general  form  ^  in  Chapter  VIII.,  and  which  needs  no  special 
elucidation  with  respect  to  cashiers  as  a  class,  in  distinction  from 
other  officers. 

If  a  cashier  negotiates  a  loan  for  other  than  banking  purposes, 
any  person  lending  to  him  with  a  knowledge  that  the  loan  is  to  be 
thus  improperly  used  will  not  create  a  valid  obligation  upon  the 
bank.  But  in  the  absence  of  such  actual  knowledge,  the  presump- 
tion of  regularity  will  bind  the  bank  to  a  bona  fide  lender,  however 
wrongful  and  unauthorized  the  conduct  of  the  cashier  in  the  trans- 
action may  in  fact  have  been.  So,  if  special  instructions  and 
authority  are  given  to  a  cashier  for  obtaining  a  loan  or  discount, 
whether  the  same  are  to  govern  him  generally  in  all  such  dealings, 
or  only  in  a  particular  instance,  all  persons  having  notice  of  this 
special  delegation  of  power  will  hold  the  bank  only  upon  contracts 
made  within  its  limits.  So  far  as  they  are  concerned,  it  is  a  valid 
restriction  of  the  cashier's  power  to  deal  with  them.  But  contracts 
with  persons  without  notice  will  bind  the  bank,  if  within  the  ordi- 
nary business  of  borrowing.  It  is  not  uncommon  to  empower  the 
president  and  cashier  to  effect  a  loan  or  discount ;  in  such  case 
they  must  agree  upon  the  contract  jointly,  and  the  cashier  alone 
could  bind  the  bank  only  to  persons  who  believed  him  to  be  acting 
in  pursuance  of  his  general  authority,  and  were  ignorant  of  this 
special  delegation  to  the  two  jointly. 

(e)  The  cashier  is  simply  an  agent  of  the  bank,  and  he  is  bound 
to  act  in  good  faith  in  the  transaction  of  the  business  of  the  bank ; 
and  those  who  deal  with  him  are  affected  by  any  bad  faith  or 
want  of  authority  of  which  they  have  knowledge.  If  the  transac- 
tion itself  is  not  in  the  usual  course  of  business,  or  is  one  which 
requires  specific  authority  on  the  part  of  the  cashier  to  perform 
it,  the  person  dealing  with  him  will  be  required  to  show  that  he  in 
fact  had  authority  to  do  the  act,  otherwise  it  will  be  held  to  have 

5  Also  see,  especially,  Bank  of  Vergennes  v.  Warren,  7  Hill  (N.  Y.) 
91;  Commercial  Bank  of  Buffalo  v.  Kortright,  22  Wend.  (N.  Y.)  348; 
Sturges  V.  Bank  of  Circleville,  11  Ohio  St.  153. 

304 


WHEN    THE    CASHIER    BINDS    THE    HANK  §   1~1 

been  clone  without  authority.  If  the  cashier  transfers  the  notes 
of  the  hank  to  i)ay  his  j)rivate  debt,  the  transaction  will  be  invalid. 
No  attempted  transfer  by  the  cashier  of  the  bills,  notes,  or  other 
securities  of  the  bank  will  be  valid,  when  it  appears,  either  from 
the  nature  of  the  transaction,  or  the  facts  and  circumstances 
existing  at  the  time  antl  known  to  the  transferee,  that  the  transfer 
was  made  in  prejudice  of  the  rights  and  interests  of  the  bank.*^ 

(/)  A  bona  fide  holder  of  j^apcr  is  not  afl'ectcd  by  fraud  of  the 
cashier.^  But  if  the  cashier's  employment  does  not  comprehend 
the  drawing  or  indorsing  of  checks,  he  cannot  bind  the  bank  by 
his  fraud  in  so  doing.'''" 

An  overdraft  by  an  agent  of  his  principal's  account,  with  the 
knowledge  of  the  cashier  of  the  bank,  is  a  simple  loan  of  money  by 
accommodation,  and  the  authority  of  the  cashier  cannot  be 
questioned  in  a  suit  by  the  bank  to  recover  the  money.^ 

Holding  out  by  Failure  to  Object 

(g)  ^^^lere  for  nearly  a  year  a  cashier  had  under  his  written 
agreement  as  cashier  constantly  pledged  negotiable  securities,  with 
another  bank  for  advances,  his  own  bank  was  bound  by  his  act, 
as  his  previous  conduct  had  been  so  open  and  long  continued  that 
it  must  have  come  to  the  knowledge  of  any  ordinary  vigilant 
directory.^ 

Evidence  of  powers  habitually  exercised   by   a   cashier  with 

» Everett  v.  United  States,  G  Port.  (Ala.)  IGG ;  Barnes  v.  Bank,  19 
N.  Y.  152 ;   Smith  v.  Law^on,  18  W.  Va.  212. 

^  National  Paliquioque  Bank  v.  Bethel  Bank,  36  Conn.  325 ;  Phillips 
I'.  Mercantile  National  Bank,  140  N.  Y.  556,  35  N.  E.  982  ;  First  National 
Bank  v.  Peck,  180  Ind.  649,  103  N.  E.  643  (1913). 

^o  Shipman  v.  Bank,  126  N.  Y.  318,  27  N.  E.  371. 

8  Union,  etc.  v.  Rocky,  2  Col.  248. 

Whatever  might  be  the  rule  of  law  as  to  a  simple  agreement  to  permit 
a  party  to  overdraw  his  account  it  is  competent  for  the  casliier  to  agree 
to  advance  money  to  pay  for  a  car  load  of  horses  under  an  arrangement 
for  securing  the  bank  by  drafts  for  the  proceeds  accompanied  by  a  bill 
of  lading.  Falls  City  State  Bank  v.  Wehrli,  68  Neb.  196,  93  N.  "W.  994 
(1903). 

9  Mercantile  Bank  v.  ^McCarthy,  7  Mo.  App.  318  (1879).  See  Lowndes 
V.  Citv  National  Bank,  82  Conn.  8,  72  Atl.  150,  22  L.  R.  A.  (n.  s.) 
408  (1909). 

When  the  management  of  the  bank  is  left  to  the  president  and  cashier 
they  have  authority  to  make  loans  and  give  credit  to  drawers  of  checks 
when  they  have  no  money  in  the  bank,  and  such  credit  is  binding  upon  the 
bank  and  mav  be  enforced.  Ivimball  v.  Farmers'  etc.  Bank,  50  Wash. 
610,  97  Pac.  748  (1908). 

395 


§171 


THE   CASHIER 


the  knowledge  and  acquiescence  of  the  bank,  defines  his  powers 
as  to  the  pubUc,  if  they  are  such  as  the  directors  have  authority 
to  confer  on  him.^° 

A  bank  for  several  years  permitted  its  cashier  to  cancel  trust 
deeds  given  to  secure  money  loaned,  and  was  thereby  estopped  to 
deny  his  power  to  cancel.^^ 

A  banking  corporation  may  be  represented  by  its  cashier,  where 
its  charter  does  not  otherwise  provide,  in  transactions  outside  of 
his  ordinary  duties,  and  this  without  his  authority  to  do  so  being 
in  writing  or  appearing  upon  the  records  of  the  proceedings  of  the 
directors.  His  authority  may  be  by  parol,  and  collected  from 
circumstances,  or  inferred,  or  implied  from  the  general  manner 
and  settled  course  of  the  business,  which  he  has  been  allowed  to 
conduct  without  interference,  and  from  the  conduct  or  acquies- 
scence  of  the  corporation,  as  represented  by  the  board  of  directors, 
whose  duty  it  is  to  use  ordinary  diligence  in  ascertaining  the  con- 
dition of  its  business,  and  to  exercise  reasonable  control  and  super- 
vision of  its  officer.^^" 

Cashier's  Payment  of  Forged  Paper  Binds  the  Bank 

(h)  If  a  cashier  of  a  bank  should  pay  to  a  bona  fide  holder  a 
forged  check  drawn  upon  the  bank,  the  payment  could  not  be 
recalled,  but  would  be  obligatory ;  for  it  is  within  the  duty  of  the 
cashier  to  answer  drafts  drawn  on  the  bank  ;  and  the  bank  intrusts 

10  Merchants'  Bank  v.  State  Bank,  10  Wall.  604,  19  L.  ed.  1008 ;  Pen- 
saeola  etc.  Bank  v.  National  Bank,  59  Fla.  347,  52  So.  294  (1910) ;  Spong- 
berg  V.  First  National  Bank,  18  Idaho  524,  110  Pac.  716,  1912A  Ann. 
Cas.  95,  n. 

A  cashier  who  is  allowed  to  discount  paper  and  lend  the  money  of 
the  bank  has  authority  to  cancel  and  surrender  a  bond  and  release  its 
sureties  and  accept  thereon  another  bond  in  a  larger  amount.  German- 
American  Bank  V.  SehAvinger,  178  N.  Y.  569,  70  N.  E.  1099  (1904),  affirm- 
ing 75  App.  Div.  393  (1902),  78  N.  Y.  S.  38. 

11  Martin  v.  Webb,  110  U.  S.  7,  28  L.  ed.  49,  3  Sup.  Ct.  428  (1883) ; 
Spongberg  v.  First  National  Bank,  18  Idaho  524,  110  Pac.  716,  1912A 
Ann.  Cas.  95,  n. 

When  a  cashier  receives  the  payment  of  a  note  it  is  presumed,  in  the 
absence  of  proof  to  the  contrary,  that  he  passes  it  along  to  the  credit  of 
the  bank  and  this  estops  the  bank  from  making  the  defence  of  want  of 
authority.  First  National  Bank  v.  Pickens,  7  Ind.  T.  725,  104  S.  W. 
947  (1907).  ^     . 

ii^Carpy  v.  DowdeU,  115  Cal.  677,  47  Pac.  695;    Wing  v.   Savings 
Bank,  103  Mich.  565,  61  N.  W.  1009;    La  Banque  D'Espargues  v.  La 
Banque,  2  Montreal  L.  R.  (Q.  B.)  64;   Williams  v.  Dorrier,  135  Pa.  St. 
445,  19  Atl.  1024. 
396 


WHEN    THE    CASHIER    BINDS    THE    UANK  §   171 

him  with  an  implied  authority  to  decide  upon  the  genuineness  of 
the  handwriting  of  the  drawer  of  the  check  when  presented  for 
payment.^-    See  contra,  §  461. 

The  same  rule  will  apply  to  the  payment  of  forged  bank  Ijills  of 
a  bank  by  the  cashier,  upon  presentment  by  a  buna  fide  holder. 
The  payment  cannot  be  recalled,  for  the  cashier  is  bound  to  know 
the  genuine  paper  of  the  bank.^^     But  see  §  033. 

A  contract  made  by  a  cashier  to  honor  checks  for  a  car  load  of 
horses,  the  drawee  bank  to  be  secured  by  a  draft  and  bill  of  lading 
of  the  shipment,  is  valid  ;  and  if  the  bank  has  sufficient  funds  it  is 
liable  for  the  payment  of  such  checks  even  though  the  drawers 
were  indebted  to  the  bank  on  other  transactions.^^" 

(0  Implications  and  Inferences  arising  from  Acts  of  the  Cashier. 
—  The  bank  is  bound  by  all  the  legal  implications  or  influences 
which  must,  as  matter  of  law,  grow  out  of  those  acts  of  the  cashier 
which  he  does  in  the  prosecution  of  any  of  the  functions  included 
in  his  agency.  Indirectly  these  acts  often  closely  resemble  declara- 
tions or  admissions.  But  they  may  bind  where  a  declaration  or 
admission  might  not  bind,  as  has  been  already  seen  in  the  cases  of 
forged  paper  used  in  illustration  above.  He  has  power  to  collect  ^^^ 
and  to  give  receipts  for  the  sums  collected,  in  behalf  of  the  bank ; 
he  has  power  to  make,  or  to  direct  his  subordinates  to  make,  the 
entries  in  the  books  of  the  bank.  These  receipts  and  entries  are 
admissible  in  evidence  as  the  acts  of  the  bank  itself,  and  if  the 
mere  making  them  or  the  peculiar  form  of  expression  used  in  them, 
have  any  technical  legal  force  or  efi'ect,  the  bank  will  be  concluded 
thereby  as  by  the  necessary  legal  sequence  of  its  own  doings.  In 
Badger  i'.  The  Bank  of  Cumberland,^^  a  suit  was  brought  to  hold 
the  defendant  corporation  as  owner  of  a  one-third  interest  in  a 
vessel.  It  appeared  that  a  debtor  of  the  bank  originally  owning 
this  one-third  had  bonded  it  to  the  bank  to  secure  his  debt ;  that 
afterward  he  had  stated  himself  unable  to  pay,  and  had  abandoned 
his  interest  to  the  bank;  that  thereafter  an  account  had  been 
settled  between  the  owner  of  the  remaining  two-thirds,  being  also 
the  ship's  husband,  and  the  cashier  of  the  bank ;  that  the  cashier, 

«  Lew  V.  Bank  of  United  States,  1  Binn.  (Pa.)  27;    Bank  of  United 
States  V.  Bank  of  Cioorgia,  10  Wheat.  333,  G  L.  ed.  335. 

13  Bank  of  United  States  v.  Bank  of  Georgia,  10  Wheat.  333,  G  L.  ed. 
335;   Salem  Bank  v.  Gloucester  Bank,  17  Mass.  1,  28. 

13°  Falls  Citv  State  Bank  v.  Wehrli,  G8  Neb.  75,  93  N.  W.  994  (1903). 

13"  ISIcLennan  v.  Bank,  87  Cal.  5G9,  25  Pac.  760. 

1^  Badger  v.  Bank  of  Cumberland,  26  Me.  428. 

397 


§  171  THE    CASHIER 

acting  in  his  official  capacity,  had  thereupon  receipted  for  what 
appeared  by  the  account  to  be  the  bank's  proportion  of  the  net 
earnings ;  that  the  president  had  requested  the  rendering  of  the 
account,  and  had  insured  one-third  of  the  vessel's  value  for  the 
benefit  of  the  bank.  It  was  held  that  the  cashier's  receipt  and 
his  entry  of  the  transaction  on  the  books  were  acts  within  the 
scope  of  his  agency,  and  that  their  legal  effect  and  significance,  as 
proof  of  part  ownership  by  the  bank,  could  not  be  controverted  by 
the  bank.  Also,  that  the  items  of  his  entries  in  the  books  were 
conclusive  proof  of  an  adoption  and  recognition  by  the  corpora- 
tion of  the  president's  acts  in  effecting  the  insurance. 

(j)  Cashier's  Ultra  Vires  Acts.  —  We  may  briefly  glance  at  a 
matter  which  will  be  fully  elucidated  hereafter.  The  general  rule 
in  regard  to  ultra  vires  acts  is  substantially  that  executory  ultra 
vires  contracts  will  not  be  enforced ;  but  when  acts  of  the  cashier 
are  acts  of  the  bank  under  the  principles  of  this  section,  and  they 
raise  liability  in  tort,  this  is  not  to  be  escaped  by  the  plea  of  ultra 
vires,  nor  will  it  avail  in  case  of  an  executed  contract  where  the 
legislature  has  clearly  indicated  an  intent  that  it  should  not  be  void, 
nor  in  fa\'or  of  a  party  who  has  received  and  retained  benefit 
under  it,  nor  against  a  party  who  has  acquired  just  rights  by  expen- 
diture or  parting  with  value  on  account  of  the  transaction  not 
knowing  it  was  ultj-a  vires  (that  fact  being  not  ascertainable  as  mat- 
ter of  law  on  the  facts  actually  or  constructively  known  to  such 
person),  keeping  in  mind,  of  course,  that  contracts  expressly  void, 
or  immoral,  or  against  public  policy,  will  not  be  enforced,  for  the 
maxims  in  pari  and  ex  turpi  causa  are  supreme. 

In  L'Herbette  v.  Pittsfield  National  Bank  ^^"  the  cashier  made 
invalid  agreements  at  the  time  of  receiving  deposits,  for  ex- 
ample, to  invest  the  money  for  the  depositors  in  stocks  and 
bonds,  paying  interest  on  the  money  in  the  meantime.  No  invest- 
ment of  the  money  being  in  fact  made,  the  bank  was  not  entitled 
to  retain  the  funds  nor  was  the  depositor  debarred  from  recovering 
them.  There  was  nothing  criminal  or  immoral  about  such  an 
agreement,  and  the  fact  of  its  being  ultra  vires  or  unauthorized 
did  not  prevent  recovery  of  the  money. 

In  a  Pennsylvania  case  ^^  the  bank  received  the  benefit,  namely, 
a  deposit  of  S3000  on  an  ultra  vires  contract,  and  it  was  held  that 
in  a  suit  to  recover  the  deposit  ultra  vires  was  no  answer.     The 

i^«  162  Mass.  137,  38  N.  W.  368. 

"  Hagerstown  Bank  ?;.  Loudon  Savings  Fund  Soc,  3  Grant  (Pa.)  135. 
398 


LIABILITY    OF   THE    CASHIER    TO    THE    BANK  §   172 

court  said  that  acts  done  by  the  cashier  in  pursuance  of  tlie  orders 
of  the  directors,  as  in  this  case,  might  bind  the  bank,  though  in 
contravention  of  the  charter,  or  of  the  provisions  of  the  organic 
law,  and  are  therefore  acts  which  in  fact  the  directors  have  no 
power  to  authorize. 

The  case  of  The  Salem  Bank  v.  The  Gloucester  Bank  ^^  asserts 
generally  that  the  bank  is  not  liable  for  the  act  of  the  cashier  done 
under  the  authority  of  the  directors,  if  they  have  no  power  to  confer 
that  authority.  The  general  rule  must  be  admitted  to  be  thus. 
But  in  this  [Massachusetts  case  no  strong  equity  tempted  the  court 
to  consider  the  possibility  of  admitting  a  limited  exception  to  the 
broad  principle. 

§  172.  Liability  of  the  Cashier  to  the  Bank.  —  The  cashier  con- 
tracts for  reasonal)!e  skill  and  care,°  and  for  integrity  and  obedience 
to  the  law,  and  the  proper,  i.e.  lawful,  directions  of  his  superiors. 
He  is  responsible  for  all  loss  resulting  directly  from  his  failure  in 
any  respect  in  his  official  duty,°"  and  it  will  not  avail  him  that  he 
acted  by  order  of  the  directors,  if  the  facts  of  which  he  had  notice 
made  such  order  wrongful  as  matter  of  law."''  If  so  far  as  any 
facts  he  knew  or  had  constructive  notice  of  could  throw  light  on 
the  matter  the  order  was  lawful,  the  bank  cannot  hold  him,  for 
it  is  not  his  business  to  supervise  the  board,  and  it  is  his  business  to 
obey  them.  Such  is  the  law  of  this  topic,  as  clearly  appears  from 
the  following  cases. 

Responsibility  for  Subordinates 

(a)  The  cashier  is,  of  course,  liable  to  the  bank  in  an  action  of 
damages,  to  make  good  any  and  all  injury  arising  from  his  fraudu- 
lent or  wrongful  acts  of  an  official  nature,  from  his  unauthorized 

>»  17  Mass.  1. 

0  §  172.  Pryse  v.  Farmers'  Bank,  33  S.  W.  532  (1895) ;  Vance  v. 
Mottley,  92  Tenn.  310,  21  S.  W.  .593  (1893) ;  Wallace  v.  Bank,  89  Tenn. 
630,  15  S.  W.  448;  Exchange  Bank  v.  Gardner,  104  Iowa  170,  73  N.  W. 
591  (1897). 

"^  He  is  liable  for  negligence  in  paying  out  money  on  unauthorized 
checks.  Daughertv  v.  Poundstone,  120  Mo.  App.  300,  90  S.  W.  728 
(190')).  See  First  National  Bank  r.  Peck,  180  Ind.  049,  103  N.  E.  043 
(1913) ;  and  for  allowing  overdrafts  without  the  consent  of  the  board  of 
directors  or  advisory  committee.  Western  Bank  v.  Coldewey,  120  Ky. 
770,  83S.  W.  ()29  (1905). 

<""  Acquiescence  by  the  directors  in  the  conduct  of  the  cashier  will  ex- 
empt him  from  failure  to  oliserve  the  by-laws  of  the  bank  in  respect  to 
an  overdraft.  Wynn  v.  Tallapoosa  County  Bank,  108  Ala.  409,  53  So. 
228  (1910). 

399 


§172 


THE   CASHIER 


assumption  of  power,  or  from  his  breach  of  the  directions  imposed 
upon  him  to  govern  his  conduct  in  his  agency.^  How  far  he  is 
responsible  for  innocent  errors  and  mistakes  has  been  considered 
under  the  topic  of  "  Official  Bonds."  The  tellers,  book-keepers, 
etc.  are  his  subordinates  and  sub-agents.  But  he  is  not  answer- 
able, like  an  ordinary  principal,  for  their  defaults,  whether  inten- 
tional or  innocent,  unless  perhaps  in  those  cases  in  which  it  can  be 
shown  satisfactorily  that  the  default  was  occasioned,  or  oppor- 
tunity or  temptation  thereto  was  furnished,  by  his  improper  or 
negligent  performance  of  his  duty  of  general  superintendence."'' 
This  rule  is  supported  by  the  necessity  of  the  business.  It  is  im- 
possible for  him  to  be  omnipresent  and  omniscient  among  all  his 
servants  in  the  institution,  and  he  is  not  liable  for  his  failure  to 
perform  this  impossibility.  He  is  required  only  to  direct  them 
properly  in  the  performance  of  their  several  functions,  and  to 
exercise  the  most  thorough  supervision  which  is  practicable  in  view 
of  the  amount  of  daily  business  and  the  method  of  conducting  the 
routine  of  daily  affairs.  The  sub-officers  and  their  respective 
provinces  are  usually  well  known.  But  if  the  duties  which  are 
ordinarily  done  solely  by  the  cashier  become  too  onerous  to  be 
executed  by  one  man,  any  arrangement  for  a  partial  sub-delegation 
which  circumstances  authorize  the  cashier  in  assuming  to  be  satis- 
factory to  and  ratified  by  the  directors,  will  be  valid,  and  will 
thereafter  save  the  cashier  from  liability  for  frauds  or  errors  com- 
mitted in  the  delegated  department .^  A  cashier  is  not  bound  to 
examine  every  entry  made  by  his  subordinates,  but  must  exercise 

1  Austin  v.  Daniels,  4  Den.  (N.  Y.)  299 ;  Wynn  v.  Tallapoosa  County 
Bank,  168  Ala.  469,  53  So.  228  (1910). 

A  cashier  of  a  bank  who  had  acquired  shares  in  the  institution  trans- 
ferred them  to  his  wife,  and,  being  desirous  of  severing  his  connection 
with  the  bank,  tendered  his  resignation,  and,  as  a  condition  to  the  res- 
ignation, he  and  his  wife  sold  the  bank  stock,  receiving  in  payment  funds 
of  the  bank.  At  the  time  of  the  sale  the  cashier  was  still  in  control  of 
the  assets  of  the  bank  and  he  prepared  the  drafts  and  checks  drawn  on 
its  correspondent,  although  they  were  signed  by  the  vice  president,  it 
appearing  that  the  other  officers  of  the  institution  negotiated  the  sale. 
It  was  held  that,  under  a  statute  prohibiting  banking  corporations  from 
purchasing  their  own  stock  or  using  their  own  funds  for  that  purpose 
the  cashier  was  liable  to  the  creditor  of  the  bank  for  such  funds.  United 
Securities  Co.  v.  Ostenberg,  60  Colo.  249,  152  Pae.  1163  (1915). 

"<=  A  by-law  which  provides  that  a  cashier  shall  be  "responsible  for  all 
moneys,  funds  and  valuables  of  the  bank"  renders  him  liable  for  losses 
resulting  from  mistakes  or  misfeasances  of  his  subordinates.  Rio  State 
Bank  v.  Amondson,  141  Wis.  82,  123  N.  W.  634  (1909). 

2  Bank  of  the  State  v.  Comegys,  12  Ala.  772. 

400 


LIABILITY    OF   THE    CASHIER   TO    THE    BANK  §  172 

such  care  and  supervision  as  a  man  of  ordinary  prudence  would  in 
his  own  afl'airs.^  If  he  employs  an  assistant  without  authority 
or  necessity,  the  cashier  is  liable  for  money  of  the  bank  fraudulently 
embezzled  by  such  assistant  while  thus  employed."'''' 

Besides  the  right  to  a  suit  in  damages  which  grows  out  of  a 
cashier's  malversation  in  office,  specific  statutory  penalties  are 
often  affixed  to  specific  acts  of  wrongdoing.  Whether  the  bank 
by  suing  to  enforce  the  penalty  deprives  itself  of  the  right  also  to 
sue  in  damages,  must  be  decided  by  a  consideration  of  the  nature 
of  the  penalty.  It  is  a  fundamental  truth  that  the  bank  has  a 
right  to  be  reimbursed  in  money  for  all  its  losses  directly  caused  by 
the  wrongful  conduct  of  its  agent.  If  the  provisions  establishing 
the  penalty  make  any  satisfactory  arrangement  for  this  reim})urse- 
ment,  then  the  proceeding  for  the  penalty  must  be  taken  as  clearly 
intended  to  supersede  the  proceeding  for  damages.  But  if  it  is 
not  so  provided  in  the  statute,  it  must  be  assumed  that  it  was  in- 
tended that  the  two  actions  might  be  prosecuted  independently 
of  each  other.  The  awarding  of  the  suit  for  the  penalty  is  akin 
to  authorizing  the  recovery  of  vindictive  damages,  in  addition  to 
the  simple  damages  which  may  still  be  demanded  in  the  other 
suit.  The  only  decision  of  interest  occurring  under  penal  statutory 
provisions  is  one  which  declared  that  a  penalty  set  upon  the 
cashier's  conversion  of  any  "  money,  bank-bill,  or  note  "  could  not 
be  applied  to  his  conversion  either  of  promissory  notes,  not  being 
bank-notes  ordinarily  so  called  and  intended  for  circulation  as 
currency,  or  of  any  other  species  of  commercial  paper.'* 

Directors'  Order  Will  not  Excuse  an  Illegal  Act 

(b)  Where  the  directors  authorize  the  act  which  has  caused  loss, 
if  there  is  any  intrinsic  illegality  or  impropriety  in  the  act  itself, 
the  cashier  cannot  plead  either  the  formal  vote,  the  ratification,  or 
the  connivance  of  the  government  of  the  bank.  The  directors 
can  by  no  possibility  authorize  him  to  commit  a  fraud,  to  misapply 
funds  (jf  the  bank,  to  subject  them  to  improper  risks,  to  make 
private  profits  by  the  use  of  them.  He  can  by  no  possibility  believe 
that  the  directors  can  thus  authorize  him.  The  question  is  not 
who  is  to  reap  the  fruits  of  the  malfeasance.     The  cashier  is 

« Batchelor  v.  Planters'  National  Bank,  78  Ky.  435. 

^  Vance  v.  Mottloy,  92  Tenn.  310,  21  S.  W.  593  (1893).     See  §  174. 

^  State  V.  Stimson,  4  Zabr.  (N.  J.)  9. 

VOL.  1  —  26  401 


§172 


THE    CASHIER 


responsible  for  obeying  an  order  which  he  knows  to  be  illegal,^"  and 
to  be  given  for  an  immoral  purpose,  equally  whether  he  is  or  is  not 
to  participate  in  the  illicit  gains.  The  empty  semblance  of  obedi- 
ence to  superiors  cannot  take  away  the  genuine  character  of  con- 
nivance in  a  wrongful  proceeding,  and  would  be  "  void  to  protect 
the  cashier  in  his  wrongful  compliance."  ^  In  the  cited  case  it 
was  held  that  the  cashier  could  not  be  protected  from  liability  to 
reimburse  a  loss  arising  from  his  having  allowed  a  customer  to 
overdraw,  by  showing  that  the  directors  had  been  wont  to  coun- 
tenance him  in  a  custom  to  allow  good  depositors  to  overdraw 
without  taking  security  from  them.  For  here,  it  was  said,  the 
act  was  intrinsically  wrongful.  It  was  a  dishonest  use  of  the  cor- 
porators' funds.  Being  thus  in  itself  inexcusable,  it  could  not  be 
excused  by  a  mere  show  of  authority. 

(c)  An  action  founded  on  the  negligence  of  the  cashier  in  the 
performance  of  his  duty  does  not  survive  his  death  and  is  not 
provable  against  his  estate.® 

§  173.  Cashier  as  a  Trustee.  —  It  has  never  been  held  that  the 
position  of  cashier  was  precisely  that  of  a  legal  trustee."  Yet  the 
qualities  of  a  trust  can  never  be  wholly  wanting  where  an  agent  has 
committed  to  him  the  care  and  managem.ent  of  the  property  of 
other  persons  for  certain  definite  purposes.  To  say  that  he  cannot 
either  directly  or  indirectly  use  his  influence,  or  any  of  his  powers, 
to  secure  advantages  to  himself,  is  only  to  assert  what  has  never 
been  called  in  question  ;  and  it  makes  no  difference  that  his  conduct 
was  not,  or  was  not  intended  to  be,  hurtful  to  the  bank.  If  he 
wishes  any  species  of  accommodation  from  the  bank,  even  though 

^»  But  a  cashier  who  is  not  charged  -^ivath  the  responsibility  of  making- 
loans  or  selecting  securities  is  not  guilty  of  negligence  or  of  any  violatiou 
of  Ms  duties  to  the  bank  or  its  stockholders,  by  entering,  under  the  direc- 
tion of  the  manager  of  the  bank,  to  the  credit  of  a  known  financially  un- 
sound corporation  a  loan  on  a  note  indorsed  by  a  solvent  firm,  and  paying 
out  the  same  on  the  check  of  said  corporation.  Warren  v.  Robison,  25 
Utah  205,  70  Pac.  989  (1902). 

Nor  is  a  cashier  who  on  purchasing  for  liimself  property  from  a  debtor 
of  the  bank  agrees  that  the  price  shall  be  applied  in  a  certain  manner  on 
the  indebtedness  to  the  bank  individually  liable  for  a  breach  thereof,  since 
he  has  acted  in  his  official  capacity  in  making  the  agreement.  Pease  v. 
Francis,  25  R.  I.  226,  55  Atl.  6S6  (190.3). 

=  Minor  v.  Mechanics'  Bank  of  Alexandria,  1  Pet.  46,  7  L.  ed.  47  ; 
Austin  V.  Daniels,  4  Den.  (N.  Y.)  299. 

«  Brandon  Bank  v.  Brigg's  Estate,  70  Vt.  599,  41  Atl.  586  (1898). 

0  §  173.     A  cashier  is  not  a  trustee  in  the  strict  sense  of  the  word, 
though  he  is  a  quasi-trustee.     Wynn  v.  Tallapoosa  County  Bank,  168 
Ala.  469,  53  So.  228  (1910). 
402 


CASHIER   AS   A    TRUSTEE  §   173 

he  might  have  power  to  grant  the  same  to  any  other  person,  he 
will  not  be  safe  in  granting  it  to  himself,  without  express  permission 
from  the  board  of  directors.  The  familiar  rule  of  agency,  that  one 
shall  not  be  agent  for  any  other  party  in  a  contract  in  which  he  is 
himself  interested,  or  aforiiuri  in  which  he  is  a  principal  on  the  other 
side,  suffices  to  prohibit  this.""  But  further  than  this,  iji  his  owii 
dealings  with  the  bank  he  is  held,  like  a  trustee,  to  exercLse  a  much 
greater  degree  of  scrupulosity  and  thoroughness  of  regard  for  the 
interests  of  the  bank  than  in  the  conduct  of  like  dealings  had  by 
other  people  with  it.  Thus,  if  he  has  a  loan  from  it  and  gives  to  it 
his  promissory  note  for  the  amount,  if  he  does  not  i)ay  the  note 
promptly  upon  its  maturity,  it  will  not  be  enough  that  he  treats  it 
precisely  in  the  same  manner  in  which  he  is  wont  to  treat  other 
unpaid  notes  belonging  to  the  bank.  He  has  an  exiiraordijiary 
duty  to  perform  in  regard  to  it,  and  must  bring  the  facts  of  its 
being  overdue  and  unpaid  distinctly  before  the  directors  hi  their 
official  capacity.  If  the  period  of  the  Statute  of  Lunitations  has 
elapsed  since  the  date  of  the  note,  he  will  not  be  allowed  to  take 
advantage  of  it  simply  because  he  has  left  the  note  in  the  bundle 
of  unpaid  notes,  which  from  time  to  time  Avas  examined  by  the 
directors  for  the  purpose  of  putting  in  suit  such  of  the  notes  con- 
tained in  it  as  they  might  see  fit.  The  statute  will  begin  to  run 
only  from  that  date  upon  which  the  cashier  can  establish  by  affirma- 
tive proof  his  express  notification  of  the  whole  matter  to  the  direc- 
tors.^ 

Property  Bought  with  Stolen   Funds 

(a)  But  if  the  cashier  embezzles  funds  of  the  bank  and  invests 
them,  a  court  of  chancery  has  no  power  to  fasten  a  trust  upon  the 
investment,  and  to  declare  the  cashier  to  be  a  trustee,  holding  what 
he  has  purchased  in  trust  for  the  bank.  The  mere  fact  that  the 
cashier  obtained  the  means  of  purchasing  by  a  theft  from  the 
corporate  funds,  provided  that  he  actually  made  the  purchase  m 
his  own  name  and  on  his  own  account,  does  not  create  such  a  case 
of  implied  or  resulting  trust  as  to  give  jurisdiction  to  a  court  of 
equity  for  the  purpose  of  taking  possession  of  the  purchased  prop- 

""  A  cashior  cannot,  without  special  aiitliority,  l)in(l  the  liank  by  dis- 
counting: his  own  notes.  Bank  of  Monticello  r.  Doolv,  113  Wis.  590,  89 
N.  W.  490  (1902). 

1  HarrisburK  Bank  v.  Forster,  8  Watts  (Pa.)  12.  See  also  Conyngbam's 
Appeal,  57  Pa.  St.  474. 

403 


§  173  THE    CASHIER 

erty  and  ordering  that  indemnification  be  made  from  it  to  the 
bank.2 

But  in  Tecumseh  National  Bank  v.  Russell  ^^  the  above  state- 
ment is  disputed,  and  the  court  holds  that  where  a  cashier  un- 
lawfully used  the  funds  for  the  purchase  of  stock  in  another  bank, 
in  his  own  name,  a  court  of  equity  will  charge  the  stock  with  a 
trust  in  favor  of  the  bank  owning  the  funds. 

When  the  cashier  paid  for  bonds  purchased  from  the  bank 
with  his  personal  check  and  credited  his  account  with  the  amount 
thereof  the  funds  used  in  paying  the  checks  were  not  stolen,  and 
could  not  be  recovered  by  the  bank  even  though  the  cashier  sub- 
sequently misappropriated  the  bonds.^* 

Equity  will  Compel  Cashier  to  Account 

(h)  The  relation  of  trust  between  the  bank  and  cashier  gives 
equity  jurisdiction  to  compel  an  account  for  money  misappro- 
priated or  other  breach  of  trust.^ 

In  the  second  case  quoted,  it  was  held  that  the  failure  of  the 
managers  to  repudiate  the  bond  and  mortgage  (given  by  one 
who  was  treasurer  and  one  of  the  managers  of  a  savings  bank  as 
security,  the  land  not  being  worth  double  the  mortgage  as  required 
by  the  bank's  charter)  for  six  years  was  no  defence,  whether 
the  breach  of  duty  was  known  or  not  to  the  other  managers.  The 
fault  of  other  officers  could  not  take  away  the  remedy  due  the 
stockholders  against  this  one. 

Profits  derived  from  the  sale  of  lands  by  a  cashier,  in  his  capac- 
ity as  such  and  while  in  discharge  of  his  duties,  belong  to  the  bank.^ 

§  174.  The  Cashier's  Subordinates.  —  Of  course,  even  in  a 
small  corporation,  it  will  be  impossible  for  the  cashier  personally 
to  do  all  the  business  included  in  these  general  functions.  He 
must  have  his  subordinates,  whose  offices  will  be  offshoots  of  his 
own.  "  They  are  under  his  direction,  and  are,  as  it  were,  the  arms 
by  which  designated  portions  of  his  various  functions  are  per- 
formed." 1     But  he  will  not  be  liable  for  the  default  of  any  of  these 

2Paseoag  Bank  v.  Hunt,  3  Edw.  Ch.  (N.  Y.)  583. 
2«  50  Neb.  277,  69  N.  W.  763  (1897). 

»  First  National  Bank  v.  Hudson,  166  App.  Div.  51  (1915),  151  N.  Y.  S. 
595. 

3  Merchants'  Bank  of  Charleston  v.  Jeffries,  21  W.  Va.  504  (1883) ; 
Williams  p.  Riley,  34  N.  .J.  Eq.  398  (1881). 

4  Mt.  Vernon  Bank  /;.  Porter,  148  Mo.  176,  49  S.  W.  982  (1898). 

1  §  174.     Merchants'  Bank  v.  State  Bank,  10  Wall.  604,  19  L.  ed.  1008. 

404 


THE  cashier's  subordinates  §  174 

subordinates,  unless  his  own  laches  or  collusion  has  caused  or 
aided  it,  or  unless  he  himself  has  employed  them  without  authority 
or  necessity.'"  The  paying  and  receiving  tellers  are  in  fact  only 
officers  detailed  to  take  charge,  each  of  a  special  duty,  falling 
within  the  general  range  of  the  cashier's  position.^  A  paying 
teller  can  only  pay  out  money,  and  a  receiving  teller  can  only 
receive  it,  on  behalf  of  the  bank.  But  though  there  be  incum- 
bents acting  in  each  of  these  respective  offices,  there  is  judicial 
authority  for  saying  that  the  cashier,  by  his  general  and  higher 
power,  may  at  any  time  make  or  receive  a  pajinent  on  behalf  of 
the  bank.  Perhaps  on  any  particular  occasion  his  doing  so  might 
be  such  a  foolish  interference  in  a  business  of  which  he  did  not 
know  all  the  details  from  hour  to  hour,  that  he  could  be  held 
liable  to  the  bank  for  negligence  or  an  improper  performance, 
if  he  should  pay  out  money  when  he  ought  not.  But  this  would 
be  only  a  question  of  liability  arising  wholly  between  the  principal 
and  the  agent.  The  act  itself  would  be  within  the  scope  of  a  cash- 
ier's authority,  and  would  bind  the  bank  in  favor  of  any  innocent 
third  party .^  This  does  not  necessarily  conflict  with  the  rule 
that,  if  the  bank  nominates  a  certain  person  to  receive  money, 
it  will  be  bound  only  by  payments  made  to  him.  For,  though 
the  bank  may  nominate  a  receiving  teller,  yet  the  cashier  has 
a  co-ordinate  power  with  him  in  this  respect  by  virtue  of  the 
general  scope  of  his  agency.  The  bank  simply  has  two  officers 
competent  to  receive,  instead  of  only  one.  But,  though  the 
cited  case  seems  to  go  the  length  of  sustaining  this  doctrine,  the 
opinion  embodying  the  views  of  the  court  is  far  from  carrying 
perfect  conviction  with  it.  Practically,  tlie  confusion  incident 
to  conducting  business  in  accordance  with  the  rule  would  breed 
endless  mischief.  As  matter  of  strict  law,  it  is  certaiidy  fair  to 
argue  that  the  especial  action  of  the  bank  in  giving  to  another 
the  charge  of  a  function  w-hich  other  wise  would  belong  to  the 
cashier,  is  equivalent  to  a  public  taking  away  of  that  function 
altogether  from  the  cashier.  Substantially  it  is  exprcftsio  iiniiis, 
exdusio  alterius.  The  teller  is  the  cashier's  subordinate,  and 
must  take  orders  from  him.  But  the  precise  act  of  receiving  or 
paying  cash  over  the  counter  may  be  regarded   as  exclusively 

1"  Vance  v.  Mottley,  92  Tenn.  310,  21  S.  W.  593  (1893). 

2  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  16  N.  Y. 
125. 

3  State  Bank  v.  Kain,  1  Breese  (111.)  45. 

405 


I  174  THE    CASHIER 

within  the  teller's  province  by  virtue  of  the  supreme  order  of 
the  board  of  directors,  with  which  even  the  cashier  cannot 
interfere. 

(a)  Teller.  —  The  office  of  teller  is  a  narrow  one,  strictly  limited 
to  the  specific  function  of  receiving  or  paying  out  funds. ^"  If  there 
be  two  tellers,  one  delegated  to  receive,  the  other  delegated  to 
pay  out  moneys,  neither  can  properly  discharge  the  duty  of  the 
other.  A  person  wishing  to  make  a  deposit  is  bound  to  make 
it  with  the  receiving  teller.  If  he  hands  the-  money  to  the  paying 
teller,  he  does  not  thereby  accomplish  his  deposit,  but  only  makes 
that  teller  his  own  agent  to  transfer  the  money  to  the  receiving 
teller  or  to  the  bank ;  and  the  bank  will  be  liable  for  the  amount 
only  if  the  paying  teller  fulfils  this  undertaking,  and  pays  in  the 
money  to  the  proper  officer  or  to  the  funds  of  the  bank.^ 

§  175.  Temporary  Substitute.  —  A  clerk  who  in  the  temporary 
absence  of  the  cashier  is  charged  with  the  performance  of  the 
duties  of  that  office,  does  not  succeed  to  the  cashier's  full  powers, 
unless  by  virtue  of  a  special  vote  and  instructions  from  the  board 
of  directors.  Otherwise  the  cashier  can  clothe  him  with  no  greater 
power  than  simply  such  as  is  necessary  for  carrying  on  the  usual 
and  ordinary  business  of  the  bank,  such  as  the  pa;yTnent  of  checks, 
the  receipt  of  payment  upon  notes  held  by  the  bank,  and  the  de- 
livery up  of  the  paid  notes.  But  the  delegate  has  no  authority 
to  transfer  or  pass  title  in  any  paper  of  the  bank.  Paper  held  by 
the  bank  in  its  own  right,  or  for  collection  for  other  persons,  and 
payable  elsewhere,  he  may  transmit  to  the  agents  of  the  bank  for 
collection ;  and  if  it  requires  indorsement  as  a  preliminary  to 
collection,  he  may  indorse,  but  only  in  such  limited  form  as  is 
strictly  indispensable  for  the  enabling  the  collection  to  be  made, 
and  not  so  as  to  vest  any  other  or  higher  title  in  the  indorsee. 
Where  he  so  sends  forward  notes  for  collection,  whether  bearing 
his  indorsement  on  behalf  of  the  bank  or  not,  the  agents  receiving 

^  A  teller  has  authority  to  discount  a  note  for  a  particular  person 
when  it  has  been  his  custom  to  accept  and  discount  notes  for  persons 
doing  business  with  the  bank  and  had  often,  in  the  presence  of  the  cashier, 
and  with  the  knowledge  and  approval  of  the  officers,  accepted  and  dis- 
counted other  notes  for  such  person.  Iowa  National  Bank  v.  Sherman, 
17  S.  D.  .396,  97  N.  W.  12  (1903). 

The  powers  of  a  teller  seem  to  be  limited  to  passing  on  the  genuineness 
of  signatures  of  checks  presented  for  payment  and  in  paying  out  money 
of  the  bank  on  checks,  but  he  has  no  authority  to  certify  them.  Muth 
V.  St.  Louis  Trust  Co.,  94  Mo.  App.  94,  67  S.  W.  978  (1992). 

^  Thatcher  v.  Bank  of  State  of  New  York,  5  Sandf.  (N.  Y.)  121. 

406 


CASUIER    AFTER    THE    EXPIRATION'    OF   THE    FRANdllSF.        §   17C 

them  -will  acquire  no  title  in  them  and  no  hen  of  any  description 
upon  them  for  any  balance  due  from  the  transmitting  bank.^ 

Where  a  statute  allows  the  cashier  to  make  affidavits  of  demand 
on  promissory  notes,  an  actinfz:  cashier  may  make  such  affidavit.^ 

§  17G.  Cashier  after  the  Expiration  of  the  Franchise.  —  \Miere 
by  the  charter  itself  or  act  of  legislature  a  bank  is  continued  in 
existence  as  a  corporation  after  the  lapse  or  surrender  of  its  fran- 
chise, for  a  limited  time  and  for  the  purpose  of  closing  its  afi'airs, 
the  directors  may  legally  appoint  a  cashier  to  act  during  such 
period.  Any  irregularity  attendant  upon  the  choice  or  process 
of  qualification  of  these  directors  will  not  aft'ect  the  validity  of 
the  acts  of  the  cashier  chosen  by  them,  provided  they  are  de  facto 
directors,  assuming  to  be  such  under  a  shadow  of  title,  and  acting 
as  such  at  the  time  of  making  the  appointment.^ 

(a)  Estoppel.  —  A  cashier,  by  performing  in  his  official  capacity 
acts  and  duties  which  are  not  inconsistent  with  the  nature  of  his 
office  and  functions,  may  be  held  to  be  thereby  estop])ed  in  a  suit 
against  himself  to  deny  that  their  performance  was  ordered  by  the 
board  of  directors .^ 

He  is  also  estopped  from  denying  his  agency  for  the  bank  where 
he  transacts  business  for  it  officially  and  at  its  instigation.^ 

1  §  175.     Potter  v.  Merchants'  Bank,  28  N.  Y.  G41. 

2  Philadelphia  National  Bank  v.  ^Morgan,  1  JSlarvol  (Del.)  2G5,  40  Atl. 
1113. 

1  §  176.     Cooper  v.  Curtis,  30  Me.  488. 

2  Durldn  r.  Exchange  Bank,  2  P.  &  H.  (Va.)  277. 

3  Mount  Vernon  Bank  v.  Porter,  52  Mo.  App.  244. 


407 


CHAPTER   XII 
RECEIVING   DEPOSITS 

Choice.     Cashier's  authority.     §  161. 

§  178.  A  bank  may,  at  common  law,  choose   from   whom   it   will 

receive  deposits,  and  how  long  it  will  continue  to  do 
business  with  any  customer.  The  relation  may  be  broken 
by  either  party  at  any  time,  saving  the  existing  liens  and 
contract  rights  of  both  parties. 

§  178.      (a)   Statute  law  sometimes  provides  against  receiving  deposits 
from  certain  persons,   as,   e.   g.,   those  reasonably   known 
by  the  bank  to  be  unsafe. 
Care. 

§  179.  Should  be  exercised  by  the  depositor  to   make   delivery   to 

the  proper  officer  and  at  the  bank.      §§98  j,  174  a. 

§  181.  And  by  the  bank  to  give  credit  to  the  proper  party.      (See 

case  of  deaf  depositor.) 
The  Receiving  Officer.      §  161. 

§  179.  The  cashier   or   teller  may  receive    deposits,    or   any   other 

officer  actually  authorized  by  the  board,  or  who  has  ha- 
bitually received  them  without  objection  from  the  bank. 

§  179.  No  officer  has  inherent  right  to  receive  deposits  away  from 

the  bank,  though  in  this  matter  also  the  bank  may  be 
bound  by  a  long-continued  course  of  conduct  without 
objection  from  the  directors. 

§  180.  If  the  same  officer  acts  for  two  banks  doing  business  over 

the  same  counter,  the  question  as  to  which  bank  is  the 
recipient  of  a  given  deposit  depends,  (1)  as  to  the  de- 
positor, on  his  understanding  with  the  officer ;  (2)  as  to 
the  banks,  upon  the  agreement  between  them  under  which 
the  officer  acts. 

§  180.  A.     Appropriation  of  Deposits.     §§  323,  327  d,  556. 

§  178.  The  Relation  is  at  the  Will  of  the  Parties.  —  From 
whom  Deposits  may  be  received.  —  It  is  of  the  essence  of  the  busi- 
ness of  banking  that  the  bank  or  banker  should  receive  on  deposit  ° 

"  §  178.  When  a  note  held  by  a  bank  as  collateral  security  is  paid 
after  the  loan  secured  by  it  has  been  repaid  the  money  received  becomes 
a  deposit  for  the  benefit  and  use  of  the  owner  if  he  desires  to  so  consider 
it.     First  National  Bank  v.  Pickens,  7  Ind.  725,  104  S.  W.  947  (1907). 

408 


THE    REL.\TION    IS    AT    TUE    WILL    OF   THE    PARTIES  §   178 

the  money  and  funds  of  other  persons.""  In  receiving  dei)osits 
and  opening  accounts  the  bank  is  free  to  choose  whom  it  will  as 
customers  from  among  those  that  ofi'er."''  No  duty  exists  on  the 
part  of  the  bank  towards  the  public  akin  to  that  which  binds 
common  carriers  to  take  every  person  who  requests  them  to  do 
so,  and  who  is  in  a  fit  condition  to  be  taken,  or  that  which  obliges 
hotel-keepers  to  admit  any  proper  applicant  as  a  guest.  The 
bank  may  select  arbitrarily,  and  cannot  be  held  accountable 
to  any  person  for  the  propriety  of  its  action  in  this  matter.^  The 
receiving  a  dejiosit  ^^  from  a  person,  without  explanation  or  under- 
standing to  the  contrary,  at  once  and  without  more  makes  that 
person  a  customer  of  the  bank.^^     But  no  implied  undertaking 

""  One  bank  may  be  a  depositor  in  another  bank.  State  v.  Corning 
State  Sav.  Bank,  136  Iowa  79,  113  X.  W.  500  (1907);  Eimira  Bank  v. 
Davis,  73  Hun  (N.  Y.)  357,  20  N.  Y.  S.  200,  affirmed  in  142  N.  Y.  590, 
37  N.  E.  646,  25  L.  R.  A.  540;  Davis  v.  Eimira  Bank,  101  U.  S.  275, 
40  L.  ed.  700,  16  Sup.  Ct.  502. 

"*  A  depositor  may  deposit  in  his  own  name  or  in  a  business  name  or 
in  his  own  name  as  trustee  or  agent.  But  a  bank  cannot  properly  collude 
with  a  depositor  for  the  purpose  of  misleading  creditors  and  covering  up 
his  funds  under  a  fictitious  name  so  as  to  prevent  them  being  subject  to 
garnishment.  Bank  of  La^vTenceville  v.  Roekmore,  129  Ga.  582,  59  S.  E. 
291  (1907). 

A  husband  may  legally  deposit  money  in  a  bank  in  the  name  of  his  wife 
so  that  he  can  draw  checks  against  it.  Hanna  v.  People's  National  Bank, 
182  111.  App.  528  (1913). 

A  county  treasurer  has  no  authority  to  deposit  public  funds  in  a  bank 
not  designated  by  the  county  commissioners  as  a  depository.  State  v. 
Lawrence,  80  Kan.  707,  103  Pac.  839  (1909). 

»  Thatcher  v.  Bank  of  State  of  New  York,  5  Sandf.  (N.  Y.)  121 ;  Ja- 
seUi  V.  Riggs  National  Bank,  36  App.  Cas.  (D.  C.)  159,  1912C  Ann. 
Cas.  119,  n.,31  L.  R.  A.  (n.  s.)  763,  n. ;  Heath  i-.  New  Bedford  Safe 
Deposit  Co.,  184  Mass.  481,  69  N.  E.  215  (1904). 

The  relation  is  contractual  and  cannot  be  created  except  by  mutual 
consent.  Wilson  v.  First  National  Bank,  176  Mo.  App.  73,  162  S.  \V. 
1047  (1914). 

^  When  the  holder  of  a  check  presents  it  to  the  bank  on  which  it  is 
drawn  which  had  money  to  pay  it  and  which  placed  it  to  his  credit 
at  his  request  it  is  equivalent  to  placing  money  to  his  credit,  and  it  is 
immaterial  that  the  drawer  did  not  have  the  amount  of  raonej'  necessary 
to  pay  the  cheek  deposited  to  liis  credit  on  the  books  of  the  bank  at  the 
time  it  was  drawn.  Hubbard  v.  Pettey,  37  Te.x.  Civ.  App.  453,  85  S.  W. 
509  (1904),  citing  Hoskins  v.  Dougherty,  29  Tex.  Civ.  App.  313,  69  S.  W. 
103. 

i!-  Jaselli  V.  Riggs  National  Bank,  36  App.  Cas.  (D.  C.)  159,  1912C 
Ann.  Cas.  119,  n.,  31  L.  R.  A.  (x.  s.)  763,  n.  See  Heath  i-.  New  Bedford 
Safe  Deposit  Co.,  184  INIass.  481,  69  N.  E.  215  (1904),  where  the  bank 
received  money  and  credited  it  to  a  party  in  another  State,  notifying 
him  thereof  by  telegraph. 

But  when  a  grain  dealer  arranges  with  a  bank  to  cash  the  checks  of 

409 


§178  RECEIVING   DEPOSITS 

to  allow  him  to  continue  so  for  any  length  of  time  exists. ^'^  Neither 
is  he  under  any  obligation  to  continue  so.  The  relationship  may 
be  dissolved  at  any  time  by  either  party,  saving  the  then  existing 
liens  and  rights  of  each.^ 

(a)  In  Wisconsin,  banks  are  prohibited  frcim  receiving  a  deposit 
from  any  one  whom  they  have  reason  to  know  is  unsafe  or  insol- 
vent, and  this  is  held  not  to  contravene  the  Constitution  of  the 
United  States  or  of  Wisconsin.  It  is  not  a  denial  of  the  equal 
protection  of  the  laws  to  all  persons.     U.  S.  Const.,  Amend.  XIV.^ 

§  179.  Depositors  shovUd  be  careful  to  deliver  their  Deposits  to 
one  authorized  to  receive  them.  —  It  is  essential  that  the  de- 
positor °  should  deliver  his  money  to  an  officer  of  the  bank  who 
may  properly  receive  it  on  behalf  of  the  bank ;  otherwise  the  bank 
will  not  be  liable  for  it,  if  it  should  be  lost  or  embezzled,  or  should 
become  worthless  during  the  course  of  its  transit  into  the  hands 
of  such  proper  officer."''  Ordinarily  banks  in  the  United  States 
have  a  "receiving  teller",  so  called,  whose  special  function  it  is 
to  receive  funds  for  his  deposit.  If  there  is  such  an  officer,  a 
depositor  who  makes  his  payment  into  the  hands  of  any  other 
officer  simply  makes  that  recipient  his  own  agent  on  this  occasion 
for  the  purpose  of  transferring  the  funds  to  the  bank,  or  to  the 
receiving  teller.  If  the  officer  fulfils  his  agency,  and  the  funds, 
undiminished  in  amount,  come  into  the  possession  of  the  bank, 
or  reach  the  hands  of  the  receiving  teller,  then  the  debt  of  the  bank 

Ms  agent  given  for  the  purchase  of  grain,  and  is  to  pay  the  money  so 
advanced  from  time  to  time  by  drafts  on  the  dealer,  and  deposits  a  small 
amount  at  the  time  of  making  such  an  arrangement  as  an  indemnity 
against  such  advancements,  the  relation  of  banks  and  depositor  is  not 
created.  Armour  v.  Green  County  State  Bank,  112  Fed.  631  (1902). 
^^  Jaselli  V.  Riggs  National  Bank,  supra. 

2  Chicago  Marine  &  Fire  Ins.  Co.  v.  Stanford,  28  111.  168 ;  Jaselli  v. 
Riggs  National  Bank,  .36  App.  Cas.  (D.  C.)  159, 1912C  Ann.  Cas.  119,  n., 
31  L.  R.  A.  (N.  s.)  763,  n. ;  Reid  v.  Charlotte  National  Bank,  159  N.  C. 
99,  74  S.  E.  746  (1912) ;  ElHott  v.  Capital  City  State  Bank,  128  Iowa 
275,  103  N.  W.  777,  111  Am.  St.  Rep.  198,  1  L.  R.  A.  (n.  s.)11  30,  n. 
(1905). 

3  Baker  v.  State,  .54  Wis.  368  (1882);  Hyland  v.  Roe,  111  Wis.  361, 
87  N.  W.  252,  87  Am.  St.  Rep.  873  (1901). 

"  §  179.  A  depositor  is  one  who  delivers  to  or  leaves  with  a  bank 
money  subject  to  his  order.  State  v.  Corning  State  Sav.  Bank,  136 
Iowa  79,  113  N.  W.  500  (1907)  ;   Catlin  v.  Savings  Bank,  7  Conn.  487. 

"^  Van  Wagenen  v.  Genesee  Falls  Savings  Association,  88  Hun  (N.  Y.) 
43 ;  Bickley  v.  Bank,  .39  S.  C.  281,  17  S.  E.  977  (1892) ;  Jumper  :>.  Bank, 
39  S.  C.  296,  17  S.  E.  980  (1892)  ;  Aeverell  v.  Second  National  Bank, 
19  D.  C.  246  (1890) ;  Stallo  v.  Wagner,  220  Fed.  360  (1914) ;  Russo- 
Chinese  Bank  v.  Li  Yan  Sam,  1910  A.  C.  174. 

410 


TWO    BANKS   RECEIVING    DEPOSITS    BY   SAME    OFFICER         §   ISO 

accrues.  Othenvise  the  deposit  is  not  completed,  and  the  bank  is 
not  liable,  although  the  fault  be  wholly  that  of  its  officer  to  whom 
the  payment  was  originally  made.  The  corporation  has  not 
delegated  to  him  that  duty,  and  is  not  responsible  for  his  perform- 
ance of  it.  Very  often  the  receiving  officer  has  his  peculiar  and 
customary  stand  at  the  bank  counter,  made  known  to  the  public 
by  a  sign  bearing  the  words  "  Receiving  Teller."  In  such  case, 
it  would  seem  that  the  pa^Tnent  should  be  made  to  him  at  this 
stand.  Certainly  it  must  be  made  to  him  within  the  banking- 
rooms.  Otherwise,  until  he  has  brought  the  money  into  the  l)ank- 
ing-rooms,  its  safety  is  still  at  the  risk  of  the  payer.  Neither 
will  it  suffice  for  a  depositor,  seeking  to  evade  the  consequences 
of  these  rules  of  law,  to  show  isolated  cases  of  a  contrary  practice 
by  his  bank.  Solitary  instances  of  payments  of  funds  to  another 
officer  than  the  receiving  teller  are  impotent  to  alter  established 
principles.  So  long  as  such  an  office  exists,  and  the  incumbent  con- 
tinues duly  to  exercise  his  functions,  the  money  for  deposit  ought  in 
some  manner  to  reach  his  hands,  and  proof  of  its  occasional  coming 
to  its  destination  through  the  hands  of  other  agents  of  the  insti- 
tution is  not  enough  to  show  that  such  a  course  is  good  and  suf- 
ficient upon  these  occasions  when  it  fails  to  effect  this  disposition 
of  the  money.^ 

Delivery  of  a  deposit  to  the  cashier,  teller,  or  assistant  teller  at 
the  bank,2  or  to  any  officer  of  the  bank  having  actual  authority 
to  receive  it,  or  authority  implied  from  usage,  is  good.  For  ex- 
ample, where  a  porter  had  for  years  been  accustomed,  without 
objection  from  any  officer,  to  receive  money  from  the  express 
company  at  the  bank,  clearing-house,  or  the  express  office,  a  de- 
livery to  him  at  the  express  office  was  held  good.^ 

§  180.  Two  Banks  receiving  Deposits  by  Same  Officer.  —  B.  was 
treasurer  of  a  savings  institute  and  cashier  of  a  bank,  both  of 
which  corporations  did  business  over  the  same    counter.     The 

1  Manhattan  Co.  v.  Lydig,  4  Johns.  (N.  Y.)  377 ;  Thatcher  v.  Bank 
of  State  of  New  York,  5  Sandf.  (N.  Y.)  121;  SterHng  v.  Marietta  & 
Susquehanna  Trading  Co.,  11  Serg.  &  R.  (Pa.)  179;  Terrell  v.  Branch 
Bank,  12  Ala.  502;  Fidelity  Deposit  Co.  v.  Colby,  148  App.  Div.  363 
(1911),  132  N.  Y.  S.  20.  But  see  East  River  National  Bank  v.  Gove, 
57  N.  Y.  597,  in  which  the  foregoing  cases  are  discussed  and  a  contrary 
conclusion  is  reached. 

2  See  chapter  on  Cashier.  Hotchlciss  c.  Artisan's  Bank,  2  Keyes  (N.  Y.) 
564. 

'  Sweet  V.  Barney,  23  N.  Y.  335.  See  Burnell  v.  San  Francisco  Sav. 
Bank,  136  Cal.  499,' 69  Pac.  144  (1902). 

411 


§  180  RECEIVING   DEPOSITS 

institute  was  by  agreement  to  receive  no  money,  but  all  its  funds 
'vere  to  be  deposited  in  the  bank.  B.  received  from  C.  at  the 
counter  certain  money  which  she  wished  to  deposit  in  the  insti- 
tute ;  but  B.  embezzled  it  and  did  not  credit  it  to  the  institute 
nor  upon  the  cash-book  of  the  bank.  It  w^as  held  that,  as  between 
C.  and  the  institute,  B.  received  the  money  as  its  treasurer ;  yet 
as  between  the  bank  and  the  institute,  under  the  agreement,  it 
w^as  received  by  him  as  money  of  the  bank,  and  the  bank  was 
liable  to  the  institute  therefor.^ 

So  where  a  check  payable  to  B.  as  treasurer  was  received  by 
him  to  pay  money  due  the  institute,  and  was  indorsed  by  him  as 
treasurer  and  then  as  cashier,  and  remitted  for  collection,  though 
no  credit  was  given  the  institute  therefor  on  the  books  of  the 
bank,  the  check  had  become  the  property  of  the  bank ;  and  the 
institute  could  recover  for  it.^ 

§180  A.  Appropriation  of  Deposits.  —  The  depositor  may 
appropriate  his  deposits ;  if  he  does  not,  the  bank  may  choose 
how  it  will  appropriate  them,  subject  to  the  rule,  that,  as  betw^een 
a  secured  and  an  unsecured  debt,  the  appropriation  must  be  to 
the  former  for  the  benefit  of  the  surety,  and  if  neither  makes  an 
appropriation,  the  law  will  appropriate  the  deposits  in  accordance 
with  this  rule.^ 

§181.  Care  in  Crediting. — The  deposit  must  be  carefully 
credited  to  the  proper  person.  Where  two  persons,  A.  and  B., 
came  to  make  a  deposit,  A.  handing  in  the  money  and  B.  saying 
it  w-as  to  be  put  to  his  credit,  which  the  bank  did ;  it  w^as  held 
that  the  bank  was  negligent,  the  fact  being  that  A.  was  deaf  and 
did  not  hear  B.'s  order.^ 

1  §  180.  Fishkill  Savings  Inst.  v.  Bostwick,  92  N.  Y.  564.  See  also 
Kelley  v.  Chenango  Valley  Savings  Bank,  22  App.  Div.  (Hun,  N.  Y.)  202 
(1897). 

1  §  180  A.     Kinnaird  v.  Webster,  10  Ch.  D.  (Eng.)  139  (1878). 

1  §  181.  Winter  v.  Bank  of  New  York,  2  Caines  (N.  Y.)  337.  See 
Jackson  Ins.  Co.  v.  Cross,  9  Heisk.  (Tenn.)  283. 


412 


CHAPTER   XIII 
KINDS  OF  DEPOSIT 

Special.     §§  189,  565,  5G7.     See  §  209,  567  c. 
§  183.  For  safe  keeping  ;    identical  thing  to  be  restored  ;  created  by 

express  contract,  or  implied  from  circumstances,  as  the  fact 
that  money  is  sealed  up,  or  the  deposit  is  not  of  a  nature 
that  can  be  credited  on  general  account  as  cash. 
§  184.  Coin  may  be  a  special  deposit,  by  usage. 

The  presumption  is  in  favor  of  general  deposit  in  case  of 
United  States  coin,  and  in  favor  of  special  deposit  in 
case  of  foreign  coin. 
Specific.     §§  206,  213,  565,  567,  569  et  seq.' 
§  185.  Any  deposit  for  a  purpose  other  than  mere  safe  keeping  and 

return,  or  credit  on  general  account,  is  a  specific  deposit, 
as  collaterals,  or  money  to  transmit,  or  to  pay  a  note. 
General.     §§  288,  565. 
§  186.  A  deposit  made  with  intent  to  pass  the  property  to  the  bank, 

to  be  credited  on  general  account,  is  a  general  deposit,  and 
§  187.  the  presumption  in  case  of  the  deposit  of  loose  monej',  or 

of  paper  or  coin  credited  as  cash,  is  that  such  a  deposit  is 
intended,  unless  there  be  a  contract  or  usage  contra. 
§  186.     (a)  The  addition  of  such  titles  as  "Clerk",  "Treas.",  etc.  to  the 
depositor's  name  does  not  affect  the  nature  of  the  deposit. 
§  186.      (6)   If  checks  or  money  are  sent  with  an  order  to  credit  on  account, 
and  tliis  is  done,  the  deposit  is  general,  even  though  a  second 
clause  in  the  order  provides  for  paying  a  specific  note. 
Change  of  a  Deposit  fkom  one  Form  to  Another. 
§  187.  May  be  accomplished  by  an  agreement,  or  order  acted  upon, 

or  by  the  bank's  crediting  generally  a  specific  deposit, 
or  the  proceeds  of  one,  and  the  best  opinion  is,  that  when 
this  is  done,  and  the  specific  funds  mingled  indistinguish- 
ablv  with  the  general  funds  of  the  bank,  whether  rightfully 
or  not,  the  depositor  can  only  claim  equally  with  the  general 
depositors  and  creditors. 
A  bank  may  put  up  the  amount  due  a  depositor  in  a  package, 
and  tender  it  to  him,  and  if  he  refuses  it,  the  bank  will 
thereafter  be  liable  only  as  a  gratuitous  bailee. 

§  183.  A  Special  Deposit  is  wliere  the  wliole  contract  is  that 
the  thing  deposited  shall  be  safely  kept,  and  that  identical  thing 
returned  to  the  depositor.^ 

1  §  183.     State  v.  Clark,  4  Ind.  316 ;   Keene  v.  Collier,  12  Mete.  (Ky.) 

413 


§  183  KINDS    OF   DEPOSIT 

And  this  contract  may  arise  by  express  agreement,  or  by  the 
nature  of  the  deposit ;  as  if  it  were  gold  plate,  or  money,  or  secur- 
ities locked  in  a  box,  or  sealed  up  in  a  bag  or  package.     (§  102  e,  A.) 

In  such  cases  the  presumption  is  that  the  deposit  is  special, 
though  in  case  of  the  deposit  of  loose  money  the  presumption  is 
the  opposite.^ 

Usage  as  Affecting  the  Nature  of  a  Deposit 

§  184.  When  Deposit  in  Coin  is  Special.  —  In  Maryland  where 
gold  coin  was  deposited  and  an  entry  "Cash,  (coin)  $3000", 
was  made  in  the  depositor's  bank-book,  it  was  held  that,  if  the 
depositor  could  show  that  this  entry  by  usage  or  by  special  cir- 
cumstances, imported  an  agreement  to  repay  the  amount  in  coin, 
it  could  only  be  so  repaid,  and  that  an  offer  of  legal  tender  notes 
would  not  discharge  the  bank.  Nor  was  the  contract  to  return 
in  specie  varied  by  showing  that  the  depositor  had  subsequently 
drawn  checks  which  had  been  paid  in  legal  tender  notes,  it  also 
appearing  that  he  had  never,  since  making  the  deposit,  had  a 
less  balance  than  S3000  to  his  credit  in  the  bank.^  But  the  pur- 
port of  Thompson  v.  Riggs  ^  seems  to  be  contrary  to  this.  The 
court  there  regard  the  entry  of  the  word  "  Coin  "  as  a  mere  memo- 
randum, and  decline  to  admit  evidence  of  a  usage  of  bankers  to 
regard  it  as  constituting  a  contract  to  repay  in  coin.  The  opinion 
is  unfortunately  obscure,  but  such  seems  to  be  its  import.  These 
cases  do  not  turn  so  much  upon  the  point  of  special  deposit  as  of 
a  coin  contract,  so  called. 

Distinction  between   United  States  and  Foreign  Coin 

On  principle,  it  would  seem  that  it  would  be  always  proper  and 
legitimate  to  draw  a  distinction,  for  various  purposes,  between 
coin  of  the  United  States  and  coin  of  a  foreign  country,  which 

417 ;  M.  A.  Association  v.  Jacobs,  13  111.  App.  340 ;  Warren  v.  Nix,  97 
Ark.  374,  135  S.  W.  896  (1911);  Nashville  Produce  Co.  v.  SeweU,  121 
Ga.  278,  48  S.  E.  945  (1904) ;  Officer  v.  Officer,  120  Iowa,  389,  94  N.  W. 
947,  98  Am.  St.  Rep.  365,  n.  (1903) ;  Miami  v.  Shutts,  59  Fla.  462,  51 
So.  929  (1910) ;  Butcher  v.  Butler,  134  Mo.  App.  61,  114  S.  W.  564  (1908) ; 
Covey  V.  Cannon,  104  Ark.  550,  149  S.  W.  514  (1912).  See  Continental 
etc.  Bank  v.  Chicago  etc.  Trust  Co.,  199  Fed.  704  (1912). 
2  Dawson  v.  Real  Estate  Bank,  5  Ark.  299. 

1  §  184.     Chesapeake  Bank  v.  Swain,  29  Md.  483. 

2  Thompson  v.  Riggs,  5  Wall.  663,  18  L.  ed.  704. 

414 


SPECIFIC    DEPOSIT  §185 

has  not  been  adopted  into  ordinary  daily  currency  among  the 
people  of  the  United  States.  If  a  deposit  of  the  former  be  made 
in  ordinary  times,  when  coin  is  at  par,  it  must  be  taken  as  a  general 
deposit  unless  otherwise  explained.  But  if  a  deposit  of  the  latter 
be  made,  it  should  be  taken  as  a  special  deposit,  in  the  absence 
of  express  understanding.  For  it  is  not  properly  a  pa;\7nent, 
Paj-ment,  except  by  agreement  of  parties,  could  not  be  made  in 
such  material.  The  bank  cannot,  practically  at  least,  pay  it  out 
again  to  its  customers ;  it  cannot  use  it  for  meeting  the  checks 
of  depositors,  not  even  of  the  very  party  depositing  it,  if  it  be  in 
fact  a  general  deposit.  In  short,  foreign  coin  is,  in  the  United 
States,  so  far  in  the  nature  of  a  commodity  that  it  cannot  pass 
either  to  or  from  a  banker  as  money  unless  by  force  of  an  agree- 
ment between  the  parties,  either  express  or  to  be  implied  from 
their  usual  course  of  dealing  together.  So  if  it  should  be  the  case 
that  the  present  or  any  future  Legal  Tender  Act  should  make  it 
sufficient  for  a  bank  to  return  in  treasury  notes  the  nominal  sum 
which  it  has  received  in  gold  coin  of  the  United  States,  it  yet  would 
not  follow  that  a  similar  return  of  the  nominal  value  of  foreign 
coin  would  be,  as  a  matter  of  logical  necessity,  equally  legitimate. 
The  coin  and  the  notes  of  the  United  States  are  both  currency  of 
the  United  States,  and  the  law  sim])ly  refuses  to  recognize  any 
distinction  or  difference  between  them.  But  the  foreign  coin  is 
difi'erent  from  both  these  kinds  of  currency ;  even  if  it  were  to  be 
replaced  by  gold  coin  of  the  United  States,  still  its  value,  in  the 
shape  of  exchange,  w'ould  be  credited  or  debited  in  making  up 
the  judgment.  None  the  less  should  its  value  be  estimated  in  the 
usual  currency  of  the  country,  which  is  legal  tender,  and  is  the  only 
money  practically  in  use.  Further,  it  certainly  seems  to  us  that 
both  law  and  justice  would  sustain  the  rule,  that  where  gold  is 
practically  a  commodity  even  when  in  the  shape  of  coin,  when  it 
has  ceased  to  circulate  and  to  be  transferred  from  man  to  man  as 
current  money,  then  a  deposit  in  it  should  no  longer  be  regarded 
as  presumal)ly  a  deposit  of  so  many  dollars,  returnable  in  paper 
of  much  less  real  value,  but  should  be  considered  i)rima  facie 
a  special  deposit,  as  much  as  gold  dust  or  jewels  in  ordinary 
times. 

§  185.  Specific  Deposit.  —  ^Yhen  money  is  deposited  to  pay  a 
specified  check  drawn  or  to  be  drawn,  or  for  any  purpose  other 
than  mere  safe  keeping,  or  entry  on  general  account,  it  is  a  specific 
deposit,  and  the  title  remains  in  the  depositor  until  the  bank  pays 

415 


§  185  KINDS   OF   DEPOSIT 

the  person  for  whom  it  is  intended,  or  promises  to  pay  it  to 
him.^ 

A  deposit  of  money  to  pay  a  specified  note,  or  of  a  bill  to  be 
collected,  or  of  paper  or  goods  as  collateral  security,  or  of  bonds 
in  order  that  the  bank  may  act  as  agent  to  collect  the  interest 
for  the  owner,  is  a  specific  deposit. 

Where  a  check  on  a  bank  is  deposited  with  the  cashier,  for  which 
he  gives  a  certificate  of  the  receipt  with  the  understanding  that 
the  amount,  in  money,  is  to  be  delivered  to  a  third  person  when 
certain  abstracts  of  title  are  received  by  the  cashier  from  such 
third  person,  the  deposit  is  specific  and  the  bank  is  bound  to  pay 
in  money  although  no  actual  money  is  deposited. ^ 

Proceeds  of  Collection 

When  a  collection  has  been  made,  the  proceeds  may  be  credited 
on  general  account  and  so  become  a  general  deposit,  or  may  be  kept 
separate  as  a  special  deposit,  at  the  option  of  the  bank;  except 
in  Wisconsin  and  Missouri,^  where  a  bank  is  held  to  have  no  right 
to  treat  the  proceeds  of  a  collection  as  its  own  money,  but  must 
treat  it  as  trust  money  in  all  cases ;  and  except  where  the  person 
for  whom  the  collection  was  made  ordered  the  bank  "  to  collect 
and  remit ",  this  direction  negativing  the  right  to  credit  the  pro- 
ceeds on  general  account.* 

When  a  deposit  is  made  under  an  agreement  between  the  de- 
positor and  a  third  person  for  whose  benefit  the  deposit  was  made, 
known  and  assented  to  by  the  bank,  that  the  deposit  should  be 
subject  to  a  lien  against  property  purchased  by  the  depositor, 
the  deposit  is  special  to  the  extent  of  the  lien.^ 

1  §  185.  Mayer  v.  Chattahoochee  National  Bank,  51  Ga.  325  ;  Whar- 
ton V.  Walker,  4  Barn.  &  C.  163;  Cobb  v.  Becke,  6  Q.  B.  930;  Raban  v. 
Cascade  Bank,  33  Mont.  413,  84  Pac.  72  (1906) ;  Brown  v.  First  National 
Bank,  216  Mass.  298,  103  N.  E.  780  (1914) ;  Shopert  v.  Indiana  National 
Bank,  41  Ind.  App.  474,83  N.  E.  515  (1907) ;  Elliott  ?^  First  National  Bank, 
105  Tex.  547,  152  S.  W.  808  (1913) ;  Ellis  v.  National  Exchange  Bank, 
38  Tex.  Civ.  App.  619,  86  S.  W.  776  (1905) ;  Minard  v.  Watts,  186  Fed. 
245  (1910),  money  deposited  to  await  the  final  determination  of  litiga- 
tion; Dodge  V.  State  National  Bank,  96  Ark.  65,  131  S.  W.  65  (1910), 
proceeds  of  a  discounted  note. 

2  American  National  Bank  v.  Presnall,  58  Kan.  69,  48  Pac.  556  (1897). 

3  Butler  County  v.  Boatmen's  Bank,  143  Mo.  13,  44  S.  W.  1047  (1897). 
'  See  Hutchinson  v.  National  Bank,  145  Ala.  196,  41  So.  143  (1906), 

where  there  were  instructions  for  specific  application  of  the  proceeds. 
5  Fort  V.  First  National  Bank,  82  S.  C.  427,  64  S.  E.  405  (1908). 

416 


A   DEPOSIT   IS    PRESUMED   TO    BE    GENERAL  §  1S6 

§  186.  A  Deposit  is  presumed  to  be  General.  —  "A  deposit  is 
general  unless  expressly  made  special  "  or  specific.' 

Or  the  circumstances  are  such  as  to  impl\'  that  the  deposit  is 
not  meant  to  be  general,  as  where  money  is  deposited  enclosed 
in  a  box  or  bag,  or  sealed  up.^ 

Trust  Money 

Wherever  the  bank  has  a  right  to  mingle  the  funds  deposited 
with  its  own  and  treat  them  as  a  debt  due  from  it,  even  though 
the  money  may  be  trust  property  given  to  the  bank  on  condition 
that  it  would  pay  a  certain  sum  to  the  cestui  during  life,  the  dei)()sit 
is  general.^  In  the  absence  of  evidence  to  show  that  it  is  the  bank's 
duty,  by  agreement  express  or  clearly  implied,  to  keep  the  funds  and 
their  investment  separate,  it  must  be  treated  as  a  general  deposit.^" 

1  §  186.  Ward  v.  Johnson,  95  III.  215,  2  III.  App.  261 ;  Brahn  v. 
Adklns,  77  111.  263;  Neely  v.  Rood,  54  Mich.  134;  Ruffin  v.  Commis- 
sioners, 69  N.  C.  498  ;  In  re  Franklin  Bank,  1  Paige  (N.  Y.)  249  ;  Nichols 
V.  State,  46  Neb.  715,  65  N.  W.  704  (1894) ;  Alston  v.  State,  92  Ala.  124, 
9  So.  732  (1890) ;  Woodhouse  v.  Crandall,  99  111.  App.  552  (1902) ;  Na- 
tional Produce  Co.  v.  Sewell,  121  Ga.  278,  48  S.  E.  945  (1904) ;  Mc- 
Gregor V.  Battle,  128  Ga.  577,  58  S.  E.  28,  13  L.  R.  A.  (x.  s.)  185,  n. 
(1907) ;  State  v.  Biekford,  28  N.  D.  36,  147  N.  W.  407  (1913) ;  Butcher 
V.  Butler,  134  Mo.  App.  61,  114  S.  W.  564  (1908) ;  Officer  v.  Officer,  120 
Iowa  389,  94  N.  W.  947,  98  Am.  St.  Rep.  365,  n.  (1903) ;  Miami  v.  Shutts, 
59  Fla.  462,  51  So.  929  (1910) ;  Citizens'  State  Bank  v.  Worden.  95  Neb. 
53,  144  N.  W.  1064  (1914) ;  Missouri  Pac.  Ry.  Co.  v.  Continental  National 
Bank, 212  Mo.  505,  111  S.  W.  574, 17  L.  R.  A.  (x.  s.)  994  (1908) ;  Schofield 
Mfg.  Co.  V.  Cochran,  119  Ga.  901,  47  S.  E.  208  (1904) ;  Sears  v.  Emerson, 
182  III.  App.  522  (1913).  Sec  Hill  v.  Arnold,  116  Ga.  45,  42  S.  E.  475 
(1902) ;    State  v.  Dickerson,  71  Kan.  769,  81  Pac.  497  (1905). 

2  Dawson  v.  Real  Estate  Bank,  5  Ark.  297. 

When  trustees  deposit  trust  money  in  their  own  name  as  trustees,  it 
must  be  presumed  that  the  trustees  intended  the  deposit  to  be  special. 
Smith  V.  Fuller,  86  Ohio  St.  57,99  N.  E.  214,  1913D  Ann.  Cas.  387,  n. 
And  where  money  is  deposited  in  a  bank  to  be  forfeited  if  the  terms  of 
a  contract  are  not  complied  with  it  is  a  special  deposit.  Hoskins  v. 
Dougherty.  29  Tex.  Civ.  App.  318,  69  S.  W.  103  (1902).  See  also, 
Carlson  r.  Ivies,  75  Wash.  171,  134  Pac.  808  (1913) ;  Missouri  Pac.  Ry. 
Co.  V.  Continental  National  Bank,  212  Mo.  505,  111  S.  W.  574,  17  L.  R.  A. 
(n.  s.)  994  (1908). 

3  Vail  V.  Newark  Savings  Inst.,  32  N.  J.  Eq.  627  (1880) ;  Schofield 
Mfg.  Co.  V.  Cochran,  119  Ga.  901,  47  S.  E.  208  (1904). 

^  Woodhouse  v.  Crandall.  99  111.  App.  552  (1902) ;  Troike  v.  Cook 
County  Sav.  Bank,  127  III.  App.  413  (1906). 

But  funds  deposited  in  trust  for  a  special  purpose  are  none  the  less 
trust  funds  even  when  they  are  mingled  with  the  general  funds  of  the 
bank.     MitcheU  v.  Bank  of  "indianolai  98  Miss.  658,  54  So.  87  (1910). 
VOL.  1  —  27  417 


§  186  KINDS   OF  DEPOSIT 

"  Clerk  " 

(a)  The  addition  of  the  word  "  clerk  "  to  the  name  of  the 
depositor  does  not  change  it  from  a  general  to  a  special  deposit^ 
or  alter  the  liability  of  the  bank/ 

Public  Deposit 

A  deposit  by  a  clerk  of  a  court  under  its  order,  and  not  kept 
separate  from  the  other  funds  of  the  bank,  is  general,  and  the  clerk 
is  not  preferred  to  other  creditors  of  the  bank  in  case  of  its  failure.^ 

So  where  the  deposit  is  by  a  judge  of  probate,  although  the 
latter  is  responsible  if  loss  occurs  by  reason  of  the  general  deposit.^" 

A  general  deposit  of  school  district  funds  by  its  treasurer  is 
not  within  his  power  and  the  deposit  does  not  become  general.^'^ 

In  Iowa  a  school  treasurer  is  not  forbidden  by  law  to  deposit 
school  funds  in  his  own  name  as  treasurer  and  he  is  not  entitled 
to  a  preference  upon  the  failure  of  a  bank  containing  money  so 
deposited  by  him.^'"' 

In  Arkansas  a  county  treasurer  may,  by  authority  of  statute 
(Kirby's  Digest,  sec.  1990),  make  a  general  deposit  of  the  public 
funds  in  an  incorporated  bank.^''" 

Money  deposited  by  a  board  of  education  and  a  library  com- 
missioner with  the  expectation  of  receiving  interest  on  daily  bal- 
ances does  not  become  a  trust  fund  so  as  to  entitle  them  to  a  pref- 
erence.^^^ 

In  Mississippi  money  deposited  in  a  bank  by  a  tax  collector 
is  a  trust  fund,  and  he  is  preferred  to  other  creditors  in  case  of  the 
insolvency  of  the  bank.^*'=    The  same  is  true  in  regard  to  money 

*  McLain  v.  Wallace,  103  Ind.  562,  5  N.  E.  911  (1885). 

5  Otis  V.  Gross,  96  111.  612  (1880) ;  In  re,  Nichols,  166  Fed.  603  (1909), 
deposit  by  town  supervisor ;  Clisby  v.  Martin,  150  Ala.  132,  43  So.  742, 
124  Am.  St.  Rep.  64  (1907),  deposit  by  the  register;  Retan  v.  Union 
Trust  Co.,  134  Mich.  1,  95  N.  W.  1006  (1903),  deposit  by  clerk  or  register. 

^^  Alston  V.  State,  92  Ala.  124,  9  So.  732  (1890). 

5''  State  V.  Midland  State  Bank,  52  Neb.  1,  71  N.  W.  1011  (1897). 

s'"'  Brown  v.  Sheldon  State  Bank,  139  Iowa  83,  117  N.  W.  289  (1908). 

hba  Warren  v.  Nix,  97  Ark.  374,  135  S.  W.  896  (1911).  See  In  re  Sal- 
mon, 145  Fed.  649  (1906). 

5*''  Board  of  Education  v.  Union  Trust  Co.,  136  Mich.  454,  99  N.  W. 
373  (1904). 

ibc  Fogg  y_  Bank  of  Friar's  Point,  80  Miss.  750,  32  So.  285  (1902) ; 
Fidelity  etc.  Co.  v.  First  State  Bank,  103  Miss.  91,  60  So.  47  (1912); 
Green  v.  Cole,  98  Miss.  67,  54  So.  65  (1910). 

418 


A   DEPOSIT   IS    PRESUMED   TO    BE    GEXERAL  §  186 

deposited  by  a  (sheriff)  tax  collector. ^^"^  And  the  preference  is 
assignable  by  the  officer  to  one  who  advances  money  to  enable 
him  to  make  his  official  settlement. 5''« 

In  Oklahoma  a  deposit  of  county  funds  made  by  a  county  treas- 
urer does  not  pass  title  to  the  bank  and  the  county  is  preferred 
to  the  other  creditors  if  it  can  trace  its  money  into  the  general 
mass  turned  over  to  the  receiver.  ^''■^ 

A  deposit  of  county  or  town  funds  by  its  treasurer  is  a  special 
deposit  and  the  debt  is  due  the  municipality,  which,  upon  the  in- 
solvency of  the  bank,  is  entitled  to  a  preference. ^^^ 

In  Montana  a  county  treasurer  may  make  a  p:eneral  deposit  of 
public  funds  in  a  bank  if  he  takes  a  bond  in  double  the  amount 
of  the  deposit.  If  the  funds  are  deposited  without  taking  a  bond 
they  are  special  funds  and  may  be  collected  from  the  receiver 
of  the  bank  if  traceable  into  his  hands. ^'''' 

Where  a  clerk  of  the  U.  S.  District  Court  deposited,  as  a  unit, 
moneys  received  by  assignees  in  bankruptcy,  to  be  drawn  on 
checks  of  the  court,  he  failed  to  deposit  all  the  money  received 
by  him.  The  bank  was  not  bound  to  open  a  separate  account 
for  each  assignee  and  was  not  liable  for  unpaid  checks  after  the 
fund  was  exliausted.^'^ 

Not  a  Specific  Deposit  if  to  be  Credited  on  General  Account,  though 
a  Specific  Direction  be  Added 

(6)  Wliere  F.  sent  a  check  with  the  instruction,  "  Credit  our 
account,  and  charge  us  our  note  due  the  4th  inst.",  and  the  check 
was  collected,  credited,  and  a  matured  note  of  F.'s  payable 
at  the  bank  was  paid  on  the  3d,  leaving  insufficient  funds 
to  pay  the  one  presented  on  the  4th,  it  was  held  that  this  was  not 
a  specific  deposit.  The  direction  to  "  Credit  our  account " 
made  it  a  general  deposit  (and  the  second  clause  was  supereroga- 
tion, as  the  bank  would  have  authority  to  pay  the  note  of  the 
4th  any  way),  and  the  bank  from  the  time  of  crediting  the  sum 

^  Metcalf  V.  Merchants'  etc.  Bank,  80  Miss.  649,  41  So.  377  (1906). 

^^  Commercial  Bank  v.  Hardy,  97  Miss.  755,  53  So.  395  (1910). 

*v  Watts  r.  Board  of  Commissioners,  21  Okla.  213,  95  Pac.  771,  16 
L.  R.  A.  (n.  s.)  918,  n.  (1908). 

■'•>"  Lock-wood  ('.  Lockwood,  68  S.  C.  328,  47  S.  E.  441  (1903). 

^f-*  Yellowstone  County  v.  First  Trust  etc.  Bank,  46  Mont.  439,  128 
Pac.  596  (1912). 

^'  State  National  Bank  v.  Reilly,  124  111.  464,  14  N.  E.  657. 

419 


§  186  KINDS   OF  DEPOSIT 

on  general  account  held  it  subject  to  checks  or  notes  in  the  order 
of  presentment.^ 

Perhaps  the  decision  was  very  just  under  all  the  circumstances, 
but  if  the  substance  is  to  be  looked  to  rather  than  hair-line  dis- 
tinctions, it  would  seem  that  the  language  used  by  the  depositor 
as  clearly  indicated  his  intent  to  apply  the  money  sent  toward 
payment  of  the  note  of  the  4th,  as  though  he  had  said,  "  We  send 
this  check  to  pay  our  note  of  the  4th  inst.",  in  which  case  there 
would  have  been  no  doubt  that  the  bank  could  use  the  money 
for  that  purpose  only.  It  has  often  been  held  that  any  specific 
directions  regarding  the  payment  of  a  note,  or  appropriation 
of  a  deposit,  must  be  regarded.'^ 

§  187.  Deposit  of  Paper.  —  When  checks,  notes,  or  other 
negotiable  paper  are  deposited,  the  question  whether  they  con- 
stitute a  general  deposit  or  a  specific  deposit  for  collection  is  one 
of  some  difficulty.  The  best  opinion  is,  that  checks  on  the  de- 
positary credited  as  cash  form  a  general  deposit,  in  the  absence 
of  agreement  or  usage  to  the  contrary,  and  that  other  paper  cred- 
ited as  cash  is  also  received  on  general  deposit,  subject  to  the  right 
of  the  bank  to  cancel  the  credit  if  the  paper  is  dishonored  without 
its  fault  (there  is  disagreement  on  this  point) .  If  paper  is  credited 
as  paper,  it  is  received  as  a  specific  deposit  for  collection.  This 
subject  is  discussed  under  the  head  of  "  Title  to  Deposits",  §  565. 
If  the  title  passes  to  the  bank,  a  general  deposit  arises;  if  not, 
a  specific  or  special  one,  according  as  the  bank  is  merely  to  keep 
and  return  the  identical  paper,  or  is  to  do  some  further  act  in 
respect  to  it. 

§  188.  Change  of  Deposit  from  One  Kind  to  Another.  —  By 
agreement  or  order,  a  special  deposit  may  be  changed  into  a 
general  or  specific  deposit,  or  a  general  into  a  specific  or  special ; 
or  a  specific  deposit  may  become  a  special  or  a  general  deposit, 
as  when  paper  is  collected,  and  the  bank  credits  the  proceeds  to 
the  depositor  on  general  account.^ 

6  Etna  National  Bank  v.  Fourth  National  Bank,  46  N.  Y.  82. 

7  Judy  V.  Farmers  &  Traders'  Bank,  81  Mo.  404 ;  Wilson  v.  Dawson, 
52  Ind.  513;  Egerton  v.  Fulton  National  Bank,  43  How.  Pr.  (N.  Y.)  216; 
Wetherell  v.  O'Brien,  140  111.  146,  29  N.  E.  904. 

1  §  188.  Howard  v.  Roeben,  33  Cal.  399  (special  to  general) ;  Com. 
National  Bank  v.  Henninger,  105  Pa.  St.  500  (general  to  special  or  spe- 
cific) ;  Chiles  v.  Garrison,  32  Mo.  475 ;  State  v.  Grills,  35  R.  I.  70,  85  Atl. 
281  (1912). 

Giving  notes  for  the  amount  of  deposits  does  not  make  them  special. 
Turner  v.  Farmers'  Bank,  148  Ky.  692,  147  S.  W.  435  (1912). 

420 


CHANGE    OF   DEPOSIT    FROM    ONE    KIND    TO    ANOTHER  §  188 

Where  a  bank  paid  money  for  C.  under  agreement  that  C. 
would  apply  his  balance  on  the  consequent  debt  to  the  bank, 
and  give  his  note,  which  he  did,  it  was  held  that  this  appropria- 
tion of  the  deposit  put  it  out  of  the  reach  of  C.  by  checking,  or 
of  his  creditors  by  attachment,  and  on  failure  of  the  bank  it  should 
be  deducted  from  the  amount  of  the  claim  on  the  note  against  C.^ 

So  when  a  depositor  (D.)  orders  his  bank  (A.)  to  remit  money 
for  him  to  another  bank  (B.),  A.  acts  as  agent  in  transmitting; 
and  as  soon  as  the  money  on  deposit  in  A.  is  appropriated  by  it 
on  the  order,  it  becomes  a  specific  deposit  as  to  A.,  the  title  being 
in  D.,  and  although  A.  deposits  the  money  in  B.  to  its  own  credit, 
the  fund  may  be  claimed  by  D.  against  the  creditors  of  A.  upon 
its  insolvency.^ 

Where  B.  drew  part  of  an  existing  deposit,  taking  a  certificate 
for  the  remainder,  and  asking  that  said  remainder  be  put  in  a 
separate  envelope  and  held  as  a  special  deposit,  the  promise  of 
the  bank  to  do  this  will  not  change  the  fund  from  general  to  special 
unless  the  separation  is  actually  made.^ 

2  Chase  v.  Petroleum  Bank,  66  Pa.  St.  169. 

3  St.  Louis  V.  Johnson,  5  Dill.  241 ;  Farley  v.  Turner,  26  L.  J.  Ch.  (x.  s.) 
710.     See  Hutchinson  v.  National  Bank,  145  Ala.  196,  41  So.  143  (1906). 

*  Bayor  v.  American  Trust  and  Savings  Bank,  157  111.  62,  41  N.  E. 
622. 


421 


CHAPTER  XIV 

SPECIAL   DEPOSIT 

§  190,  Definition.     §§  182,  183. 

§  182.  How  distinguished  from  general  and  specific  deposits. 

§  191.  Power.     §  48. 

Bank  has  inherent  power  to  receive.     (Doubted  in 
New  York.) 

§  192.  Anything  may  be  deposited  specially  that  the  bank 

chooses   to  receive,   and  the  identical   thing  de- 

§  193.  posited,  together  with  its  accumulations,  and  all 

§  204.  profits  arising  from  it,  must  be  returned  to  the  de- 

§  194.  positor,  or  to  one  properly  authorized  to  receive  it, 

§  202.  and  if  the  bank  is  lacking  in  due  care  whereby  the 

§  204.  deposit  is  lost,  damaged,  or  delivered  to  an  im- 

proper person,  it  is  liable  to  the  depositor.  §§  184, 
565,  567,  568  b. 

§  194.  The  Measure  of  Care  a  bank  must  bestow  in  case  of 

a  special  deposit  is  the  subject  of  conflict. 

§§  194,  195.  The  best  rule  is  that  a  bank  is  bound  to  ordinary 

care,  and  no  more. 

§§  198,  199.  Sometimes  it  is    said    that    only    gross    negligence 

§  196.  equivalent  to  fraud  will  make  the  bank  liable,  and 

that  if  it  gives  the  same  care  as  to  its  own  bank 
property  no  fault  can  be  imputed. 

§  194.  Sometimes  gross  negligence  is  taken  as  the  standard, 

and  (2)  defined  as  the  lack  of  even  so  much  care  as 
the  most  inattentive  person  of  common  sense  exer- 
cises in  his  own  affairs. 

§  197.  And,  again,  gross  negligence  is  nominally  accepted 

as  the  test,  but  the  court  defines  it  as  lack  of  or- 
dinary care. 

§§  195,  199.  Some  Things  seem  Certain  amid  the  confusion. 

(a)  A  bank  is  not  liable  for  a  special  deposit  stolen  with- 
out its  fault. 

§§201,  202,  204.      (6)  Nor  for  a  loss  by  the  wilful  act  of  an  officer  beyond 
the  sphere  of  duty.      §  102  e,  h. 

§  196  el  seq.  Bad   faith,  or  less  care   than  the  bank  takes  of  its 

own  like  property  will  everywhere  make  it  liable. 

§  200.  No  more  than  ordinary  care  is  ever  required  unless  a 

§203.  Special  Agreement  is  entered  into  by  the  bank,  which 

may  enlarge  its  contract. 
422 


POWER 


§   191 


§  203,  Unauthorized    representations    of    an    officer,     un- 

known to  the  directors,  cannot  enlarge  the  con- 
tract. 

§  205.  Interest  on  Special  Deposit. 

§  190.  Definition.  —  A  special  deposit,  so  called,  is  the  placing 
of  something  in  the  charge  or  custody  of  the  bank,  of  which  specific 
thing  restitution  must  be  made.^  Or  the  phrase  may  be  applied 
to  the  thing  deposited. 

§191.  Power.  (See  §  48.)  —  It  has  generally  been  considered 
that  taking  a  special  deposit  falls  within  the  general  scope  of  the 
banking  business,  although  no  express  power  is  conferred  by  the 
charter  of  the  bank,  or  by  the  organic  law,  so  to  do.  It  has  been 
regarded  as  an  incident  to  the  general  function  of  the  institution.' 

But  the  power  of  the  bank  to  make  contracts  of  bailment  of 
this  nature  has  been  questioned  in  some  cases.  Whether  the 
receipt  of  goods  and  securities  on  deposit  for  safe  keeping  is  within 
the  implied  powers  of  national  banks  organized  under  the  Act 
of  Congress  of  1864,  c.  106,  is  a  quoere  by  the  New  York  Court 
of  Appeals.  But  it  is  said  to  be  certain  that  such  a  function  is 
not  ordinarily  or  necessarily  appurtenant  to  a  part  of  the 
general  banking  business  which  such  associations  are  authorized 
by  their  organic  law  to  conduct;  that  accordingly  the  cashier 
has  no  power  to  enter  into  such  a  contract  of  bailment  with  any 
person  on  behalf  of  the  bank  without  some  special  authority; 
that  in  the  absence  of  proof  that  the  cashier  had  received  such 
authority  from  the  directors,  or  that  they  had  ever  sanctioned 
or  had  knowledge  of  such  contract,  or  that  it  was  the  habit  of  the 
bank  to  enter  into  such  undertakings,  or  that  other  national 
banks  were  accustomed  to  receive  deposits  of  like  character  under 
like  circumstances,  it  was  unquestionable  that  the  authorit\-  so  to 

1  §  190.  Dawson  v.  Real  Estate  Bank,  5  Pike  283 ;  Story  on  Bail- 
ments, §  88;  Keene  v.  Collier,  1  Mete.  (Ky.)  417;  State  v.  Clarke,  4  Ind. 
31G;  Alston  v.  State,  92  Ala.  124,  2  So.  732  (1890);  State  v.  Bickford, 
28  N.  D.  36,  14  N.  W.  407  (1913) ;  First  National  Bank  v.  Henry,  159 
Ala.  367,  49  So.  97  (1906) ;  Warren  v.  Nix,  99  Ark.  374,  135  S.  W.  896 
(1911) ;  Doeph  v.  Cross,  153  Iowa  289,  133  N.  W.  669  (1911) ;  Officer  v. 
Officer,  120  Iowa  389,  94  N.  W.  947,  98  Am.  St.  Rep.  365,  n.  (1903) ; 
Schofield  MfR.  Co.  t-.  Cocliran,  119  Ga.  901,  47  S.  E.  208  (1904). 

1  §  191.  Foster  v.  Essex  Bank,  17  Mass.  479  ;  Tslarine  Bank  of  Chicago 
V.  Chandler,  27  111.  525 ;  Scott  v.  National  Bank  of  Chester  Valley,  72 
Pa.  St.  471;  Lancaster  Bank  ;•.  Smith,  12  P.  F.  Smith  (Pa.),  54;  Cald- 
well r.  National  Mohawk  Valley  Bank,  64  Barb.  (N.  Y.)  333. 

A  sa\nngs  bank  mav  receive  a  special  deposit.  Sherwood  r.  Home 
Savings  Bank,  131  Iowa  528,  109  N.  W.  9  (1906). 

423 


§  191  SPECIAL  DEPOSIT 

contract  did  not  reside  in  the  cashier,  and  such  a  contract,  made 
by  him,  was  ultra  vires?  The  bank  receiving  such  an  unauthorized 
bailment,  being  at  best  a  mere  gratuitous  bailee,  is  liable  only  for 
gross  negligence.^ 

It  has  been  said  that,  though  the  act  of  the  cashier  in  receiving 
special  deposits  cannot  alone  bind  the  bank,  yet  if  the  directors 
have  knowledge  of  his  action  in  this  respect,  and  do  not  interfere 
or  object  to  it,  or  if  it  is  the  established  custom  of  the  bank,  then 
the  bank  will  be  bound  by  the  cashier's  receipt  of  the  property.^ 

§  192.  What  may  be  deposited  Specially.  —  Anything  what- 
ever, which  the  bank  may  consent  to  receive  in  charge,  may  be 
the  subject  of  a  special  deposit.  Ordinarily,  a  deposit  of  money, 
at  least  if  it  be  the  current  money  of  the  country  or  State  where 
the  deposit  is  made,  will  be  assumed  to  be  a  general  deposit, 
unless  the  contrary  is  at  the  time  directly  notified,  or  in  some 
shape  distinctly  implied,  so  that  the  bank  could  not  reasonably 
misunderstand  the  depositor's  intent.  Thus,  if  a  "  sealed  packet, 
bag,  box,  or  chest  "  be  deposited,  though  it  contain  ordinary 
current  money,  yet  the  manner  and  condition  of  the  delivery  shall 
suffice  to  inform  the  bank  that  the  deposit  is  designed  to  be  special, 
and  not  general.  Neither  does  it  matter  what  may  be  the  actual 
value  of  the  property  deposited,  or  what  that  value  may  become 
during  the  period  of  deposit. 

If  bills  or  notes  be  deposited  which  are  partially  depreciated, 
and  which  continue  to  depreciate  even  to  the  point  of  worthless- 
ness,  yet  the  bank  is  still  bound  to  restore  them  specifically  to  the 
depositor,  whose  rights  of  ownership  are  not  affected  by  the  value 
of  the  property .1  These  cases  show  that  it  has  been  thus  held, 
even  where  the  deposit  was  of  "  Confederate  money  ",  and  of  the 
so-called  "  Cotton  money  ",  current  in  the  revolted  States  during 
our  Civil  War.  The  illegality  and  wrongfulness  attendant  upon  the 
original  issue  and  subsequent  using  of  such  money  was  not  suffi- 
cient excuse  to  exonerate  the  bank  from  returning  a  special  deposit 

2  First  National  Bank  v.  Ocean  National  Bank,  60  N.  Y.  278 ;  Wiley 
V.  First  National  Bank  of  Brattleboro,  47  Vt.  546 ;  Lloyd  v.  West  Branch 
Bank,  15  Pa.  St.  172.  But  see  Turner  v.  First  National  Bank  of  Keokuk, 
26  Iowa  562,  which,  by  implication,  would  sustain  a  contrary  view,  since 
it  seems  to  recognize  a  claim  for  a  special  deposit  as  a  debt  of  the  bank. 

3  First  National  Bank  v.  Ocean  National  Bank,  60  N.  Y.  278. 
^  First  National  Bank  v.  Graham,  79  Pa.  St.  106. 

1  §  192.  Dawson  v.  Real  Estate  Bank,  5  Pike  283 ;  Green  v.  Sizer,  40 
Miss.  530.     And  see  Maynand  v.  Newman,  1  Nev.  271. 

424 


LIABILITY    OF   THE    BANK    FOR   A    SPECIAL   DEPOSIT  §  194 

of  it  in  specie.  But  other  cases  are  to  a  contrary  purport  upon  this 
precise  point. - 

§  193.  The  very  Thing  and  its  Accumulations  or  Profits  must 
be  returned.  —  After  the  passage  of  the  Legal  Tender  Acts,  so 
called,  it  was  held,  in  Pennsylvania  and  Louisiana,  that  a  deposit 
of  so  much  gold  coin,  for  which  a  certificate  of  deposit  was  returned, 
could  yet  be  repaid  in  treasury  notes.^  It  was  regarded  as  a  gen- 
eral deposit  of  money,  not  as  a  special  deposit  of  specific  coins. 
In  Wisconsin  it  was  less  justifiably  held  that  a  deposit  of  coin  as 
collateral  for  a  loan  —  which  is,  in  fact,  at  least  for  the  purposes 
involved  in  this  discussion,  a  special  deposit  of  that  coin  —  could 
be  discharged  by  the  return  of  the  same  nominal  amount  in  the 
legal  tender  treasury  notes  of  the  United  States.^  In  Indiana  it 
was  properly  held,  on  the  contrary,  that  where  a  special  deposit 
of  gold  coin,  partly  of  the  United  States  and  partly  foreign,  harl 
been  converted  by  the  bailee,  the  bailor  should  be  allowed  to  re- 
cover the  real  value  of  the  amount  in  the  treasury  notes,  as  contra- 
distinguished from  the  nominally  equivalent  sum.^  The  bailee 
must  deliver  to  the  bailor  the  profit  accruing  from  the  special 
deposit.^  Xo  difference  is  recognized  between  a  bank  note  and 
gold  coin  in  payment  of  a  debt,  but  when  a  bailee  of  specific  coin 
has,  in  violation  of  his  duty,  sold  it  for  a  premium,  he  cannot 
hold  the  profit  and  pay  the  bailor  in  bank  notes  equal  nominally 
to  the  coin.  No  one  has  a  right  to  make  a  profit  by  violation  of 
his  legal  duty,  and  the  law  will  not  allow  him  to  retain  it  if  he  has.^ 

§  194.  Liability  of  the  Bank  for  a  Special  Deposit.  —  General 
Review  of  the  Subject.  — ■  As  to  the  measure  of  responsibility  of 
the  bank  in  the  case  of  a  special  deposit,  a  decision  may  be  found 
for  any  desired  standard. 

Great  Negligence  Held  to  be  Fraud 

(1)  Some  cases  say  that  the  bank  as  a  gratuitous  bailee  is 
only  bound  to  such  care  as  is  consistent  with  good  faith,  holding 
that  gross  negligence  and  fraud  are  one  and  the  same,  and  that  it 

2  See,  contra,  Nelligan  v.  Citizens'  Bank  of  Louisiana,  21  La.  Ann.  332  ; 
Foster  v.  Bank  of  New  Orleans,  id.,  338. 

1  §  193.     Sandford  v.  Hays,  52  Pa.  St.  26 ;    Gumbel  v.  Abrams,  20 
La.  Ann.  568 ;   and  see  Thompson  v.  Riggs,  5  Wall.  663,  18  L.  ed.  704. 
=  Warner  r.  Sauk  County  Bank,  20  Wis.  492. 

3  Bank  of  tlie  State  v.  Burton,  27  Ind.  426. 
^  Story  on  Bailment,  §§  122,  123,  209. 

*  Bank  of  the  State  v.  Burton,  27  Ind.  426. 

425 


§  194  SPECIAL  DEPOSIT 

is  sufficient  if  the  bailee  exercises  the  same  care  of  the  deposit  as 
of  his  own  Hke  goods. ^  The  vast  weight  of  authority  is  against 
this.2 

Gross  Negligence  Lack  of  Slight  Care 

(2)  Other  cases  hold  that  gross  negligence  is  the  test,  and  that 
there  is  a  shade  of  difference  between  gross  negligence  and  fraud  : 
a  man  might  leave  a  purse  of  gold  on  the  table  of  a  hotel,  and 
although  it  would  be  gross  carelessness  it  would  not  be  fraud. 
These  cases  define  gross  negligence  to  be  lack  of  such  care  as  the 
least  attentive  persons  of  common  sense  take  of  their  own  affairs.^ 
The  bank,  as  a  gratuitous  bailee,  is  liable  only  for  gross  negligence, 
and  for  the  lack  of  that  "  care  which  the  most  inattentive  persons 
take."  4 

Gross  Negligence  Held  Lack  of  Ordinary  Care 

(3)  Again  it  is  held  that  a  bank  is  only  responsible  as  gra- 
tuitous bailee  for  gross  negligence,  but  that  gross  negligence  is 
lack  of  ordinary  care.^  Such  a  ruling,  though  doing  justice  between 
the  parties,  introduces  confusion  into  the  standards  of  the  law 
by  confounding  negligence  and  gross  negligence.  There  are 
three  degrees  of  diligence,  —  great,  ordinary,  and  slight ;  —  and 
three  corresponding  degrees  of  negligence,  —  slight  negligence,  or 
lack  only  of  great  care ;  simple  negligence,  or  lack  of  ordinary 
care  ;  but  above  slight  care  ;  and  gross  negligence,  or  lack  even  of 
slight  care,  or  such  as  persons  of  common  sense,  but  very  little 
prudence,  take  of  their  own  concerns. 

The  True  Rule,  Ordinary  Care 

(4)  The  true  rule  seems  to  be  that  in  the  absence  of  special 
agreement  the  bank  is  bound  to  exercise  ordinary  care,  and  no  more, 
in  keeping  a  special  deposit.^ 

Loss  caused  by  the  negligence  of  A.  should  be  borne  by  A. ; 

1  §  194.     Essex  Bank  case  below,  and  Jones  on  Bailment,  10,  46,  119. 

^  Story  on  Bailment,  §  22. 

^  Vaughan  v.  Menlove,  3  Bing.  N.  C.  468 ;  Tompkins  v.  Saltmarsh,  14 
Serg.  &  R.  (Pa.),  275. 

^  De  Haven  v.  Kensington  National  Bank,  81  Pa.  St.  95. 

5  First  National  Bank  v.  Ocean  National  Bank,  60  N.  Y.  295. 

« First  National  Bank  v.  Zent,  39  Ohio  St.  105 ;  Sherwood  v.  Home 
Savings  Bank,  131  Iowa  528, 109  N.  W.  9  (1906) ;  Barnett  v.  First  National 
Bank,  148  Iowa  667,  127  N.  W.  1012  (1910). 

426 


LIABILITY    OF   TUE'  BANK    FOR   A    SPECIAL   DEPOSIT  §   194 

the  development  of  priulence  and  the  repression  of  neghgence 
is  consciously  or  unconsciously  one  of  the  great  objects  of  the 
law  ;  and  whether  for  reward  or  not  one  undertakes  to  do  a  certain 
thing,  he  should  be  held  to  ordinary  care  in  doing  it,  except  in 
special  cases,  just  as  every  man  is  held  responsible  to  others  for  loss 
caused  to  them,  by  lack  of  ordinary  care  on  his  part  in  the  conduct 
of  his  own  affairs,  even  where  there  is  no  relation  of  contract  at  all ; 
otherwise  the  risk  would  be  run  of  throwing  loss  upon  prudence 
rather  than  imprudence,  and  developing  and  sending  down  to 
future  generations  qualities  detrimental  to  social  life,  thus  failing 
to  carry  out  the  mission  of  the  law,  the  purifying  of  the  blood  of 
society. 

It  is  a  question  of  negligence  between  the  bailor  and  bailee. 
If  the  bailor  knows  the  character  of  a  man,  and  gets  him  as  a  favor 
to  keep  goods  for  the  bailor,  the  latter  may  well  be  held  to  be 
entitled  to  expect  only  such  care  as  he  knows  the  bailee  is  in  the 
habit  of  giving  to  his  own  affairs.  Or  if  A.  urges  B.  to  act  as  a 
gratuitous  bailee,  B.  not  holding  himself  out  in  such  a  character, 
it  might  be  argued  that  A.  should  be  held  to  adopt  B.  as  he  is, 
much  as  he  would  adopt  a  shovel  or  a  steam-engine,  within  the 
limits  of  good  faith,  though  it  is  by  no  means  certain  that  in  any 
case  where  B.  consents  to  act  and  A.  is  ignorant  of  his  character 
there  should  be  any  yielding  of  the  rule  requiring  ordinary  care. 
But  ichen  B.  holds  himself  out  as  willing  to  keep  deposits,  and  as 
having  facilities  for  that  purpose,  surely  A.  cannot  be  negligent 
in  taking  advantage  of  the  offer ;  and  if  B.  should  be  negligent 
and  loss  follow,  the  detrimental  conduct  from  which  such  loss 
flows  is  clearly  B.'s  alone,  and  he  should  suffer.  Even  if  the 
question  of  consideration  is  considered  of  importance,  it  cannot  be 
doubted  that  an  institution  whose  avowed  object  is  money  making 
would  never  pursue  the  business  of  receiving  deposits  if  it  did 
not  consider  such  dealings  advantageous  to  itself.  The  drawing 
of  paying  business  by  this  sort  of  accommodation  is  as  solid  a 
reason  for  receiving  deposits  as  a  direct  reward ;  moreover  the 
mere  entering  upon  any  trust  is  deemed  in  the  law  a  sufficient 
consideration  for  the  contract  to  perform  the  duties  of  the  trust 
in  a  proper  manner.'     See  §  215. 

7  Sherwood  v.  Home  Savings  Bank,  131  Iowa  528,  109  N.  W.  9  (1906). 

If  a  banker  undertakes  to  invest  money  for  his  depositor,  and  collect 
the  same  he  must  exercise  ordinarj'  care  and  dilijrence.  Watson  v.  Fanner, 
208  111.  136,  70  N.  E.  23  (1904) ;  and  it  seems  that  if  the  money  is  to  be 

427 


§194 


SPECIAL  DEPOSIt 


Two   Tilings  Certain  on  the  Cases 

(5)  On  the  cases  only  two  things  seem  to  be  certain  in  this 
matter.  1st.  The  bank  will  be  everywhere  held  liable  for  loss 
arising  from  bad  faith  of  its  officers  in  the  sphere  of  their  duties. 
2d.  A  bank  will  nowhere  be  held  to  more  than  ordinary  diligence 
in  respect  to  a  special  deposit,  nor  for  a  theft  or  other  wilful  act 
of  an  officer  out  of  the  line  of  his  emplo^Tnent. 

These  are  the  limits.  Within  them  the  States  range  in  pro- 
cession. 

§  195.  Cases  upon  the  Banlc's  Liability  for  Special  Deposits.  — 
A  recent  New  York  case  contains  a  very  elaborate  discussion 
concerning  the  liability  of  banks  for  special  deposits  which  are 
stolen  while  in  their  custody.  The  deposit  in  this  instance  con- 
sisted of  a  parcel  of  bonds,  left  with  the  teller.  They  w^ere  put 
into  the  safe  where  the  bank's  own  securities  were  kept ;  but  the 
safe  was  accessible  to  any  person  entering  the  bank;  the  safe 
door  was  sometimes  left  open ;  and  the  interior  of  the  safe  was 
not  always  within  view  of  any  officer  of  the  bank.  There  was 
evidence  to  show  that  the  theft  probably  took  place  in  the  daytime 
by  some  one  coming  in  from  the  street.  The  evidence  justified 
the  finding  of  gross  negligence.  Property  of  the  bank  also  was 
stolen  at  the  same  time.  But  the  court  said  that  this  was  not 
conclusive  that  the  bank  was  not  guilty  of  gross  negligence,  and 
consequently  liable.^ 

Where  the  cashier  places  his  indorsed  note  in  the  private  envelope 
of  a  depositor,  in  the  vault  of  the  bank,  as  collateral  security  for 
his  individual  note  to  the  depositor,  the  bank  is  not  liable  for 
failure  to  present  the  note  for  payment  and  to  notify  the  indorser 
of  non-payment.  The  note  being  merely  a  special  deposit  with 
the  bank  it  is  constructively  in  the  depositor's  possession.^ 

Gross  Neglect  Measured  by  tlie  Care  the  Depositary    Takes  of  his 
Own  Goods.    Special  Deposit  Act  outside  of  Duty 

§  196.  Banks  frequently  receive  special  deposits  from  their 
customers  gratuitously,  accepting  no  pay  and  deriving  no  benefit 

applied  to  the  payment  of  stock  the  bank,  though  acting  gratuitously, 
must  exercise  the  care  that  is  customary  with  banks  under  like  circum- 
stances.    Foran  v.  Royal  Bank,  141  App.  Div.  548  (1910),  126  N.  Y.  S.  575. 

1  §  195.     Pattison  v.  Syracuse  National  Bank,  80  N.  Y.  94. 

2  Bohl  V.  Carson,  63  Fed.  26. 

428 


LIABILITY    OF    BANK  §  196 

from  the  act,  which  is  done  solely  for  the  depositor's  accommoda- 
tion. Assuming  that  the  bank  has  authority  to  enter  into  such 
an  undertaking,  it  is  at  best  a  naked  bailment,  and  the  bank  is 
bound  only  to  keep  the  property  with  the  same  care  with  which 
it  keeps  its  own  property  of  the  like  description.  It  is  responsible 
only  for  gross  negligence,  like  any  other  bailee  without  reward. ^ 
It  need  keep  no  further  supervision  over  the  officers  who  have  di- 
rect charge  and  control  of  it  than  it  keeps  over  the  same  officers 
having  the  same  charge  and  control  of  its  own  property  of  the  same 
kind.2  So  if  the  property  be  placed  in  the  vaults  of  the  bank, 
together  with  its  own  similar  property,  and  be  thence  stolen  by 
the  officer  who  has  charge  of  the  vaults,  the  bank  is  not  liable  to 
the  depositor.  "  The  bailee  will  be  answerable  only  for  gross 
negligence,  ivkich  is  considered  equivalent  to  a  breach  of  faith  ;  as 
every  one  who  receives  the  goods  of  another  in  deposit  impliedly 
stipulates  that  he  will  take  some  degree  of  care  of  them.  The 
degree  of  care  ichich  is  necessary  to  avoid  the  imputation  of  bad 
faith  is  measured  by  the  carefulness  ichich  the  depositary  uses  toward 
his  oicn  property  of  a  similar  kind.  For  although  that  may  be  so 
slight  as  to  amount  even  to  carelessness  in  another,  yet  the  de- 
positor has  no  reason  to  expect  a  change  of  character  in  favor  of 
his  particular  interest ;  and  it  is  his  own  folly  to  trust  one  who  is 
not  able  or  willing  to  superintend  with  diligence  his  own  concerns." 
In  this  case  the  special  deposit  was  a  cask  containing  gold  coin, 
which  was  fraudulently  taken  by  the  cashier  and  clerk  of  the  bank. 
The  bank  was  declared  not  liable,  because  the  theft  was  a  private 
act.  "  If  the  cashier  had  any  official  duty  to  perform  relating 
to  the  subject,"  said  the  court,  "  it  was  merely  to  close  the  doors 
of  the  vault  when  banking  hours  were  over,  that  this,  together 
with  other  property  there  should  be  secure  from  theft.  He  cannot, 
therefore,  be  considered  in  any  view  as  acting  within  the  scope 
of  his  emplo\Tnent  when  he  committed  the  villany  ;  and  the  bank 
is  no  more  answerable  for  this  act  of  his  than  it  would  be  if  he 
had  stolen  the  pocket-book  of  any  person  who  might  have  laid 

1  §  196.  Cliattahoochee  National  Bank  v.  Schley,  58  Ga.  369.  See 
People's  National  Bank  v.  Wheeler,  21  Okla.  387,  96  Pac.  619,  21  L.  R.  A. 
(n.  s.)  816,  n.  (1908). 

When  diamonds  which  were  left  with  a  bank  as  a  special  deposit  were 
lost  through  the  gross  neghgence  of  the  employees  of  the  bank,  the  bank 
was  HalMe  therefor.  First  National  Bank  v.  Tevis,  29  Okla.  714,  119  Pac. 
218  (1911). 

2  First  National  Bank  v.  Ocean  National  Bank,  60  N.  Y.  278. 

429 


R  196  SPECIAL  DEPOSIT 

it  upon  the  desk  while  he  was  transacting  some  business  at  the 
bank."  3 

§  197.  Gross  Negligence  "  is  incapable  of  precise  definition, 
and  its  application  and  use  may  lead,  in  some  cases,  to  results 
unsatisfactory ;  but  that  comes  as  directly  from  the  nature  and 
extent  of  the  duty  in  the  particular  case,  as  from  the  phrase  by 
which  a  breach  of  the  duty  is  expressed.  What  constitutes  gross 
negligence,  that  is,  such  want  of  care  as  would  charge  a  bailee  for 
loss,  must  depend  very  much  upon  the  circumstances  to  which 
the  term  is  to  be  applied.  It  has  been  defined  to  be  the  want  of 
that  ordinary  diligence  and  care  which  a  usually  prudent  man 
takes  of  his  own  property  of  the  like  description.  This  definition 
is  given  by  a  reference  to  the  degree  of  care,  rather  than  the  degree 
of  negligence,  which  may  be  the  easier  and  more  intelligible  mode 
of  defining  the  extent  of  the  obligation,  and  the  measure  of  duty 
assumed.  Ordinary  care  as  icell  as  gross  negligence,  the  one  being 
in  contrast  ivith  the  other,  must  be  graded  by  the  nature  and  value 
of  the  property,  and  the  risks  to  which  it  is  exposed.  A  depositor 
of  goods  or  securities  for  safe  keeping  with  a  gratuitous  bailee, 
can  only  claim  that  diligence  which  a  person  of  common  sense, 
not  a  specialist  or  expert  in  a  particular  department,  should 
exercise  in  such  department."  ^ 

Banks  not  Bound  to  Provide  against    Unknoivn  Risks 

"  Independent  acts  of  negligence,  disconnected  with  the  loss, 
were  not  properly  admissible  in  evidence.  The  defendant  was 
not  chargeable  with  negligence  or  want  of  care  for  not  acting  upon 
facts  or  circumstances  not  coming  to  the  knowledge  of  its  directors 
or  officers.  Facts  not  brought  home  to  them,  tending  to  show 
that  the  property  was  ex^Dosed  to  loss  from  some  unusual  cause,  to 
some  peril  growing  out  of  peculiar  circumstances,  were  not  admis- 
sible in  evidence  against  the  defendant.  The  bailee  was  only  called 
upon  to  take  such  care  as  became  necessary  to  protect  it  against 
risks  known  to  it,  or  of  which  it  had  notice.  There  was  great  lati- 
tude in  the  evidence  on  the  part  of  plaintiffs.  .  .  .  The  purpose 
and  end  was  to  show  that  the  place  of  deposit  was  peculiarly  and 
extraordinarily  exposed  to  perils  from  robbers  at  the  time,  calling 

3  Foster  v.  Essex  Bank,   17  Mass.  479;    Scott  v.  National  Bank  of 
Chester  Valley,  72  Pa.  St.  471 ;  but  see  Leaeli  v.  Hale,  31  Iowa  69. 

1  §  197.     First  National  Bank  v.  Ocean  National  Bank,  60  N.  Y.  295. 

430 


LIABILITY    OF    BA.VK  §  199 

for  more  than  the  usual  cautions  from  the  bailee.  This  was  com- 
petent, so  far  as  facts  and  circumstances  pro\-e(]  to  exist  were 
communicated  to  the  officers  of  the  bank,  but  no  farther."  2 

Bank  must  Exercise   Ordinary  Care  in    Keeping  Special  Deposit 

§  198.  "  It  is  usually  stated  that  a  bailee  who  is  to  receive 
no  reward  is  liable  only  for  gross  negligence,  and  some  of  the  cases 
hold  that  such  a  bailee  is  responsible  only  for  want  of  that  care 
which  is  taken  by  the  most  inattentive.  But  that  rule  cannot 
be  applied  to  all  cases  of  bailment  without  reward, /or  when  securi- 
ties are  deposited  with  persons  accustomed  to  receive  such  deposits, 
they  are  liable  for  any  loss  occurring  through  the  want  of  that  care 
which  good  business  men  would  exercise  in  regard  to  property  of  such 
value.  This  was  the  degree  of  care  required  of  the  bank  in  this  case. 
Were  the  bonds  lost  for  the  want  of  such  care?  They  were  de- 
manded, .  .  .  and  the  only  excuse  given  for  not  delivering  them, 
as  stated  in  the  answer  of  the  bank,  was,  that  '  the  said  bank, 
not  having  any  such  bonds  in  its  possession,  did  not  deliver  any 
to  the  plaintiffs.'  Xo  explanation  was  offered,  and  no  reason 
given,  for  the  bonds  not  being  in  the  possession  of  the  bank.  We 
hold  that  under  these  circumstances  the  proof  of  demand  and  the 
refusal  to  deliver  was  sufficient  evidence  that  the  bonds  had  been 
lost  by  the  gross  negligence  of  the  bank."  ^ 

Ordinary  Care  the  Limit.     Own  Care  Standard  Denied 

§  199.  In  England,  it  has  been  held  that  where  securities  are 
deposited  by  a  customer  with  his  banker  for  safe  keeping,  or  for 
the  purpose  of  having  the  interest  thereon  collected  for  him  by 
the  banker,  the  banker  is  not  liable  if  the  securities  be  stolen, 
unless  the  loss  has  been  caused  or  aided  by  his  gross  or  contribu- 
tory negligence.!  xhe  court  said  :  "  It  is  clear  that  the  bank  in 
this  case  was  not  bound  to  more  than  ordinary  care  of  the  deposit 
intrusted  to  it,  and  that  the  negligence  for  which  alone  it  could  be 
made  liable  would  have  been  the  want  of  that  ordinary  diligence 
which  men  of  common  prudence  generally  exercise  about  their 
own  affairs.  There  was  an  entire  failure  of  evidence  of  the  want 
of  that  ordinary  care  which  the  bank  was  bound  to  bestow  on  the 
plaintiff's  deposit.    Tlie  defendant's  evidence  added  to  the  plain- 

2  j})i,j_  1  §  lOS.     First  National  Bank  v.  Zont,  39  Ohio  St.  105. 

1  §  199.     Giblin  t;.  M'AIullen,  2  L.  II.  P.  C.  317,  3S  L.  J.  P.  C.  25. 

431 


§  199  SPECIAL   DEPOSIT 

tiff's  case  the  important  fact,  that  in  the  strong-room  in  which 
the  plaintiff's  debentures  were  kept  there  were,  beside  the  boxes 
of  other  customers,  bills,  securities,  and  specie,  the  property  of 
the  bank,  to  a  very  considerable  amount.  It  may  he  admitted 
not  to  he  sufficient  to  exempt  a  gratuitous  bailee  from  liahility  that 
he  keeps  goods  deposited  ivith  him  in  the  same  manner  as  he  keeps 
his  oicn,  though  this  degree  of  care  will  ordinarily  repel  the  presump- 
tion of  gross  negligejice.  But  there  is  no  case  which  puts  the  duty  of 
a  hailee  of  this  kind  higher  than  this,  that  he  is  bound  to  take  the 
same  care  of  the  property  intrusted  to  him  as  a  reasonably  pru- 
dent and  careful  man  may  fairly  be  expected  to  take  of  his  own 
property  of  the  like  description.  This  was  in  effect  the  question 
left  to  the  jury  in  Dorm  an  v.  Jenkins,  where  Lord  Denman  told 
them  that  it  did  not  follow  from  the  defendant's  having  lost  his 
own  money  at  the  same  time  as  the  plaintiff's,  that  he  had  taken 
such  care  of  the  plaintiff's  money  as  a  reasonable  man  would  or- 
dinarily take  of  his  own ;  and  he  added  that  the  fact  relied  upon 
was  no  answer  to  the  action,  if  they  believed  that  the  loss  occurred 
from  gross  negligence."  ^ 

Bank  not  Bound  to  More  than  Ordinary  Care 

§  200.  A  bank  is  not  bound  to  use  more  than  ordinary  pru- 
dence in  the  care  of  a  special  deposit,  and  it  is  to  be  the  general 
tendency  of  the  courts  to  be  satisfied  with  no  less  than  ordinary 
care.^ 

The  bank  must  keep  a  special  deposit  under  the  same  safe- 
guards afforded  to  its  own  like  property  but  merely  leaving  the 
safe  door  open  during  business  hours,  or  leaving  the  bank  at  noon 
in  charge  of  only  one  person,  is  not  even  negligence,  let  alone 
gross  negligence.^ 

Wilful  Act  of  Officer  beyond  Duty  does  not  Make  Bank  Liable 

§  201.  When  the  president  for  his  own  purposes  hypothecates 
bonds  that  are  held  by  the  bank  on  special  deposit,  and  they  are 
lost,  the  bank  cannot  be  held  unless  the  officers  knew  of  the  pres- 
ident's conduct,  or  were  guilty  of  gross  neglect  in  the  discharge 

2  Giblin  v.  M'MuUen,  2  L.  R.  P.  C.  317,  38  L.  J.  P.  C.  25. 

1  §  200.  Griffith  v.  Zipperwiek,  28  Ohio  St.  388 ;  First  National  Bank 
V.  Zent,  39  Ohio  St.  105 ;  Levy  v.  Pike,  25  La.  Ann.  630 ;  Hills  v.  Daniels, 
15  id.,  280 ;  First  National  Bank  v.  Ocean  National  Bank,  60  N.  Y.  295. 

2  Whitney  v.  First  National  Bank,  55  Vt.  154. 

432 


LIABILITY    OF    BANK  §  202 

of  their  duties,  and  this  neglect  opened  the  door  to  the  fraud,  or 
lost  opportunities  of  recovering  the  propert3\  A  bank  is  not  Hable 
by  reason  of  the  crime  or  any  wilful  act  of  an  officer  out  of  the 
course  of  his  duty.*     (§  102  e,  h.) 

If  a  bank  is  guilty  of  no  negligence  in  the  selection  or  supervision 
of  its  officers  it  cannot  be  held  for  property  stolen  by  them. 

A  bank  is  not  liable  for  the  act  of  its  officer  outside  of  his  sphere 
of  duty,  as  every  embezzlement  is,  e.g.  in  case  of  breaking  open 
a  cask  of  gold  coin  on  special  deposit  in  the  bank,  and  taking  the 
money.  It  was  not  the  duty  of  the  officer  as  acting  for  the  bank 
to  open  the  cask ;  he  was  going  beyond  his  authority,  and  the 
bank  was  not  answerable  for  his  acts.^ 

Acts  beyond  the  Officer's  Duty.    Gross  Neglect 

§  202.  A\Tien  bonds  were  left  for  safe  keeping  and  were  stolen 
by  the  teller,  the  court  said :  "  Being  a  bailment  merely  for  safe 
keeping  for  the  benefit  of  the  bailor,  and  without  compensation,  it 
is  evident  the  dishonest  act  of  the  teller  was  in  no  way  connected 
with  his  employment.  So  long  as  the  bank  was  ignorant  of  the 
dishonesty  of  the  teller,  and  trusted  him  with  its  own  funds,  con- 
fiding in  his  character  for  integrity,  it  would  be  a  harsh  rule  that 
would  hold  it  liable  for  an  act  not  in  the  course  of  business  of  the 
bank,  or  of  the  employment  of  the  officer.  There  was  no  under- 
taking to  the  bailor  that  the  officers  should  not  steal.  Of  course, 
there  was  a  confidence  that  they  would  not,  but  not  a  promise 
that  they  should  not.  .  .  .  Nothing  short  of  a  knowledge  of  the 
true  character  of  the  teller,  or  of  reasonable  grounds  to  suspect 
his  integrity,  followed  by  a  neglect  to  remove  him,  can  be  said 
to  be  gross  negligence,  without  raising  a  contract  for  care  higher 
than  a  gratuitous  bailment  can  create."  * 

The  fact  that  for  two  years  he  has  falsified  the  books  of  the 
bank  without  being  discovered  was  held,  in  the  cited  case,  not 
to  be  such  negligence  as  to  render  the  bank  liable.  For  the  neg- 
ligence constituting  the  ground  of  liability  must  be  such  as  enters 
into  the  cause  of  the  loss ;  but  the  loss  here  was  chargeable  to  the 
immediate  act  of  dishonesty  of  the  teller,  not  to  the  fact  that  he 
had  purloined  the  bank's  funds  or  falsified  the  bank's  books. 

M  201.     First  National  Bank  of  AUontown  v.  Rex,  89  Pa.  St.  308. 
"  Foster  v.  Essex  Bank,  17  Mass.  479  ;  Rav  v.  Bank,  10  Bush  (Ky.)  344  ; 
Finucane  v.  Small,  1  Esp.  R.  315 ;   Giblin  v.  M'Mullen,  2  L.  R.  P.  C.  317. 
»  §  202.     Scott  V.  National  Bank,  72  Pa.  St.  471. 

VOL.  1  —  28  433 


§  202  SPECIAL   DEPOSIT 

Robbery 

A  bank  is  liable  for  loss  of  a  special  deposit  by  robbery,  there 
being  neither  fraud  nor  gross  negligence  imputable  to  it.^ 

More  proof  must  be  given  by  the  owner  than  merely  that  the 
bonds  were  stolen,  or  he  cannot  recover.^ 

When  the  plaintiff's  evidence  fails  to  exclude  the  possibility 
of  loss  by  other  means  than  the  negligence  of  the  bank,  as  where 
the  evidence  tends  to  show  that  the  bank  did  use  due  care,  and 
there  is  no  evidence  of  negligence  in  the  selection  of  cashier  or  of 
clerks,  and  the  only  evidence  of  negligence  is  that  provided  by  the 
mere  fact  of  loss,  although  the  presumption  of  innocence  will 
protect  the  cashier  and  clerks  from  a  charge  of  theft,  yet  it  will 
not  "  sustain  the  burden  of  proof  in  an  action  against  the  bank  for 
negligence."  '^ 

§  203.  Varying  the  Contract  by  Agreement.  —  If  any  special 
arrangement  should  be  entered  into  by  which  the  bank  should 
be  enabled  to  derive  any  advantage  or  profit  from  the  receipt 
and  custody  of  the  deposit,  or  if  it  should  accept  pay  for  the  care 
of  the  same,  then  its  duties  would  at  once  be  changed  to  those 
of  an  ordinary  bailee  for  hire.  Then,  as  in  the  supposed  instance 
of  robbery  or  embezzlement  by  one  of  its  own  officers,  it  would 
be  no  exoneration  from  liability  to  show  that  the  same  care  had 
been  taken  of  this  as  of  the  bank's  funds,  and  that  the  same  officer 
had  in  the  same  way  plundered  the  bank  itself.     The  corporation 

2  Whitney  v.  First  National  Bank,  55  Vt.  154  (1882).  See  Gerrish  v. 
Muskegon  Savings  Bank,  138  Mich.  46,  100  N.  W.  1000  (1904). 

When  an  employee  of  the  bank  places  bonds  of  a  town  in  the  safe  of  a 
bank  for  his  own  personal  accommodation  with  knoAvledge  of  a  rule  that 
the  bank  would  not  act  as  the  custodian  of  negotiable  securities  and  that 
such  securities  were  at  the  owner's  risk,  the  bank  is  not  a  bailee  of  the 
securities  and  is  not  liable  when  the  securities  are  stolen.  Fairfield  v. 
Southport  National  Bank,  80  Conn.  92,  67  Atl.  471  (1907). 

3  WyUe  V.  Northampton  Bank,  15  Fed.  Rep.  428. 

^  Smith  V.  First  National  Bank,  99  Mass.  605.  It  seems  to  be  law 
that  in  trover  proof  of  demand  and  refusal  will  throw  the  burden  on  the 
defendant,  to  show  a  good  excuse  for  refusal  to  deliver ;  but  that  in  as- 
sumpsit or  action  on  the  ease  the  burden  is  on  the  plaintiff  to  make  out 
neghgenee.  See  Story  on  Bailments,  §  213.  This  does  not  commend 
itself  very  strongly,  for,  the  facts  being  the  same,  the  form  of  action  should 
not  be  allowed  to  shift  the  burden.  The  substantial  and  common  sense 
fact  is,  that  the  defendant,  having  failed  to  deliver,  should  justify  him- 
self, especially  as  the  facts  which  can  accomplish  that  object  are  pecul- 
iarly within  his  own  knowledge.  See  also  Merchants'  Bank  v.  Carhart, 
95  Ga.  394,  22  S.  E.  628  (1894). 

434 


DELIVERY    OF   SPECIAL   DEPOSIT  §  204 

would  still  be  held  to  make  good  the  bailor's  loss.  But  it  is  clear 
that  some  such  direct  advantage,  operating  by  way  of  considera- 
tion for  the  assumption  of  increased  responsibility,  must  accrue 
to  the  bank  to  place  it  under  such  an  obligation.  An  cx]:)ress 
stipulation  or  acknowledgement,  given  by  the  cashier  in  writing, 
to  the  efYect  that  the  property  has  been  received  by  the  bank 
"  for  safe  keeping,"  does  not  make  the  transaction  other  than  a 
naked  bailment,  as  above  stated.^ 

(a)  Showing  to  the  depositor  the  arrangements  of  the  bank 
for  safe  keeping  of  deposits  is  not  a  representation  increasing 
the  obligation  or  liability  of  the  bank.^  But  representations 
may  be  made  to  induce  parties  to  deposit,  which  may  call  for 
greater  care  on  the  part  of  the  bank,  or  by  agreement  the 
bank  may  even  become  an  insurer  of  the  deposit,  as  where 
a  written  promise  was  given  to  return  bonds  on  demand  or  pay 
their  value. ^ 

Representation  of  Cashier  UnautJiorized  and  Unknown  to  Board, 
Cannot  Enlarge  the  Contract 

(b)  A.,  at  the  solicitation  of  the  cashier  of  a  bank,  deposited 
with  it,  for  safe  keeping,  certain  bonds,  taking  a  receipt  therefor, 
stating  that  they  were  received  "  for  deposit  in  the  vault  of  this 
bank  at  the  risk  of  the  depositor."  Held,  that,  in  absence 
of  any  evidence  that  the  bank  was  accustomed  to  receive  bonds 
for  safe  keeping,  except  owner's  risk,  or  that  the  directors  had 
knowledge  that  bonds  were  left  at  the  instance,  request,  or  solic- 
itation of  the  cashier,  evidence  of  the  latter's  representations 
at  the  time  of  the  deposit  as  to  the  safe  keeping  of  the  bonds  was 
not  sufficient  to  change  the  effect  of  the  receipt  so  as  to  affect  the 
bank.^ 

§204.  Delivery  of  Special  Deposit.  —  A  bank  is  liable  for 
gross  negligence  in  keeping  or  delivering  a  special  deposit,  but 
if  the  person  to  whom  it  negligently  delivers  the  deposit,  without 
requiring  evidence  of  any  authority  on  his  part  to  receive  it, 
was  nevertheless  unknown  to  the  bank,  really  authorized  by  the 
depositor  to  receive  it,  the  bank  is  discharged.^ 

1  §  203.     Fostor  v.  Essex  Bank,  17  Mass.  479. 

2  Hale  V.  Rawallio,  8  Kan.  13G ;   Maurv  v.  Covie,  34  Md.  23.5. 

3  Comp  V.  Carlisle  Deposit  Bank.  94  Pa.  St.  409  (1880).     See  §  103. 

1  §  204.     Chatlahoochee  National  Bank  v.  Schley,  58  Ga.  369  (1877). 

435 


I 


§  204  SPECIAL  DEPOSIT 

Delivery  to  Wrong  Person 

The  bank  was  held  Uable  where  the  teller  delivered  certain 
bonds,  left  as  a  special  deposit,  to  a  person  calling  himself  by  the 
same  name  as  the  bailor,  but  in  fact  not  being  the  bailor ;  on  the 
ground  that  the  teller  was  guilty  of  gross  negligence  in  not  taking 
proper  care  to  assure  himself  as  to  the  identity  of  the  stranger 
with  the  bailor. 2 

W.  left  securities  with  a  bank  for  safe  keeping,  taking  a  receipt 
which  stated  that  they  would  be  delivered  on  its  surrender.  The 
bank  delivered  to  W.'s  husband,  without  requiring  production 
of  the  receipt  or  of  an  order  from  W.  Held,  the  bank  was  still 
liable  to  W.3 

A  bank  is  not  liable  for  delivering  special  deposits  to  an  agent 
who  had  authority  to  control  them  for  certain  purposes,  unless  it 
had  notice  of  the  revocation  of  his  authority,  or  knew  the  use  he 
was  going  to  make  of  them,  and  that  it  was  an  unauthorized  use.* 

A  sealed  packet  must  be  delivered  to  a  magistrate  upon  a  sub- 
poena duces  tecum  requiring  the  banker  to  produce  it.^ 

§  205.  A  Special  Deposit  is  no  Part  of  the  Bank's  Available 
Assets.  —  As  has  been  seen,  a  special  deposit  does  not  enter  into 
the  general  funds  of  the  bank,  and  form  a  part  of  its  disposable 
capital.  It  is  to  be  kept  by  itself,  and  specifically  returned. 
Hence  it  follows  that  a  bank  cannot  base  any  increase  of  issues 
or  discounts  upon  such  unavailable  deposits.  They  are  in  no 
sense  at  its  disposal,  and  it  can  in  no  manner  (unless  there  be  a 
special,  extraordinary,  and  peculiar  arrangement)  reap  any  advan- 
tage or  profit,  direct  or  indirect,  from  the  simple  custody  of  them. 
They  are  not  part  of  its  moneys.''     Whence  it  follows,  that,  if  the 

2  Lancaster  Bank  v.  Smith,  12  P.  F.  Smith  (Pa.)   54. 

When  a  bank  accepts  money  and  agrees  to  hold  it  subject  to  a  lien  it 
is  liable  for  whatever  has  to  be  paid  to  protect  the  property  from  a  judg- 
ment obtained  in  the  lien  proceedings,  if  it  pays  the  money  to  the  depositor. 
Fort  V.  First  National  Bank,  82  S.  C.  427,  64  S.  E.  405  (1908). 

If  a  bank  holding  money  in  escrow  to  be  paid  to  one  of  two  parties  in 
accordance  with  the  terms  of  an  agreement  pays  it  to  the  one  not  entitled 
thereto  it  is  liable  to  the  other  party.  Citizens'  National  Bank  v.  Davisson, 
329  U.  S.  212,  .57  L.  ed.  1153,  33  Sup.  Ct.  625  (1912). 

3  Ganley  v.  Troy  City  National  Bank,  98  N.  Y.  487. 

^  Walker  v.  Manhattan  Bank,  25  Fed.  Rep.  247  (1885). 

5  Rex.  V.  Dave  (1908),  2  K.  B.  3.33. 

"  §  205.  McGregor  v.  Battle,  128  Ga.  577,  58  S.  E.  28  (1907) ;  Shopert 
V.  Indiana  National  Bank,  41  Ind.  App.  474,  83  N.  E.  515  (1908) ;  Butcher 
V.  Butler,  134  Mo.  App.  61,  114  S.  W.  564  (1908). 

436 


A  SPECIAL  DEPOSIT    IS   NO   PART  OF   BANK's  AVAIL.\BLE   ASSETS     §  205 

law  require  the  bank  to  return  to  the  government  officials  an  an- 
nual account  of  moneys  deposited,  yet  the  bank  is  not  bound  to 
return  any  account  of  its  special  deposits.^ 

Trover  will  lie  for  a  depositor  to  recover  his  special  deposit, 
in  specie;  or,  if  it  has  been  converted  by  the  bailee,  assumpsit  will 
lie  to  recover  its  value.^ 

A  bank  has  no  right  to  use  a  special  deposit  or  to  mingle  it 
with  its  funds.2" 

Interest  can  be  allowed  on  a  special  deposit  only  from  the  tune 
of  wrongful  refusal  to  return  it.^ 

1  Foster  v.  Essex  Bank,  17  Mass.  479. 

2  Ibid. ;  Bank  of  Columbia  v.  Patterson's  Adm'r,  7  Cranch  299  ;  Green 
V.  Sizer,  40  Miss.  530. 

2»  Covey  V.  Cannon,  104  Ark.  550,  149  S.  W.  514  (1912). 

3  Anderson  v.  Pacific  Bank,  112  Cal.  598,  44  Pac.  1063. 


437 


CHAPTER   XV 
SPECIFIC   DEPOSIT 

Duty  of  the  Bank. 

§  207.  A  specific  deposit  must  not  be  applied  to  any  other  purpose 

than  the  one  for  which  it  was  deposited,  and  the  instruction 
accompanying  it  must  be  carefully  carried  out. 

§  208.  The  bank  has  no  lien  on  such  deposits  for  its  general  balance ; 

and  if  there  is  a  surplus  from  sale  of  collateral,  after  payment 
of  the  debt  secured,  the  bank  cannot  credit  it  on  general  ac- 
count.    §  325. 

Liability  of  the  Bank. 
(a)  Property  kept  distinct. 
§  189  If  the  bank  is- a  gratuitous  bailee,  it  is  liable,  as  for  a  special 

deposit,  in  case  of  negligence. 
§  211.  If  the  bank  is  a  bailee  for  hire,  it  is  bound  to  ordinary  care, 

and  no  more,  and  is  liable  for  loss  by  theft,  if  grossly 
negligent. 
§  209.  Receiving  a  commission  does  not  necessarily  make  the  bank  a 

bailee  for  hire. 
§  215.     (5)    If  the  fund  is  not  kept  separate,  but  mingled  with  the  prop- 
erty of  the  bank  indistinguishably,  the  bank  is   liable  as 
for  a  general  deposit. 
§  630.  The  deposit  becomes  a  debt,  or  a  claim  for  damages  grows 

upon  the  grave  of  the  trust. 
§  589  b.   Title  to.     §  565  (2),  (9). 

§  207.  A  Specific  Deposit  must  not  be  diverted  from  its  Purpose.'^ 
—  A.  deposited  in  a  bank  the  counterparts  of  certain  contracts 
to  deliver  oil  at  his  own  option  within  a  stated  time,  and,  as  a 
security  for  the  contracts,  also  deposited  checks  of  H.,  who  was 
a  depositor  in  the  bank,  payable  to  the  cashier  "  for  margin  for 
oil  sold  as  per  contracts  in  the  hands  of  "  the  cashier.     The  counter- 

«  §  207.     United  States  v.  National  Bank,  73  Fed.  379. 

The  bank  is  justified  in  refusing  to  pay  checks  when  not  drawn  for  the 
purpose  of  the  specific  deposit.  Stephens  v.  Chehalis  National  Bank,  80 
Wash.  254,  141  Pac.  340  (1914) ;  and  it  is  hable  for  failure  to  pay  checks 
drawn  for  the  specific  purpose  of  the  deposit.  Eshbach  v.  Byers,  164 
lU.  App.  449  (1911). 

438 


INSTRUCTIONS   ACCOMPANYING    A    DEPOSIT  §  208 

parts  were  indorsed  by  A.,  to  the  effect  that  the  mar^'ln  was  a 
guaranty  for  the  fulfihnent  of  the  contracts,  and  with  tlie  further 
stipulation,  that,  if  more  margin  be  needed,  demand  should  be 
made  on  A.,  and  if  not  met  the  contract  should  be  sokl.  The 
cashier  also  indorsed  on  the  counterparts  the  receipts  for  the 
margins  on  the  conditions  therein  set  forth.  Before  the  contracts 
matured  they  were  settled,  and  the  margins  were  carried  by  the 
bank  to  the  credit  of  A.,  who  drew  them  out  by  check.  In  an 
action  by  H.  against  the  bank  for  the  margins,  he  recovered,  the 
court  hokling  that  the  checks  operated  as  a  specific  appropriation, 
to  the  extent  named  therein,  of  the  drawer's  funds,  to  be  a])plied 
by  the  bank  solely  to  pay  such  sum  as  A.  might  become  liable  to 
pay  on  the  event  of  his  failure  to  comply  with  the  contracts,  and 
the  bank,  as  custodian  of  tlie  money  for  that  specific  purpose, 
had  no  right  to  appropriate  it  in  any  other  way.^ 

So,  where  a  buyer  of  cattle,  indebted  to  a  banking  firm  as 
principal  upon  a  note  that  had  matured,  deposited  and  checked 
out  an  amount  greater  than  the  note,  under  a  special  agreement 
with  the  bank  that  he  would  give  the  sellers  checks  payable  after 
he  had  sold  the  cattle  and  deposited  the  proceeds,  and  that  the 
bank  should  apply  such  deposits  exclusively  to  pay  such  checks. 
Held,  that  the  same  could  not  have  been  applied  to  pay  the  note.^ 

§  208.  Instructions  accompanying  a  Deposit,  and  coming  from 
the  proper  authority,  must  be  carefully  attended  to.  When  the 
depositor  orders  his  money  to  be  put  on  one  of  his  accounts,  or 
to  be  applied  to  take  up  a  particular  check  or  note,  or  to  be  trans- 
mitted to  a  certain  person,  or  whatever  special  direction  he  may 
give,  the  bank  must  obey  if  it  receives  the  deposit  at  all.^ 

1  Parker  v.  Hartley,  01  Pa.  St.  465  (1879). 

2  Wilson  V.  Dawson,  52  Ind.  513  (1870). 

1  §  208.  Judy  V.  Farmers  &  Traders'  Bank,  81  Mo.  404 ;  Union  Na- 
tional Bank  v.  Desmond,  33  111.  App.  102 ;  Desmond  v.  Merchants'  Na- 
tional Bank,  33  111.  App.  95 ;  Hummel  v.  First  National  Bank,  2  Col. 
App.  571 ;  MeDonald  i>.  Amcriean  National  Bank,  25  Mont.  450,  G5  Pac. 
890  (1901)  ;  Marsh  v.  First  State  Bank,  185  111.  App.  29  (1913),  and  the 
words  "%  D.  W.  T."  are  immaterial  since  they  do  not  amount  to  a 
direction  to  deposit  to  the  general  account  of  D.  W.  T. 

When  a  bank  receives  money  to  loan  on  good  real  estate  security  it  is 
guilty  of  fraud  in  loaning  the  money  to  an  insolvent  person  ^^^thout  taking 
good  security  therefor,  or  in  transferring  to  the  depositor  secured  notes 
held  bv  it  but  which  it  is  not  willing  to  recommend  without  qualification. 
Larsen  v.  Utah  Loan  etc.  Co.,  23  Utah  449,  ()5  Pac.  208  (1901). 

If  a  banker  is  authorized  to  loan  his  customer's  money  he  is  the  cus- 
tomer's agent  for  that  purpose  and  is  only  liable  for  failure  to  exercise 

439 


§208 


SPECIFIC   DEPOSIT 


If  the  purpose  for  which  the  special  deposit  was  made,  fails, 
the  bank  is  liable  to  the  depositor  for  the  return  of  the  funds. i" 

When  the  bank  returns  to  the  depositor  money  deposited  as  a 
forfeit  it  is  liable  if  the  depositor  is  the  one  who  fails  to  fulfil  the 
condition.^^  But  if  a  bank  holds  money  deposited  on  a  continu- 
ing offer  lacking  mutuality  it  is  not  liable  to  the  other  party  on  a 
revocation  of  the  offer.^'' 

If  money  is  left  by  C.  to  be  sent  to  bank  A.,  and  instead  it  is 
sent  (according  to  a  custom  among  the  banks)  to  B.,  the  cor- 
respondent of  A.,  loithout  notice  to  B.  that  the  fund  belongs  to  C, 
and,  A.  becoming  insolvent,  B.  applies  the  money  on  A.'s  debt  to 
itself,  the  depository  bank  is  liable  to  C.  for  the  amount,  for  it 
should  have  transmitted  directly  to  A.,  or  have  accompanied  the 
funds  with  notice  of  C.'s  rights,  so  that  B,  could  not  have  acquired 
title  to  them  .2 

§  209.  A  Commission  does  not  always  make  the  Bank  a  Bailee 
for  Hire.  —  A  bank  was  in  the  habit  of  taking  bonds  for  safe 
keeping,  and  of  detaching  the  coupons  and  collecting  the  interest 
for  the  depositors  of  the  bonds.  It  sent  these  coupons  to  city 
banks  and  the  proceeds  were  there  placed  to  its  credit,  and  upon 
the  funds  thus  accumulated  it  would  draw  drafts  and  charge  a 
small  commission  therefor.  The  interest  paid  by  the  city  banks 
was  inconsiderable,  and  the  amount  realized  therefrom,  and  the 
commissions  on  drafts,  did  not  compensate  for  the  trouble  of 
forwarding >the  coupons  and  paying  out  the  interest.  Held,  that 
these  facts  did  not  constitute  the  bank  a  bailee  for  hire.^ 

§  210.  Liability  for  Money  deposited  specifically.  —  It  is  the 
custom  of  banks,  upon  receiving  money  for  a  specific  purpose,  as 

good  faith  and  reasonable  diligence.  But  if  he  loans  the  money  without 
authority  he  becomes  agent  from  his  own  wrong  and  becomes  absolutely 
responsible  for  the  money.  Watson  v.  Fagner,  99  111.  App.  364(1901)  ; 
id.,10.5Ill.  App.  52  (1902). 

The  instructions  may  be  shown  after  the  decease  of  the  depositor. 
Washbon  v.  State  Bank,  8G  Kan.  4G8,  122  Pac.  515  (1912) ;  Fidehty  etc. 
Co.  V.  State  Bank,  91  Kan.  740,  139  Pac.  370  (1914). 

1°  American  Exchange  National  Bank  v.  Loretta  Gold  and  Silver 
Mining  Co.,  165  III.  103,  46  N.  E.  202;  McDonald  v.  American  National 
Bank,  25  Mont.  456,  65  Pac.  896  (1901) ;  Mester  v.  Quincy  National  Bank, 
163  111.  App.  645  (1911). 

1^  Hunter  v.  Wallace,  .57  Tex.  Civ.  App.  1,  121  S.  W.  180  (1909). 

1"=  Herrin  v.  Scandinavian- American  Bank,  65  Wash.  5G9,  118  Pac.  648 
(1911). 

2  Drovers'  National  Bank  v.  O'Hare,  119  III.  646,  10  N.  E.  360. 

1  §  209.     Comp  V.  Carlisle  Deposit  Bank,  94  Pa.  St.  409  (1880). 

440 


GROSS    NEGLIGENXE    MAKES   THE    BANK    LIABLE  §  212 

to  pay  a  note,  to  mingle  the  funds  with  their  own,  and  to  pay  the 
note  at  the  proper  time,  just  as  they  would  a  eheck;  the  funds 
are  not  kept  separate.  There  is  no  practical  difference  between 
such  a  deposit  and  a  general  deposit,  and  it  seems  clear  that  the 
bank  should  be  held  to  the  same  liability  as  for  a  general  deposit.^ 

Evidence  of  Liability 

A  certificate  issued  by  a  cashier  of  a  bank  in  the  ordinary  course 
of  business,  stating  the  receipt  of  a  specific  deposit,  payable  on 
the  happening  of  a  certain  contingency,  is  privia  facie  evidence 
of  the  bank's  liability .- 

§211.  Liability  of  Bank  for  Collateral  Security.  —  In  the  case 
of  property  pledged  to  the  bank  as  collateral  security,  it  has  been 
said  that  the  bank  is  ])()und  only  to  ordinary  care  in  keeping  it.^ 

§212.  Gross  Negligence  makes  the  Bank  liable.  —  A  bank 
is  liable  for  securities  deposited  as  collateral  and  stolen  by  the  pres- 
ident, if  the  bank  has  been  remiss  in  its  duty  in  the  selection  and 
supervision  of  its  officers.^  In  this  case  the  trustees  were  in  the 
habit  of  leaving  the  entire  active  management  of  the  bank  in  the 
hands  of  the  president ;  he  had  occasionally  abstracted  securities 
and  used  them  in  his  own  private  affairs,  but  had  been  accus- 
tomed to  return  them  whenever  called  for.  It  appeared  that  the 
borrower  knew  of  these  facts  when  lie  deposited  the  security. 
The  trustees  did  not  hold  the  meetings  required  by  the  by-laws. 
The  court  held  that  the  bank  was  bound  to  use  ordinary  care  to 
select  good  officers  and  servants,  and  that  it  must  exercise  such 
supervision  and  vigilance  as  a  discreet  person  would  use  in  his 
own  affairs.  A  bank  might  not  be  liable  for  a  single  act  of  fraud 
or  crime,  where  it  would  be  for  a  continuous  series  of  acts,  especially 
so  easily  detected  as  here.  Here  are  no  meetings,  no  supervision, 
no  examination,  no  inquiry,  actual  knowledge  of  the  managing 
trustee  of  the  wrongful  conduct,  and  silence.^  Surely  a  strong 
case. 

Bonds  were  deposited  as  a  special  deposit ;    afterward  they 

1  §  210.     McLain  v.  Wallace,  103  Ind.  5G3,  5  N.  E.  911. 

2  American  National  Bank  v.  Presnall,  .58  Kan.  69,  48  Pac.  556  (1897). 

^  §  211.  Jenkins  v.  National  Village  Bank,  58  Me.  275;  Dearborn  v. 
Union  National  Bank,  58  id.,  273 ;  61  id.,  369.  See  Ornie  v.  Baker,  74 
Ohio  St.  337,  78  N.  E.  439  (1906) ;  Scott  v.  First  National  Bank,  5  Ind. 
T.  292,  82  S.  W.  751  (1904). 

1  §  212.     Cutting  V.  INIarlor,  78  N.  Y.  454. 

441 


I  212  SPECIFIC   DEPOSIT 

were  held  as  collateral  security.  They  were  embezzled  by  the 
cashier.  Held,  the  bank  was  hable  as  a  pledgee,  it  having  been 
guilty  of  gross  negligence  in  allowing  the  cashier  to  retain  his  posi- 
tion after  knowledge  that  he  gambled. ^ 

Where  bonds  are  delivered  to  a  bank  as  collateral  security  for 
a  debt,  if  it  does  not  appear  what  has  become  of  them,  it  is  to  be 
assumed  that  they  are  in  the  bank's  possession.* 

2  Prather  v.  Kean,  29  Fed.  498  (Feb.  1887). 

3  Detroit  Motor  Co.  v.  Third  National  Bank,  111  Mich.  407,  69  N.  W. 
726  (1897). 


442 


CHAPTER   XVI 
COLLECTION   IX   GENERAL 

(See  "Title"  and  "Deposit.") 

A.  Nature  of  the  Contract. 

§  214.  In  collecting  upon  paper  in  its  hands,  or  in  applying  money 

previously  received,  the  bank  acts  as  agent  for  the  one  who 
is  entitled  to  the  proceeds ;  but  if  money  was  received  be- 
fore the  paper  was  lodged  with  it  for  collection,  or  before 
maturity  of  the  paper,  and  not  applied,  it  has  acted  only 
as  agent  of  the  debtor. 

§  215.  The  consideration  arising  from  the  hope  of  attracting  custom 

is  sufficient,  though  a  commission  may  be  charged. 

§  216.  The  authority   to  collect   continues  after  dishonor,  if  the 

paper  is  left  wth  the  bank. 

§  217.  Indorsement  to  "Bank,  for  collection,"  neither  carries  title 

to  the  bank,  nor  makes  the  indorser  liable  as  such,  but  is 
notice  to  all  of  the  indorser's  right  to  the  proceeds,  and 
also  that  B.  or  his  agent  is  the  proper  person  to  receive 
payment. 

B.  Duty  of  the  Bank. 

I.     In  General. 

§§  218,  219.  (1)  The  bank  must  use  reasonable  care  and  skill,  keeping 
in  mind  the  best  interests  of  its  principal,  and  so  act- 
ing as  to  preserve  the  UabiHty  of  all  parties  to  him, 
by  proper  presentment,  protest,  notice,  and  care  of 
securities,  so  far  as  reasonable  diligence  can  accom- 
plish these  objects.     See  §  239. 

§  230.  (2)  The  bank  must  observe  the  laws  and  usages  prevail- 

§  243.  ing  in  its  locus,  unless  the  contract  is  in  reference  to 

some  other,  as, 

§  221.  When  it  receives  special  instructions,  or  when  the 

parties  must  be  presumed  to  have  contracted  in 
reference  to  the  usage  of  a  particular  bank. 

§  222.  Proof  of  knowledge  of  usage  of  a  single  bank. 

§  223.  (3)   Local  usage  can  affect  only  the  manner  of  presentment, 

notice,  etc.,  and  cannot  justify  their  omission.  See 
contra,  §  231. 

§  224.  (4)  The  l^ank  must  obey  instructions  received  from  its  prin- 

cipal, and  must  forward  proper  directions  to  its  corre- 
spondent. §  362. 

§  255.  (5)  Must  take  care  of  collateral  security,  bills  of  lading,  etc. 

443 


COLLECTION    IN   GENERAL 

§  226.  (6)  The  bank  has  discretion  in  doubtful  eases.     See  §  §  255, 

250. 
II.     Special  Statement  of  Duties  of  Bank  collecting  in 
Locus. 
(1)  Presentment  for  acceptance.     See  §  252  a. 
§  258.  (a)  What  paper  must  be  presented  for  acceptance. 

§  227.  (1)  Draft  payable  at  a  future  day  should  be 

presented. 
§  258.  (b)  When  presentment  for  acceptance  should  be  made, 

where,  by  whom,  to  whom,  its  effect,  and 
the  effect  of  failure. 
§§  229,  259.     (2)  Presentment  for  payment. 
§§240,242,245.  (a)  Time  of . 

§§  230,  259  b.  {b)  Place  of. 

§§  223,  231.  (c)   Usage  of  some  banks  to  send  notice  to  the 

debtor  that  the  paper  is  at  the  bank,  instead 
of  making  demand  upon  him  in  the  regular 
way. 
I  259.  (d)  By  whom,  on  whom,  and  how,  presentment 

for  payment  should  be  made. 
I  228.  (3)  Protest,  or  steps  taken  to  provide  authentic  evidence 

of  dishonor.     See  §  252  c. 
§  260.  What  paper  should  be,  and  what  may  be,  pro- 

tested, where,  when,  by  whom,  and  how  the 
protest  is  to  be  made. 
§  261.  (4)  Notice  of  dishonor. 

General  statement. 
I  232.  The  bank  need  give  notice  only  to  its  imme- 

diate principal,  unless  agreement  or  usage 
vary  the  rule, 
(a)  As  in  New  York  city. 
§  233.  (b)  When  notice  is  to  be  given. 

Manner  of  notice,  when  personal,  and  when  by 
mail, 
(c)   Test  of  the  difference  of  place  requisite  to  use 
of  the  mail. 
§  234.  (5)     Excuse  for  failure  to  present  or  notify. 

§  262.  (6)     What  is  no  excuse. 

§  263.  §  234  a.     Insolvency  is  not. 

III.  Collections  not  in  the  Locus  of  the  Depositary. 
I  235.  Duty  of  the  transmitting  bank.    General  statement. 

To  select  its  agent  with  care,  transmit  instruc- 
tions, and  inquire  promptly.     See  §  252  d. 
§  236.  What  is  due  care  in  selecting  a  sub-agent. 

It  is  negligence  in  the  United  States  to  send  the 
paper  to  the  drawee.     §  427. 

§  237.     IV.    Collection  of  Checks. 

§  238.  (1)  Distinction  between  duty  of  bank  to  its  customer 

and  duties  existing  between  other  parties. 
§  239.  Illustration.     The  time  of  presentment  required 

to  fulfil  the  bank's  duty  to  the  depositor,  and 

the  very  different  time  that  may  be  necessary 

to  hold  the  drawer. 
(2)  Time  of  presenting  checks.     See  §  259. 

444 


COLLECTION    IN    GENERAL 

§  240.  General  rule. 

I  247.  Special  rule,  where  a  check  is  taken  by  an  agent 

in  paying  without  authority  so  to  do. 
§  241.  Time  within  which  a  check  payable  in  another  place 

must  be  forwarded. 
§  245.  Time  enlarged  l)y  crossing,  in  some  cases. 

§  242.  The  time  rule  may  l)e  varied  by  instructions,  course 

§  222.  of  dealing,  general  usage  of  the  banks  in  a  city 

or  town,  or  usage  of  a  particular  bank,  in  certain 
cases. 
§  244.  The  fundamental  rule. 

Underlying  all  questions  of  presentment,  notice, 
etc.,  is  that  the  bank  must  use  ordinary  care 
and  diligence  under  all  the  circumstances. 
§  245.       V.     Crossed  Checks. 

Must  be  paid  as  crossed. 

Time  for  presentment  may  be  enlarged  by  crossing. 
§  246.     VI.     Suits  by  the  Bank  upon  Paper  it  holds  for  Collection. 

VII.     Proceeds.     §  589  c. 
§  247.  (1)  The  general  rule  is  that  only  good  money   is 

to  be  received  in  payment  of  paper  by 
collecting  bank, 
(o)  Mode  of  dealing,  or  an  agreement,  may  vary 
the  rule,  and  a  bank  may  take  its  own 
certificate  of  deposit,  unless  the  taking  is 
a  fraud.     §  305. 

(b)  A  substituted  note  may  be  recovered  by  the 

owner  of  the  note  for  which   the    sub- 
stitute was  received. 

(c)  Check  taken  in  payment  without  authority 

is  at  the  bank's  risk,  (unless  the  principal 
ratifies  its  action,  as  he  may  do,  by  re- 
ceiving the  check,  with  knowledge  of  the 
facts  of  the  case,)  and  it  should  take  care 
to  preserve  the  evidence  of  liability  of 
prior  parties.  See  §  366. 
§  247.  (d)  If  the  bank  receives  depreciated  currency, 

it  must  make  good  the  face  of  the  paper 
in  good  money. 
(2)  Disposal  of  the  Proceeds. 
§  248.  The  bank  may  elect  to  credit  them  to  the  prin- 

cipal on  general  deposit  (unless  the  instruc- 
tions are  to  collect  and  remit), 

(1)  When  the  owner  is  a  depositor. 

(2)  When  he  is  not. 

Or  it  may  retain  them  as  a  special  deposit, 
or,  without  instructions,  remit  them  at  once. 

If  it  credits  them,  it  wU  bear  any  loss  that 
occurs  by  depreciation  of  the  funds  received. 
If  it  keeps  separate  the  specific  funds,  it 
may  at  any  time  discharge  itself  by  de- 
livering them  to  the  owner  of  the  paper, 
from  the  collection  of  which  they  are  the 
proceeds. 

445 


§  214  COLLECTION    IN    GENERAL 

§  248  (o).  Insolvency  revokes  the  right  to  credit  the 

proceeds,  and  mingle  them  with  the  bank's 
funds. 
Insolvency  of  the  collecting  bank. 
Insolvency  of  the  transmitting  bank. 
§  248  (b).  Proceeds  of  paper  having  forged  indorsement 

belong  to  tlie  rightful  power  of  the  paper. 
Title  to  proceeds.     See  §  565. 

C.     Liabilities  growing  out  of  Collection. 
1.     To  whom  the  liability  runs. 
§  249.  When  the  first  bank  becomes  debtor  to  the  owner. 

Liabilities  of  the  various  banks  to  the  owner. 
§  250.  Cessation  of  the  liability  of  the  agent  bank  to  the  owner, 

when  such  agent  becomes  a  bona  fide  holder.     See  §  565. 

§  251,  §  220.     Liability  to  the  Real  Party  in  Interest. 

II.     Causes  of  liability. 
§  243.  Failure  to  follow  the  usual  course. 

§  252.  (a)   Irregular  acceptance. 

(6)   Taking  check  instead  of  money.     English  usage 
allows.     See  §  247. 

(c)  Failure  to  protest.     §§228,259. 
Violation  of  instructions.      §§  220,  224. 

(d)  Failure  to  inquire.      §  235. 

(e)  Negligent  loss  of  the  paper. 
§  253.  Default  of  branch  bank. 

§  255.  Mistakes.     See  §  226. 

§  256.  Of  fact. 

Of  law. 

§  254.  When  Depositor  is  also  in  Fault. 

§  214.  The  Collecting  Bank  acts  as  Agent.  —  A  bank  receiving 
paper  for  collection  °  is  generally  the  agent  of  the  party  from 
whom  it  receives  it ;  ^   sometimes  of  the  real  owner,  if  he  stands 

°  §  214.  The  delivery  of  a  certificate  of  deposit  by  mail  with  a  letter 
stating  that  it  was  "for  deposit  in  your  bank  to  my  credit"  is  a  deposit 
for  collection.  Hilsinger  v.  Trickett,  86  Ohio  St.  286,  99  N.  E.  305, 
1913D  Ann.  Cas.  421,  n. 

1  Daly  V.  Butchers  &  Drovers'  Bank  of  St.  Louis,  56  Mo.  94,  and  cases 
cited  post;  Ward  v.  Smith,  7  Vv^all.  447,  19  L.  ed.  207 ;  Exchange  Bank  v. 
Sutton  Bank,  78  Md.  577;  Medland  National  Bank  v.  Brightwell,  148 
ISIo.  358,  49  S.  W.  994  (1898) ;  Garrison  v.  Union  Trust  Co.,  139  Mich. 
392,  102  N.  W.  978,  111  Am.  St.  Rep.  407,  70  L.  R.  A.  615  (1905) ;  Com- 
mercial National  Bank  v.  First  National  Bank,  158  Ky.  392,  165  S.  W.  398 
(1914) ;  Fort  Dearborn  National  Bank  v.  Security  Bank,  87  Minn.  81, 
91  N.  W.  257  (1902)  ;  Ober  v.  Cochran,  118  Ga.  396,  45  S.  E.  382,  98 
Am.  St.  Rep.  118  (1903);  Second  National  Bank  v.  Bank  of  Alma,  99 
Ark.  383,  138  S.  W.  472  (1911)  ;  Fanset  v.  Garden  City  State  Bank,  24 
S.  D.  248,  123  N.  W.  686  (1909)  ;  Lord  v.  Hingham  National  Bank,  186 
Mass.  161,  71  N.  E.  312  (1904) ;  Gleason  v.  Thayer,  87  Conn.  248,  87  Atl. 
790,  1915B  Ann.  Cas.  1069,  n.:  Goshorn  v.  Murray,  197  Fed.  407  (1912) ; 
Security  Savings  etc.  Co.  v.  King,  69  Or.  228,  138  Pac.  465  (1914) ;  Na- 

446 


THE    COLLECTING    BANK   ACTS   AS    AGENT  §  214 

farther  removed  in  the  chain  of  title.^  But  in  no  sense  is  it  the 
agent  or  trustee  for  the  maker  of  the  paper  it  holds  for  collection, 
or  for  the  party  who  is  indebted  theret^n.  If  the  debtor  simjily 
pays  into  the  bank  the  amount  due,  and  takes  up  his  paper,  he  is 
thereby  fully  acquitted  and  absolved.  He  is  not  responsible 
for  the  subsequent  fate  of  the  sum,  and  is  not  bound  to  inquire 
whether  it  comes  to  the  hands  of  the  person  entitled  to  it,  or  is 
lost,  wasted,  or  embezzled  in  the  bank.  As  he  is  under  no  liability 
of  this  description,  so  it  follows  that  he  has  no  right  of  action 
against  the  bank  if  it  fails  to  pay  over  properl>'.  The  whole 
business  is  completed,  so  far  as  he  is  concerned,  by  his  payment 
and  the  contemporaneous  surrender,  cancellation,  or  destruction 
of  the  evidence  of  his  debt.^ 

Paper  Payable  at  the  Bank 

If  a  note,  bond,  or  other  instrument,  be  made  payable  at  a 
bank,  and  be  deposited  in  that  bank  for  collection,  the  bank 
becomes  the  agent  of  the  payee  to  receive  the  money.  But  if 
it  be  not  deposited  in  the  bank,  and  the  debtor  deposits  money 
there  to  meet  it,  then  the  bank  is  the  agent  of  the  debtor.'*  By 
making  such  deposit  in  due  season,  the  debtor  so  far  fulfills  his 
duty  that,  if  the  obligation  be  not  presented  there  for  payment 
at  the  day  of  its  maturity,  the  debtor  is  liable  for  no  loss  or  damage 
which  may  subsequently  accrue,  either  in  the  way  of  interest 
or  costs  of  suit,  by  reason  of  the  delay."  Apparently,  too,  he  should 
be  acquitted  if  subsequently,  and  before  demand  by  the  holder  of 
the  paper,  the  bank  should  fail. 

tional  Revere  Bank  v.  National  Bank  of  Republic,  172  X.  Y.  102,  G-i 
N.  E.  799  (1902). 

A  check  may  be  received  for  collection  from  the  holder  exen  though  it 
is  made  payable  to  a  guardian  and  duly  indorsed  by  him  as  such.  Hood 
V.  Kensington  National  Bank,  230  Pa.  St.  r>OS,  79  Atl.  714  (1911). 

When  paper  is  sent  to  a  bank  for  collection  at  the  reriuest  of  the  obligor, 
the  bank  is  the  agent  of  the  owner  of  the  paper  in  making  the  collection. 
Schafer  v.  Olson,  24  N.  D.  .542,  1.39  N.  W.  983,  43  L.  R.  A.  (x.  s.)  762  (1913). 

The  agency  may  be  revoked  by  the  true  owner  of  the  paper  at  any 
time  prior  to  tlie  collection  of  the  money ;  and  if  the  paper  is  not  returned 
upon  demand  there  is  a  conversion  thereof  for  which  an  action  may  be 
maintained.  Bank  of  America  ;-.  Wavdell,  103  App.  Div.  25  (1905),  92 
N.  Y.  S.  GOG,  187  N.  Y.  115,  79  N.  E.  857. 

2  The  question  who,  as  principal,  may  hold  the  bank  as  agent,  is  dis- 
cussed hereafter. 

»  Smith  V.  Essex  Countv  Bank,  22  Barb.  (N.  Y.)  627. 

*  Ward  V.  Smith,  7  Wall.  447,  19  L.  ed.  207. 

447 


§  214  COLLECTION   IN    GENERAL 

Where  a  seller  consigns  goods  to  his  own  order,  and  attaches 
to  the  bill  of  lading  a  draft  upon  the  purchaser  for  the  price,  and 
places  such  draft  in  the  bank  with  directions  to  collect,  and  turn 
over  the  bill  of  lading  to  the  purchaser,  the  bank  is  the  agent  of 
the  seller.^" 

Agent  of  Debtor  When  Receiving  Money  to  Pay  Note  not  in   Its 

Possession 

A  note  was  sent  to  the  M.  Bank  indorsed  for  collection  for  the 
Y.  Bank.  The  M.  Bank  had  received  money  from  the  maker 
to  pay  the  note,  but  failed  before  remitting  the  proceeds,  and  the 
note  was  found  uncancelled  among  its  papers.  Held,  that  the 
note  had  not  been  paid ;  the  M.  Bank  had  done  nothing  as  the 
agents  of  the  holders  of  the  note  toward  paying  it.^ 

This  case  brings  clearly  to  view  the  distinction  that  if  the 
bank,  having  received  a  note  for  collection,  afterward  collects 
the  money  for  it,  or,  having  the  money  already  deposited  for  that 
purpose,  applies  it  to  the  note,  these  acts  are  done  as  agent  for  the 
holder  of  the  note  ;  but  if  the  maker  deposits  money  to  pay  a  note 
before  it  is  received  by  the  bank,  or  before  it  is  due,  such  receiving 
of  money  is  as  agent  of  the  maker  only,  and  unless  the  bank  sub- 
sequently does  some  act  applying  the  money  upon  the  note,  it 
does  not  act  as  agent  for  the  note  holder,  and  the  latter  is  not  pre- 
vented from  recovering  the  paper  and  suing  the  maker  upon  it. 

So  if  A.  deposits  money  to  pay  a  claim,  and  before  applying  the 
money  to  this  purpose  the  bank  fails,  it  is  the  loss  of  A.,  not  of 
his  creditor.® 

§  215.  Consideration  for  Collecting." — Sometimes  banks  charge 
a  commission  for  collection  where  the  business  is  required  to  be 
done  in  distant  places.  Sometimes  they  do  it  without  charge, 
trusting  to  the  indirect  profits  and  advantages  which  may  be 
expected  to  accrue  by  reason  of  the  chance  of  the  money  being 
left  uncalled  for  during  a  few  days  following  its  actual  receipt, 
and  their  consequent  use  of  it  for  that  time ;  or  from  the  hope  of 
attracting  customers  and  increasing  their  business  by  offering 
such  facilities   without   extra   charges.     These   motives   of   self- 

4"  Charles  v.  Carter,  96  Tenn.  617,  36  S.  W.  396  (1896). 
B  Sutherland  v.  First  National  Bank  of  Ypsilanti,  31  Mich.  230. 
6  Moore  v.  Meyer,  57  Ala.  20 ;    State  Bank  v.  Byrne,  97  Mich.  178,  56 
N.  W.  355. 

0  §  215.     See  Fed.  Res.  Act,  Sec.  16,  Part  II,  §  167. 

448 


EFFECT   OF    INDORSEMENT    FOR    COLLECTION  §  217 

interest,  which  must  always  be  supposed  to  influence  the  hank 
when  it  consents  to  collect  without  direct  compensation,  are  to 
be  regarded  as  constituting  a  sufficient  and  valuable  inducement 
for  the  undertaking  to  collect ;  and  prevent  the  bank  from  avail- 
ing itself  of  tlie  ])lea  that  its  contract  was  without  consideration.^ 

§210.  Continuance  of  Authority  to  Collect.  —  Authority  to 
collect  continues  after  the  paper  is  due  and  protested,  and  notes 
are  often  left  with  a  bank  some  time  after  protest  in  the  hope 
that  they  may  be  taken  up,  as  they  often  are  to  save  the  credit 
of  the  debtor.  But  it  is  questionable  whether  a  payment  may  be 
received  two  or  three  years  after  dishonor,  in  a  currency  depre- 
ciated to  one  twelfth  of  the  value  of  that  in  which  the  note  should 
have  been  paid  at  its  maturity.^  Insolvency  revokes  authority 
to  collect. - 

§  217.  Effect  of  Indorsement  for  Collection.  —  Indorsement 
for  collection  does  not  give  the  bank  title  to  the  paper,^  nor  render 
the  depositor  liable  as  an  indorser,^  nor  guarantee  the  drawer's 

1  §  21.5.  Halls  V.  Bank  of  the  State,  3  Rich.  (S.  C.)  366.  Also  see  re- 
marks per  Lord  Loughborough  in  Shiells  v.  Blaekburne,  1  H.  Bl.  159 ; 
the  analogy  is  sufficiently  strong  to  make  this  case  an  authority  for  the 
doctrine  of  the  text.  But  in  Bank  v.  Butler,  41  Ohio  St.  519,  the  court 
in  holding  the  bank  excused  on  other  grounds  fortifies  itself  by  saj'ing 
that  the  Inink  received  no  remuneration. 

1  §  216.     Alley  v.  Rogers,  19  Cxratt.  (Va.)  366. 

2  Western  German  Bank  v.  Norvell,  134  Fed.  724  (1905). 

^  §  217.  See  §  565,  Title.  So  if  a  note  is  sent  for  collection  and  the 
bank  allows  it  to  remain  uncancelled  among  its  papers,  and  fails,  the  note 
is  unpaid,  and  maj'  be  recovered,  although  the  bank  had  received  money 
from  the  maker  expressly  to  pay  it.  The  payment  not  having  been 
actually  made,  and  the  title  to  the  note  being  in  the  depositor  of  it,  he 
may  reelaiiu  it.  Sutherland  r.  First  National  Bank,  31  Mich.  230.  So 
collaterals  sent  with  a  draft  which  is  still  uncollected  may  be  recovered ; 
thcv  are  not  assets  of  the  bank  in  case  of  insolvency.  Corn  Exchange 
Bank  r.  Blye,  44  N.  Y.  (Sup.  Ct.)  473,  aff.  101  N.  Y.  (Ct.  of  Appeals)  303 ; 
U.  S.  National  Bank  v.  Geer,  55  Neb.  469  (1898) ;  Branch  v.  U.  S.  National 
Bank,  50  Neb.  470,  70  N.  W.  34  (1897). 

Nor  does  the  correspondent  to  which  it  is  sent  for  collection  receive 
any  bettfr  title  than  the  one  who  sent  it,  unless  it  becomes  a  bona  fide 
purchaser  or  makes  advances  thereon  in  good  faith.  Bank  of  America 
V.  Waydell.  187  N.  Y.  115,  79  N.  E.  857  (1907). 

The  forwarding  bank  of  such  indorsed  check  is  in  the  position  of  one 
who  takes  a  check  and  presents  it  in  jierson  to  the  drawee  liank  and  de- 
mands pavment.  Newberrv  Sa\Tngs  Bank  v.  Bank  of  Colum1)ia,  91  S.  C. 
294,  74  S.'e.  615,  38  L.  R.  A.  (x.  s.)  1200  (1912). 

-  Broun  c.  Hull,  33  Gratt.  (Va.)  23.  And  parol  is  not  admissible  to 
show  that  an  indorsement  "for  collection"  was  really  an  absolute  one. 
Third  National  Bank  v.  Clark,  23  Minn.  263 ;  U.  S."  National  Bank  v. 
Geer,  55  Neb.  469  (1898). 

VOL.  1—29  449 


§  217  COLLECTION   IN    GENERAL 

signature.-"     But  the  bank  is  deemed  the  holder  to  receive  and 
transmit  notice  of  non-payment.^ 

Notice  of  Ownership 

Indorsement  to  "  B.  for  collection  "  is  notice  to  the  maker  of 
the  note  that  B.  or  his  agent  is  the  proper  party  to  collect  the  note, 
and  if  he  pays  it  to  any  one  else  it  is  at  his  own  risk.* 

A  bank  receiving  a  note  from  the  owner  indorsed  simply  for 
collection,  with  instructions  to  apply  the  proceeds  to  his  indebted- 
ness to  the  bank,  does  not  receive  it  as  collateral  security,  but  as 
his  agent. ^ 

Indorsement  for  collection  is  notice  to  all  parties  of  the  ownership 
of  the  proceeds,  and  the  collecting  bank  cannot  keep  the  proceeds 
to  pay  the  debt  of  the  bank  that  forwarded  the  paper  to  it.^ 

Indorsement  for  Collection  Destroys  Negotiability 

A.  at  St.  Louis,  owing  V.  at  St.  Joseph's  $40,000,  requested  V. 
to  draw  on  him,  and  he  would  raise  the  money  on  the  draft,  and 

2"  Bank  of  Belmont  v.  Bank  of  BarnesvilJe,  55  Ohio  St.  207  (1898). 

3  Freeman's  Bank  v.  Perkins,  18  Me.  292 ;  Ogden  v.  Dobbin,  2  Hall 
(N.  Y.)  112. 

^  Barnett  v.  Ringgold,  80  Ky.  289 ;  Freeman's  Bank  v.  National  Tube 
Works,  151  Mass.  413,  24  N.  E.  779  (1890) ;  citing  Lynn  National  Bank  v. 
Smith,  132  Mass.  227 ;  Rice  v.  Stearns,  3  Mass.  225 ;  Wilson  v.  Holmes, 
5  Mass.  543 ;  Dorchester  &  Milton  Bank  v.  New  England  Bank,  1  Cush. 
177 ;  Boykin  v.  Bank,  118  N.  C.  566,  24  S.  E.  357  (1896) ;  First  National 
Bank  of  Circleville  v.  Bank  of  Monroe,  33  Fed.  408.  See  also  Peek  v. 
First  National  Bank,  43  Fed.  357  ;  Bank  of  Clarke  Co.  v.  Gilman,  81  Hun 
(N.  Y.)  486;  Manufacturers'  Bank  v.  Continental  Bank,  148  Mass.  553, 
20  N.  E.  193  (1889),  citing  Audenried  v.  Betteley,  8  Allen  (Mass.)  302; 
Bank  of  Belmont  v.  Bank  of  Barnesviile,  55  Ohio  St.  207  (1898) ;  Tyson 
and  Rawls  v.  Western  National  Bank,  77  Md.  412,  26  Atl.  520 ;  Evans- 
ville  Bank  v.  German  American  Bank,  155  U.  S.  556,  39  L.  ed.  259,  15 
Sup.  Ct.  221. 

*  Prescott  V.  Leonard,  32  Kan.  142,  4  Pae.  172 ;  Cronheim  v.  Postal 
Telegraph  Co.,  10  Ga.  App.  716,  74  S.  E.  78  (1912). 

A  bank  which  receives  a  check  for  collection  and  enters  the  face  value 
of  it  as  a  deposit  credit  to  the  owner  becomes  the  agent  of  the  owner  to 
collect  it.  -Jefferson  County  Sav.  Bank  v.  Hendrick,  147  Ala.  670,  39 
So.  295,  1  L.  R.  A.  (n.  s.)  246,  n. 

6  City  Bank  v.  Weiss,  3  S.  W.  299  (Tex.,  April,  1887) ;  People's  Bank 
V.  Jefferson  Co.  Savings  Bank,  106  Ala.  525,  17  So.  728  (1896). 

This  is  true  even  though  the  draft  was  made  payable  to  the  cashier 
of  the  forwarding  bank  but  was  accompanied  by  a  letter  stating  that 
the  draft  was  for  "collection  and  credit"  which  letter  was  forwarded 
with  the  draft  to  the  collecting  bank.  Morris  v.  Alabama-Carbon  Co.,. 
139  Ala.  620,  36  So.  764  (1903). 

450 


GENERAL   STATEMENT   OF   THE    DUTIES    OF   COLLECTING    BANK      §  218 

remit  the  proceeds  to  V. ;  whereupon  V.  drew  to  the  order  of  the 
})unk  at  St.  Joseph's,  whose  cashier  indorsed  on  the  draft,  "  Pay 
to  H.  or  order  for  collection  for  account  of  First  National  Bank." 
A.  on  receiving  the  draft  accepted  it,  and  offered  it  for  discount 
to  the  Mechanics'  Bank.  By  A.'s  consent  and  that  of  the  ^lechan- 
ics'  Bank  the  indorsement  was  erased,  the  jNIechanics'  Bank 
discounted  the  draft,  and  A.  remitted  the  amount  to  V.  In  an 
action  by  the  Mechanics'  Bank  against  V,,^  it  was  held  that  the 
indorsement,  being  restrictive,  destroyed  the  negotiability  of  the 
draft,  and  operated  as  a  mere  power  of  attorney  to  the  plaintiff 
to  receive  the  proceeds  for  the  use  of  the  drawer ;  and  that  the 
erasure  without  V.'s  assent  destroyed  the  validity  of  the  draft 
as  to  him,  and  the  plaintiff  was  bound  to  know  that  such  was  its 
effect  when  the  draft  was  taken. 

§  218.  General  Statement  of  the  Duties  of  the  Collecting  Bank. 
—  A  bank  contracts  to  use  due  diligence  in  the  business  of  col- 
lection.^ And  it  is  "  bound  only  to  reasonable  care  and  diligence 
in  the  discharge  of  its  assumed  duties.  In  a  case  of  doubt  its 
best  judgment  is  all  the  principal  has  a  right  to  require."  Es- 
pecially if  the  doubt  arises  by  reason  of  the  neglect  of  the  principal 
to  give  specific  instructions,  the  bank  will  be  acquitted,  even  if 
its  discretion  be  exercised  erroneously .^ 

Placard  Hung  in  the  Bank 

The  contract  may  be  varied  by  express  agreement,  and  it  has 
been  held  that  the  plaintiff,  in  a  suit  alleging  negligence  on  the 
part  of  the  bank  in  failing  to  make  a  collection,  may  adduce  evi- 
dence of  the  contents  of  a  placard  posted  up  in  the  bank,  whereby 
the  bank  offered  to  make  collections  upon  certain  terms  (the 
president  having  been  notified  to  produce  the  placard,  and  not 
having  done  so)  ;   that  this  constituted  an  important  link  in  the 

7  Mechanics'  Bank  v.  Valley  Packing  Co.,  4  Mo.  App.  200  (1877). 

'  §  218.  Fabens  v.  Mercantile  Bank,  23  Pick.  (Mass.)  330 ;  Bank  of 
Big  Cabin  v.  English,  41  Okla.  546,  139  Pac.  258  (1914);  Hilsinger  v. 
Trickett,  SO  Ohio  St.  280,  09  N.  E.  305,  1913D  Ann.  Cas.  421,  n. ;  Pinkney 
V.  Kanawha  Valley  Bank,  68  W.  Va.  2.54,  69  S.  E.  1012,  1912B  Ann. 
Cas.  115,  n.,. 32  L.  R.  A.  (n.  s.)  987;  Manhattan  Life  Ins.  Co.  v.  First 
National  Bank,  20  Colo.  App.  529,  80  Pac.  467  (1905). 

2  National  Bank  of  Commerce  v.  Merchants'  National  Bank,  91  U.  S. 
92,  23  L.  ed.  208;  Sahlien  v.  Bank,  90  Tenn.  221,  16  S.  W.  373  (1890). 
See  Bank  of  Bay  Biscayne  v.  Monongahela  National  Bank,  126  Fed.  436 
(1903). 

451 


§  218  COLLECTION   IN    GENERAL 

chain  of  evidence  going  to  show  what  the  contract  between  the 
parties  in  fact  was ;  and  that  this  evidence  was  admissible  with- 
out preHminary  proof  that  the  plaintiff  had  read  the  placard,  or 
had  acted  ui)on  the  faith  of  it.^ 

§  219.  The  Bank's  Duty  is  to  act  for  its  principal's  best  interest, 
and  preserve  the  liability  of  all  parties  to  him.  "It  is  the  duty 
of  an  agent  who  receives  negotiable  paper  for  collection,  in  case 
such  paper  is  not  paid,  so  to  act  as  to  secure  and  preserve  the  lia- 
bility thereon  of  all  the  parties  prior  to  his  principal ;  and  if  he 
fails  in  his  duty,  and  thereby  causes  loss  to  his  principal,  he  becomes 
liable  for  such  loss.*'  But  this  is  not  the  utmost  limit  of  the  agent's 
duty  and  liability.  He  may  so  act  as  to  charge  all  the  parties  to 
the  paper,  and  yet  become  liable  for  a  loss  occasioned  by  his 
negligence.  The  rule  which  will  measure  the  diligence  which  is 
exacted  of  a  holder  of  such  paper  in  order  to  charge  the  prior 
parties,  will  not  always  measure  the  diligence  which  is  required 
of  a  collecting  agent  in  the  discharge  of  his  duty  to  his  principal. 
Suppose  an  agent  receives  for  collection  from  the  payee  a  sight 
draft.  No  circumstance  can  make  it  his  duty  in  order  to  charge 
the  drawer  to  present  it  for  payment  until  the  next  day.  He 
has  entered  into  no  contract  with  the  drawer,  is  not  employed 
or  paid  by  him  to  render  him  any  service,  and  owes  him  no  duty 
to  protect  him  from  loss.  What  is  required  to  be  done  to  charge 
the  drawer  is  simply  a  compliance  with  the  condition  attached 
to  the  draft,  as  if  written  therein ;  and  that  condition  is  in  all 
cases  complied  with  by  presentation,  demand,  and  notice  on  the 
next  day  after  receipt  of  the  draft.  But  suppose  the  agent  on  the 
day  he  receives  the  draft  obtains  reliable  information  that  the 
drawee  must  fail  the  next  day,  and  that  the  draft  will  not  be  paid 
unless  immediately  presented,  what  then  is  the  duty  he  owes  his 
principal,  whose  interests  for  a  compensation  he  has  agreed  with 
proper  diligence  and  skill  to  serve  in  and  about  the  collection  of 
the  draft  ?     Clearly,  all  would  say,  to  present  the  draft  at  once, 

3  Wingate  v.  Mechanics'  Bank,  10  Barr  (Pa.),  104. 

"  §  219.  Jagger  v.  National  German-American  Bank,  53  Minn.  386; 
Bank  v.  Bank,  49  Ohio  St.  351,  30  N.  E.  958  (1892) ;  West  v.  St.  Paul 
National  Bank,  54  Minn.  466,  56  N.  W.  54 ;  Carpenter  v.  National  Shaw- 
mut  Bank,  187  Fed.  1  (1911);  Bank  of  Big  Cfebin  v.  English,  41  Okla. 
546,  139  Pae.  258  (1914);  Fort  Dearborn  National  Bank  v.  Security 
Bank,  87  Minn.  81,  91  N.  W.  257  (1902) ;  Louisville  Banking  Co.  v. 
Asher,  112  Ky.  138,  65  S.  W.  133,  99  Am.  St.  Rep.  283  (1901) ;  LIcBride 
V.  Illinois  National  Bank,  138  App.  Div.  339  (1910),  121  N.  Y.  S.  1041. 

452 


THE  bank's  duty  §  219 

and  if  he  fails  to  do  this  and  loss  ensues  he  incurs  responsibility 
to  his  principal ;  and  yet  the  drawer  would  be  charged  if  it  was 
not  presented  until  the  next  day.  When  an  agent  receives  a  bill 
for  collection  payable  some  days  or  months  after  date,  in  order  to 
charge  the  drawer,  he  need  not  present  it  iov  acceptance  until  it 
falls  due ;  and  if  he  then  presents  it  and  demands  payment,  and 
protests  it,  and  gives  the  notice,  tlic  drawer  is  held  ;  and  yet  in 
such  a  case  he  owes  his  principal  the  duty  to  present  the  bill  for 
acceptance  at  once,  and  if  he  fails  in  such  duty,  and  loss  ensues 
to  his  principal,  he  becomes  liable  for  such  loss."  ^ 

When  a  bank  receives  a  note  for  collection  i)ayable  to  any  bank 
in  the  city  in  which  the  bank  is  located  its  only  duty  is  to  present 
the  note  for  payment  at  the  proper  time  at  the  counter  of  some 
bank  in  the  city,  including  itself,  and  to  notify  its  correspondent 
bank  of  any  default.  And  even  though  the  bank  to  which  it  is 
sent  has  on  deposit  money  of  the  maker  of  the  note  it  is  not  jus- 
tified in  paying  the  note  from  the  deposit.^" 

Adverse  Interest 

A  bank  having  a  claim  against  an  insolvent  firm,  upon  being 
consulted  by  other  creditors  of  said  firm  in  regard  to  c(-llecting 
and  securing  their  claim,  is  not  legally  bound  to  disclose  to  such 
creditors  the  existence  of  its  own  claim,  but  may  keep  silent  and 
protect  its  own  interests  provided  it  is  guilty  of  no  fraudulent 
conduct,  and  does  nothing  more  than  is  necessary  to  protect  its 
own  interests. - 

And  it  may,  in  good  faith,  obtain  security  to  protect  its  ovm 
claim  although  it  neglects  to  obtain  security  for  the  payment  of 
paper  it  hokls  for  collection.^ 

By  receiving  a  draft  for  collection  a  bank  does  not  waive  its 

1  First  National  Bank  v.  Fourth  National  Bank,  77  N.  Y.  323 ;  Pinkney 
t;.  Kanawha  VaUey  Bank,  69  W.  Va.  446,  69  S.  E.  1012,  1912B  Ann. 
Cas.  115,  n.,  32  L.  R.  A.  (x.  s.)  987;  Howard  v.  Bank  of  ISletropolis,  95 
App.  Div.  342  (1904),  88  N.  Y.  S.  1070. 

1°  Carpenter  v.  National  Shawmut  Bank,  187  Fed.  1  (1911). 

The  term  "any  bank"  is  different  from  "a  bank  "  or  "the  bank" 
used  in  INIass.  Rev.  Laws,  Ch.  73  §  104.  Carpenter  v.  National  Shawmut 
Bank,  supra. 

2  National  Bank  v.  NaiU,  52  Kan.  211  (1893),  34  Pac.  797,  citing  Bliss 
V.  Couch,  46  Kan.  400,  26  Pac.  706;  Randall  v.  Shaw,  28  Kan.  419; 
Tootle  V.  Coldwell,  30  Kan.  125,  1  Pac.  329.    ' 

3U.  S.  Bank  v.  Westervelt,  .55  Neb.  425,  75  N.  W.  857  (1898),  dis- 
tinguishing Dern  v.  Kellogg,  54  Neb.  560,  74  N.  W.  844. 

453 


§  219  COLLECTION   IN    GENERAL 

right  to  collect  its  own  claims  against  the  drawee,  and  it  may 
secure  by  attachment  priority  for  itself  although  there  is  nothing 
left  to  pay  the  drafts  received.* 

It  is  for  the  jury  to  decide  whether  the  bank  has  acted  with 
negligence  or  fraud. ^  Negligence  is  not  presumed;  it  must  be 
.proved.^ 

§  220.  What  Law  and  Usage  shall  govern  the  Collection.  — 
The  collecting  bank  must  be  governed  in  all  matters  concerning 
the  time  and  mode  of  presentment,  demand,  and  notice  by  the 
laws  and  customs  which  prevail  in  the  place  of  its  own  situation. 
If  the  paper  has  been  transmitted  from  a  distant  place,  where 
the  laws  and  customs  are  different,  the  transmitting  party,  if  he 
wishes  these  to  be  conformed  to,  must  send  special  instructions 
to  that  effect.  In  that  case  the  collecting  bank,  if  it  undertakes 
the  collection,  will  be  bound,  at  its  own  peril,  not  to  deviate  from 
the  course  thus  prescribed ;  though  in  the  absence  of  express 
directions  it  would  not  be  bound  to  inquire  into,  nor  probably 
would  it  even  have  the  right  to  recognize,  if  it  knew,  the  laws  or 
usages  of  any  place  other  than  its  own.  The  understanding, 
which  is  assumed  to  be  mutual  and  to  enter  into  the  contract  of 
the  parties,  is  that  the  bank  shall  perform  the  various  acts  which 
are  embraced  in  the  business  of  collection  in  every  respect  accord- 
ing to  the  method  which  it  is  wont  to  pursue,  in  accordance 
with  the  local  law,  rules,  and  regulations.^  Evidence  of  the 
habitual  course  of  dealing,  provided  it  be  not  incurably  illegal, 
is  admissible,  not  as  amounting  to  rules  of  judicial  decision,  but 
as  evidence  of  the  contract.^    The  assent  of  all  concerned  to  the 

4  Freeman  v.  Bank,  78  Iowa  150,  42  N.  W.  632. 

5  Finch  V.  Karste,  97  Mich.  21,  56  N.  W.  123;  Sprague  v.  Farmers* 
National  Bank,  63  Kan.  12,  64  Pae.  967  (1901) ;  Bank  of  Big  Cabin  v. 
English,  41  Okla.  546,  1.39  Pac.  258  (1914). 

6  Storm  Bros.  v.  First  National  Bank,  148  Ky.  585,  147  S.  W.  5  (1912). 

1  §  220.  Lincoln  &  Kennebec  Bank  v.  Page,  9  Mass.  155 ;  Chieopee 
Bank  v.  Eager,  9  Met.  (Mass.)  584 ;  Hartford  Bank  v.  Stedman,  3  Conn. 
489;  Bowen  i-.  Newell,  5  Sandf.  (N.  Y.)  326;  Hilsinger  v.  Triekett,  86 
Ohio  St.  286,  99  N.  E.  305,  1913D  Ann.  Cas.  421,  n. ;  Holder  v.  Western 
German  Bank,  132  Fed.  187  (1904) ;  id.  1.36  Fed.  90  (1905) ;  and  all  the 
cases  cited  below  in  the  discussion  of  this  topic. 

2  Warren  Bank  v.  Suffolk  Bank,  10  Cash.  (Mass.)  582;  Blanchard  v. 
Hilliard,  11  Mass.  88  ;  Jones  v.  Fales,  4  id.  245  ;  Widgery  v.  Munroe,  6  id., 
449 ;  Renner  v.  Bank  of  Columbia,  9  Wheat.  .581,  6  L.  ed.  166  ;  Yeaton  v. 
Bank  of  Alexandria,  5  Cranch  49,  3  L.  ed.  33;  Bank  of  Columbia  v. 
Fitzhugh,  1  Har.  &  G.  (Md.)  239;  Hartford  Bank  v.  Stedman,  3  Conn. 
489. 

454 


USAGE    OF   THE    BAXK  §  221 

pursuance  of  this  course  of  dealing,  and  their  waiver  of  any  strictly 
legal  claims  which  they  might  have  in  contravention  or  variation 
thereof,  becomes  then  an  implication  of  law.  All  the  parties 
upon  the  note  are  equally  bound  by  this  implication,  though  they 
have  had  nothing  whatsoever  to  do  with  the  paper  at  the  time  of 
its  being  deposited  for  collection,  and  so  were  not  by  immediate 
personal  action  parties  to  this  portion  of  the  proceedings,  or  able 
to  influence  or  control  them.^  They  are  bound  and  concluded 
by  the  act,  and  the  legal  implications  arising  from  the  act,  of  him 
who  has  become  the  holder,  and  who  has  the  right  to  put  the  note 
in  the  ordinary  business  channel  for  collection.  Thus,  if  demand 
is  made  upon  a  note  upon  the  day  before  or  the  day  after  it  falls 
due,  according  to  the  established  custom  of  the  collecting  bank, 
or  upon  the  fourth  day  after  maturity,  under  a  local  custom  to 
allow  four  days  of  grace  instead  of  three,  the  maker  and  the  indors- 
ers  will  be  held,  and  cannot  set  up  insufficiency  or  irregularity 
in  the  demand.^  So  a  custom  of  a  bank  to  hold  the  indorser 
without  having  first  sued  the  maker,  though  he  is  solvent,  is 
good."  So  likewise  a  custom  to  make  demand  on  the  maker  of 
a  note  lodged  in  a  bank  without  presenting  it  to  him.^ 

§221.  Usage  of  the  Bank.  —  Knowledge  of  the  usage,  either 
express  or  implied,  must,  it  has  been  said,  be  brought  home  to 
the  parties  who  are  to  be  bound  by  it.^  But  other  cases  of  high 
authority  declare  that  the  usage  of  the  bank  in  collections 
will  bind  the  persons  dealing  with  it  in  this  business,  whether 
such  usage  be  known  to  them  or  not ;  ^    and    this   is   certainly 

3  Pearson  (Brent's  Ex'rs)  v.  Bank  of  Metropolis,  1  Pet.  89,  6  L.  ed.  65. 

••Patriotic  Bank  v.  Farmers'  Bank,  2  Cranch,  C.  C.  560;  Bank  of 
Columbia  v.  Magruder,  6  Har.  &  J.  (Md.)  172;  City  Bank  v.  Cutter, 
3  Pick.  (Mass.)  414 ;  Yeaton  v.  Bank  of  Alexandria,  5  Cranch  49,  3  L. 
ed.  33. 

5  Renner  i'.  Bank  of  Columbia,  9  Wheat.  581,  6  L.  ed.  166. 
■    «  Pearson  (Brent's  E.x'rs)  v.  Bank  of  the  Metropolis,  1  Pet.  89,  6  L.  ed. 
65;    Raborg  v.  Bank  of  Columl)ia,  1  Har.  &  G.  (^Id.)  231;    Whitwell  v. 
Johnson,  17  Mass.  452;   Citv  Bank  v.  Cutter,  3  Pick.  (Mass.)  414. 

1  §  221.  MiUs  /-.  Bank  of  United  States,  11  Wheat.  431,  6  L.  ed.  512 ; 
Peirce  r.  Butler,  14  JMass.  303 ;  Bank  of  Commerce  v.  Miller,  105  111. 
App.  224  (1902). 

2  Smith  ('.  Whiting,  12  Mass.  6;  Bank  of  Washington  v.  Triplett, 
1  Pet.  25,  7  L.  ed.  37  ;  Dorchester  &  Milton  Bank  v.  New  England  Bank, 
1  Cush.  (Mass.)  177 ;  Farmers'  Bank  and  Trust  Co.  v.  Newland,  97  Ky. 
472,  31  S.  W.  38  (1895);  Jeiferson  County  Savings  Bank  v.  Commercial 
National  Bank,  39  S.  W.  338  (1897) ;  Hilsinger  /•.  Trickett,  86  Ohio  St. 
286.  99  N.  E.  305,  1913D  Ann.  Cas.  421,  n. ;  Plover  Sa\'ings  Bank  v. 
Moodie,  135  Iowa  685,  110  N.  W.  29  (1907) ;   Holder  v.  Western  German 

455 


§  221  COLLECTION    IN    GENERAL 

the  correct  rule.  Indeed,  the  opposing  cases  can  be  easily  rec- 
onciled by  the  link  which  appears  to  be  suggested  in  one  of  them. 
The  fact  that  one  deals  with  the  bank  without  taking  the  trouble 
to  inquire  as  to  its  system  will  raise  the  implication  that  he  already 
knows  and  is  satisfied  with  that  system.  It  is  clear  that,  if  a  per- 
son hands  over  a  note  to  a  bank  for  collection  without  any  species 
of  remark  as  to  the  course  to  be  pursued,  the  bank  is  not  bound 
to  thrust  upon  him  a  statement  of  its  intended  course,  and  to 
retain  him  till  the  whole  theory  has  been  expounded  to  him, 
when  his  conduct  unmistakably  shows  that  either  he  already 
knows  it  or  else  he  does  not  desire  to  know  it.  Either  he  knows 
and  approves  it,  or  he  voluntarily  trusts  to  the  wisdom  of  the 
bank,  at  his  own  deliberately  assumed  risk  of  its  sufficiency.  In 
such  a  case  the  bank  not  only  has  a  right  to  assume,  but  it  is 
even  positively  bound  to  assume,  that  his  desire  is  that  the  or- 
dinary and  established  usage  be  pursued.  An  unordered  devia- 
tion from  that  usage,  though  the  usage  were  unknown  to  him, 
would  lay  the  bank  open  to  his  suit  for  damages ;  and  the  court 
must,  as  has  been  already  shown,  rule  for  him  as  matter  of  law 
that  the  pursuance  of  this  custom  was  an  implied  item  of  the 
contract.  It  is  clear,  then,  that  he  could  not  plead  ignorance 
of  it  in  order  to  lay  a  foundation  for  a  suit  against  the  bank  for 
acting  according  to  it.  The  knowledge  on  his  part  would  be  im- 
plied conclusively.^ 

§  222.  Proof.  —  Whenever  it  may  be  necessary  to  prove  knowl- 
edge by  an  individual  of  the  usage  of  a  bank,  proof  of  one  trans- 
action having  been  previously  conducted  between  them  in  accord- 
ance with  that  usage  is  sufficient.^ 

It  has  been  seen  that  the  time  when  demand  must  be  made 
may  be  modified  by  proof  of  usage  concerning  the  local  rule  of 
grace.  In  like  manner  proof  of  a  particular  usage  concerning 
the  place  at  which  demand  shall  be  made,  in  default  of  the  desig- 
nation of  any  place'  in  the  instrument  itself,  is  admissible,  and 

Bank,  132  Fed.  187  (1904) ;  id..  136  Fed.  90  (190.5) ;  Falls  City  Woolen 
Mills  V.  Louisville  National  Bank,  145  Kv.  64,  140  S.  W.  66  (1911) ;  Landa 
V.  Traders'  Bank,  118  Mo.  App.  356,  94  S.  W.  770  (1906). 

Custom  will  not  govern  when  it  is  in  conflict  with  an  express  contract. 
Landa  v.  Traders'  Bank,  supra. 

^  See  §  9,  on  Usage,  in  wliich  this  subject  is  further  discussed  and  im- 
portant cases  are  cited,  showing  upon  what  grounds  knowledge  of  the 
usage  and  custom  of  the  banks  will  be  conclusively  inferred  at  law. 

1  §  222.  Dorchester  &  Milton  Bank  v.  New  England  Bank,  1  Cush. 
(Mass.)  177. 

456 


USAGE    CAN    ONLY    AFFECT    MANNER    OF    COLLECTING  §  223 

may  be  conclusive.  Thus,  where  a  customer  lived  at  a  distance 
from  his  bank,  and  was  wont  to  draw  his  notes  "  negotiable  at  " 
the  bank,  it  was  held  that  it  was  a  proper  case  for  the  introduction 
of  evidence  of  a  custom  to  make  presentment  and  demand  upon 
his  notes  only  at  the  bank ;  which  custom,  if  sufficiently  proved, 
would  justify  the  collecting  bank  in  presenting  and  demanding 
in  compliance  with  it.^ 

§  223.  Usage  can  only  affect  Manner  of  Collecting.  —  But  the 
usages  which  can  be  shown  are  solely  those  which  qualify  some 
portion  of  those  proceedings  which  the  bank  is  obliged  to  under- 
take for  the  immediate  purpose  of  effecting  the  collection.  It 
is  only  the  points  of  detail,  or  the  methods  which  the  bank  pursues 
in  presenting,  demanding,  and  notifying,  that  can  be  thus  modified. 
No  usage  will  justify  the  actual  omission  of  any  of  these  substantial 
and  material  acts,  nor  the  substitution  of  any  other  act  as  an 
equivalent  for  any  of  them.  The  act  must  be  distinctly  done ; 
it  is  only  in  reference  to  the  manner  of  doing  it,  as  regards  time 
and  place  and  the  like  considerations,  that  the  rigidity  of  the  gen- 
eral doctrines  of  the  law  may  be  slightly  deflected  by  the  force  of 
local  rules.  Thus,  though,  as  has  been  seen,  demand  may  be 
made  a  day  or  two  earlier  or  later  than  the  usual  third  day  after 
the  literal  maturity  of  the  paper,  yet  demand  must  be  made,  and 
it  must  be  a  real  boiia  fide  demand.  Xo  usage  can  be  allowed  to 
substitute  a  notification  to  the  makers  of  the  time  and  of  the 
place  where  the  paper  is  deposited  for  collection,  instead  of 
the  positive  demand  of  payment  which  the  law  imperatively 
requires.^  The  contrary  has,  however,  been  held.  See  §  231 
below. 

It  is  a  reasonable  usage  for  local  banks  to  accept  in  payment 
of  drafts  sent  them  for  collection  certified  checks  on  one  of  their 
own  number  in  good  standing,  to  present  these  checks  each  day 
at  11  A.M.,  and  to  leave  them  for  examination.^ 

But  a  mere  usage  between  banks  whereby  the  collecting  bank 
credits  the  transmitting  bank  with  the  amount  collected,  instead 
of  remitting,  is  not  alone  sufficient  to  be  set  up  against  the  real 
owner  of  notes  or  bills  so  as  to  deprive  him  of  his  rights.^ 

2  Pearson  (Brent's  Ex'rs)  v.  Bank  of  the  IMetropolis,  1  Pet,  89,  7  L.  ed. 
65. 

1  §  223.     Farmers'  Bank  p.  Duvall,  7  Cill  &  J.  (Md.)  78. 
^Jefferson  County  Savinp:s  Bank  v.  Commercial  National  Bank,  98 
Tenn.  .337,  39  S.  \V.  338  (189<i). 

3  Armstrong  v.  National  Bank,  90  Ky.  431,  14  S.  W.  411  (1890). 

457 


§  224  COLLECTION   IN    GENERAL 

§  224.  Instructions.  —  If  the  customer  gives  any  instructions 
or  directions  concerning  any  item  in  the  method  which  is  to  be 
pursued  in  collecting  or  protesting  the  paper,  the  bank  receiving 
the  paper  is  bound  to  forward  such  instructions  and  directions 
to  its  agent  or  correspondent.  If  it  neglects  altogether  to  transmit, 
or  if  it  fails  to  transmit  them  accurately  as  the  customer  gave 
them,  it  will  be  liable  for  the  resulting  loss.^  It  may  often  happen 
that,  where  paper  payable  in  one  State  is  deposited  in  a  bank  situ- 
ated in  another  State,  it  is  necessary,  in  order  to  hold  some  of  the 
parties  upon  it,  that  presentment,  demand,  and  notice  should  all  be 
performed  according  to  the  laws  and  usages  of  the  State  in  which 
the  first  bank  is  situated,  rather  than  of  the  State  where  the  actual 
collection  or  protest  is  to  be  made.  In  such  case  it  is  certainly 
more  proper  for  the  depositor  to  notify  the  first  bank  of  this  fact. 
But  it  seems  that  even  if  he  does  not  do  so,  yet  the  bank,  if  it  is 
aware  or  ought  to  be  aware  of  the  existence  of  the  necessity,  is 
bound  to  transmit  to  its  correspondent  full  and  ample  directions  as 
to  the  precise  form  to  be  adhered  to  throughout  the  w^hole  process.^ 
In  fact,  it  was  upon  this  very  point  that  the  decision  in  the  famous 
case  of  Allen  v.  Merchants'  Bank  really  turned.  The  facts  of  that 
case  were  that  the  notary  in  protesting  complied  perfectly  with 
the  laws  and  customs  of  the  place  of  his  own  residence.  But  these 
were  different  from  the  laws  and  customs  of  New  York  City, 
wherein  the  Merchants'  Bank  was  situated.  And  though  the  court, 
choosing  to  call  this  a  default  on  the  ixtrt  of  the  notary,  which  was 
not  certainly  his  personal  error,  or  his  default  at  all  in  any  usual 
sense  of  the  word,  gave  a  judgment  in  favor  of  the  plaintiff,  upon 
the  ground  that  the  bank  was  liable  for  the  acts  of  all  the  sub- 
agents  ;  yet  it  was  not  really  necessary  for  them  to  have  divided 
upon  this  question  at  all,  provided  they  were  all  united,  as  they 
seem  to  have  been,  upon  the  other  point  which  was  ruled  in  the 
case.  This  other  point  was  precisely  the  doctrine  just  asserted, 
and  the  declaration  in  the  opinion  was  simply  that,  since  the  lex 
loci  contractus  governed,  it  was  the  duty  of  the  bank  to  have 
notified  its  correspondents  of  the  requirements  of  that  law ;  and 
inasmuch  as  the  loss  had  been  caused  by  the  failure  of  the  notary  to 
comply  with  those  requirements  which  the  bank  had  negligently 
failed  to  transmit,  it  was  in  fact  caused  by  the  non-performance 

1  §  224.  Borup  v.  Nininger,  5  Minn.  523 ;  Mechanics'  Bank  v.  Earp, 
4  Rawle  (Pa.)  384. 

2  AUen  V.  Merchants'  Bank,  22  Wend.  (N.  Y.)  215. 

458 


INSTRUCTIONS  §  224 

on  the  part  of  the  bank  of  its  obvious  duty,  and  must  therefore 
be  made  good  by  the  bank.  It  is  curious  thus  to  observe  how  easily 
the  whole  controversy,  which  has  made  this  cause  famous,  and 
a  subject  of  criticism  in  so  many  tribunals,  might  have  been  com- 
pletely avoided  in  it. 

Instructions  to  a  bank  to  "  collect  and  credit  a  draft  enclosed", 
which  is  indorsed  to  the  writer,  require  the  proceeds  to  be  credited 
to  the  writer.^" 

Liable  for  Disregarding  Instructions 

A  bank  must  obey  the  instructions  of  its  principal,  and 
where  it  was  told  to  allow  a  renewal  of  a  note  on  condition 
that  a  good  indorser  should  be  obtained  on  the  new  note, 
and  the  bank  took  a  renewal  without  such  indorser,  it  was  held 
liable  to  its  principal  on  the  subsequent  insolvency  of  the 
maker.^ 

When  a  bank  receiving  a  draft  for  collection  surrenders  a  bill 
of  lading  accompanying  such  draft,  contrary  to  instructions,  it 
is  liable  for  any  damages  which  may  have  been  sustained  by 
reason  thereof.^" 

A  bank  having  claims  against  D.  to  the  extent  of  his  entire 
property  receives  for  collection  a  draft  on  D.  with  instructions 
to  return  immediately  if  not  paid.  These  instructions  are  dis- 
obeyed, and  subsequently  directions  to  turn  the  draft  over  to  attor- 
neys for  suit  are  neglected  until  the  bank  has  secured  a  mortgage 
on  D.'s  property.  The  case  should  go  to  the  jury  on  the  questions 
of  negligence  and  fraud  .^" 

Where  the  orders  were,  "  On  payment  of  the  drafts,  you  will 
deliver  the  cargo  to  the  order  of  A.  If  not  paid,  please  hold  and 
advise  by  telegraph",  —  and  the  receiving  bank  collected  the  sight 
drafts,  and  took  an  acceptance  of  one  of  the  drafts  which  ivas  on 

2"  Long  V.  Bank  of  Commerce,  38  S.  W.  S8G  (1897). 
'  Central  Georgia  Bank  v.  Cleveland  National  Bank,  59  Ga.  667. 
!"•  Second  National  Bank  v.  Bank  of  Alma,  99  Ark.  386,  138  S.  W.  472 
(1911). 

The  damage  is  prima  facie  the  face  of  the  draft,  but  the  defendant 
may  show  the  actual  damage  or  that  there  was  no  damage.  Becker  v. 
First  National  Bank,  1.")  N.  D.  279,  107  N.  W.  9S()  (1906). 

3"  Finch  V.  Karste,  97  Mich.  21,  .56  N.  W.  123  ;  Lord  v.  Ilingham  National 
Bank,  186  Mass.  161,  71  N.  E.  312  (1904). 

If  a  bank  fails  to  return  a  note  as  directed  it  is  liable  for  nominal  damages 
even  though  it  is  improbable  that  it  would  have  been  collected  if  returned. 
Kibhnger  v.  Sauk  Bank,  131  Wis.  595,  111  N.  W.  709  (1907). 

459 


§  224  COLLECTION   IN    GENERAL 

time,  and  delivered  the  cargo  of  wheat,  the  bills  of  lading  of  which 
accompanied  the  drafts,  and  before  the  maturity  of  the  time  draft 
the  acceptor  failed,  the  question  of  negligence  went  to  the  jury. 
The  court  thought  there  was  a  violation  of  the  instructions  amount- 
ing to  negligence/ 

Wliere  a  bank  receives  for  collection  a  draft  to  which  is  pinned 
a  package  with  the  instructions,  — "  Papers  to  be  delivered 
only  on  payment  of  draft",  —  the  word  "  delivered  "  means 
absolute  delivery,  and  permission  of  the  bank  to  the  drawee  to 
take  the  package  for  the  purpose  of  examination  is  not  within 
the  prohibition  of  the  instructions.^" 

Where  the  drawee  is  entitled  to  delivery  of  the  bills  of  lading 
upon  acceptance  of  the  draft,  of  course  the  bank  is  guilty  of  no 
negligence  in  so  doing.^ 

§  225.  Duty  of  Collecting  Bank  concerning  Collateral  Security. 
—  It  has  been  held  that  where  a  time  draft,  drawn  by  consignors 
of  merchandise  upon  the  consignees,  is  forwarded  to  a  bank  without 
any  special  instructions,  but  having  the  bills  of  lading  for  the 
merchandise  attached,  the  bank  is  justified,  by  reason  of  the  im- 
plied intention  of  the  parties  and  the  usages  and  necessities  of 
business,  in  surrendering  the  bills  of  lading  to  the  consignees  upon 
their  acceptance  of  the  draft,  without  waiting  for  them  to  make 
final  payment  of  it.^ 

But  a  bill  of  lading  accompanying  a  time  draft  must  be  re- 
tained by  a  collecting  bank  after  acceptance  of  the  draft,  to  secure 
its  payment  when  the  bill  of  lading  is  made  deliverable  to  con- 

« National  Bank  v.  City  Bank,  103  U.  S.  668,  26  L.  ed.  417. 

^^  People's  National  Bank  v.  Freeman's  National  Bank,  169  Mass.  129, 
47  N.  E.  588.  See  Becker  v.  First  National  Bank,  15  N.  D.  279,  107  N.  W. 
968  (1906),  wliere  the  question  of  whether  or  not  an  automobile  may  be 
delivered  for  examination  is  undecided. 

5  Woolen  V.  N.  Y.  &  Erie  Bank,  12  Blatchf.  359. 

1  §  225.  National  Bank  of  Commerce  v.  Merchants'  National  Bank, 
91  U.  S.  92,  23  L.  ed.  208  ;  Lanf  ear  v.  Blossman,  1  La.  Ann.  148  ;  Wisconsin 
Marine  &  Fire  Ins.  Co.  v.  Bank  of  British  North  America,  21  Upper 
Canada,  Q.  B.  284 ;  s.  c.  affirmed,  2  Upper  Canada,  E.  &  A.  282  ;  Mason 
V.  Hunt,  1  Dougl.  (Eng.)  297;  Commercial  Bank  v.  Railway  Co.,  160  111. 
401,  407,  43  N.  E.  756,  citing  National  Bank  v.  Merchants'  Bank,  91  U.  S. 
92,  23  L.  ed.  208 ;  Porter  on  Bills  of  Lading,  §  521 ;  Bank  v.  Cummings, 
89  Tenn.  613,  18  S.  W.  115  (1890). 

But  if  the  bank  surrenders  the  bill  of  lading  and,  without  surrendering 
the  draft,  takes  from  the  insolvent  consignee  a  draft  for  the  price,  on  third 
parties,  the  payment  of  which  is  refused,  the  bank  is  liable  to  the  shipper 
of  the  merchandise  for  the  loss  occasioned  thereby.  People's  National 
Bank  v.  Brogden,  98  Tex.  360,  83  S.  W.  1098  (1904). 

460 


DISCRETION    OF   THE    BANK   IN   DOUBTFUL    CASES  §  226 

signor  or  his  order.'"  A  bank  receiving  a  sight  draft  for  collection 
should  not  surrender  the  accompanying  bill  of  lading  until  the 
draft  has  been  paid.'* 

Indorsement  by  a  bank  "  for  collection  "  on  invoices  that 
accompany  bills  of  lading  attached  to  drafts  creates  no  responsi- 
bility on  the  part  of  the  bank ;  it  is  not  a  guaranty  that  the  bills 
of  lading  arc  genuine.^  "  It  imported  nothing  more  than  that  the 
goods  which  the  bills  stated  had  been  shipped  were  to  be  held  for 
the  payment  of  the  drafts,  if  the  drafts  were  not  paid  by  the  drawees, 
and  that  the  bank  transferred  them  only  for  that  purpose."  ^ 

\Yhere  a  customer  instructs  a  bank  to  accept  bills  of  exchange 
drawn  against  bills  of  lading,  the  bank  does  not  ha\'e  to  inquire 
as  to  the  genuineness  of  the  bills  of  lading,  and  though  they  prove 
to  be  forgeries,  it  may  recover  the  amount  paid  on  the  bills  of  ex- 
change* 

A  bank  that  without  notice  or  suspicion  of  wrong  doing  receives 
a  draft  from  the  drawer  for  collection  and  demands  and  obtains 
payment  of  the  same  from  the  drawee,  and  in  good  faith  pays 
the  proceeds  of  it  to  its  employer,  is  not  liable  to  the  payor  because 
the  latter  made  payment  without  consideration  and  in  reliance 
upon  a  forged  bill  of  lading  which  the  drawer  had  attached  to  and 
caused  to  be  forwarded  with  the  draft  .^ 

§  226.  Discretion  of  the  Bank  in  Doubtful  Cases.  —  If  any 
point  of  law  concerning  any  act  in  the  business  of  collection  is  in 
doubt  by  reason  of  having  never  been  adjudicated  upon,  if  the 
bank  using  its  best  discretion  should  pursue  the  course  which 
the  courts  subsequently  declare  to  be  improper  and  illegal,  it  will 
nevertheless  be  absolved  from  all  liability  for  the  results  of  its 
mistake.'     But  if  the  bank  makes  a  mistake  for  which  it  has  no 

i«  Bank  v.  Cummings,  89  Tenn.  610,  18  S.  W.  115  (1890). 

">  Ihid.  Especially  when  payment  has  been  made  a  prerequisite  to  a 
surrender  of  the  bill  of  lading.  Gulf  etc.  Ry.  Co.  v.  North  Te.xas  Grain 
Co.,  32  Tex.  Civ.  App.  03,  74  S.  W.  567  (1903).  See  Gregg  v.  Bank  of 
Columlna,  72  S.  C.  458,  52  S.  E.  195,  110  Am.  St.  Rep.  033  (1905). 

2  Craig  V.  Sibbett,  15  Pa.  St.  238 ;  Hunter  v.  Wilson,  19  L.  J.  Ex.  8 ; 
Leather  v.  Simpson,  L.  R.  11  Eq.  398. 

When  a  bank  collects  a  draft  with  a  bill  of  lading  attached  it  is  not 
liable  for  the  goods  not  being  as  contracted  for.  Commerce  ^Milling  Co.  v. 
Morris,  27  Tex.  Civ.  App.  553,  65  S.  W.  1118  (1901). 

3  Goetz  V.  Bank  of  Kansas  City,  7  Sup.  Ct.  Rep.  318  (1887). 
••  Woods  ('.  Thiedemann,  1  H.  &  C.  478. 

5  Nebraska  Ilav  etc.  Co.  v.  First  National  Bank,  78  Neb.  334.  110  N.  W. 
1019,  120  Am.  St.  Rep.  002,  9  L.  R.  A.  (n.  s.)  251  (1907). 

1  §226.     Mechanics'  Bank  v.  Merchants'  Bank,  6  Met.   (Mass.)   13; 

461 


§  226  COLLECTION   IN    GENEKAL 

such  excuse,  as  simply  a  mistake  of  misreading,  it  will  not  be  dis- 
charged from  its  liability  to  make  good  the  consequent  loss.'^ 
Though  of  course  in  this  case  of  a  misinterpretation  it  is  to  be 
supposed  that,  if  the  writing  really  appeared  so  illegible  that  the 
mistake  was  reasonably  excusable,  a7id,  which  is  essential,  the 
bank  by  reason  of  distance  and  want  of  time  was  actually  unable 
to  obtain  directions  or  explanations  from  competent  authority, 
it  would  be  acquitted  if  it  pursued  its  own  best  discretion.  In 
the  cited  case  there  was  obvious  negligence  on  the  part  of  the  bank 
in  the  reading  of  the  note. 

§  227.  Collections  made  in  the  Locus  of  the  Bank.  —  The  duty 
of  the  bank  to  the  holder  of  the  paper  which  is  received  for  collec- 
tion differs  slightly,  according  to  the  character  of  the  paper  and  the 
place  where  it  is  made  payable.  First  in  order  will  be  considered 
those  collections  which  are  to  be  made  in  the  same  place  where  the 
collecting  bank  itself  is  situated.  For  the  purpose  of  this  dis- 
cussion it  makes  no  difference  whether  the  bank  is  itself  the  owner  ; 
or  has  come  by  the  paper  directly  from  the  hands  of  the  owner 
or  his  agent ;  or  has  received  it  from  a  correspondent  of  its  own  in 
some  distant  place.  The  only  conditions  are,  that  the  bank 
performing  the  actual  collection  be  situated  in  the  same  town 
where  is  also  the  person  who  is  bound  to  make  the  payment,  or  the 
banking-house  at  which,  by  the  terms  of  the  instrument,  payment 
is  to  be  made.  If  the  paper  be  a  promissory  note,  a  bill  of  ex- 
change, or  a  draft,  the  duty  of  the  collecting  bank  is  comparatively 
simple.  It  must  perform  the  ordinary  requirements  in  the  way 
of  presenting  for  acceptance  if  the  paper  ought  to  be  accepted, 
and  of  presenting  for  payment  at  maturity  when  such  present- 
ment is  necessary.  But  the  bank  is  not  liable  for  neglecting  to 
present  a  draft  where  presentment  is  not  necessary  for  charging 
any  of  the  parties,  and  must  therefore  be  legally  useless  even  if 
made.^  If  either  acceptance  or  payment  is  refused,  the  paper 
must  be  sent  to  a  notary  for  protest,  provided  there  is  anj'  occasion 
for  having  it  protested  at  all.^  i^nd  the  bank  is  liable  if,  through 
an  erroneous  opinion  as  to  the  legal  character  of  any  especial 
piece  of  business  paper,  though  in  an  unusual  form,  it  does  not 

National  Bank  of  Commerce  v.  Merchants'  National  Bank,  91  U.  S. 
92,  2.3  L.  ed.  208. 

2  Bank  of  Delaware  County  v.  Broomhall,  38  Pa.  St.  135. 

1  §  227.  Mobley  v.  Clark,  28  Barb.  (N.  Y.)  390 ;  West  Branch  Bank 
V.  Fulmer,  3  Barr  (Pa.)  399. 

^  Georgia  National  Bank  v.  Henderson,  46  Ga.  487. 

462 


PRESENTMENT   FOR    PAYMENT  §  229 

cause  presentment,  demand  and  protest  to  be  made  in  the  manner 
which  the  court  holds  to  be  necessary.^  Thouj^h  if  the  person 
from  whom  the  bank  received  the  paper  is  immediately  acces- 
sible, there  seems  to  be  no  reason  why  the  bank  should  not  be 
allowed  at  once  to  return  the  paper  to  him,  and  leave  him  to  have 
it  protested,  if  he  sees  fit.  But  in  such  case  it  is  essential  that 
the  return  can  be,  and  in  fact  is,  accomplished  with  sufficient 
despatch  to  leave  him  reasonable  time  for  attending  to  the  pro- 
testing before  it  is  too  late  to  secure  its  advantages. 

Duty  to  Present  Draft  Payable  at  a  Future  Day 

As  it  is  the  duty  of  the  bank  as  agent  to  act  as  a  prudent  man 
would  in  his  own  affairs,  and  as  it  is  for  the  interest  of  the  holder 
of  a  draft  piiyable  at  a  day  certain  in  the  future  to  present  it  at 
once  for  acceptance,  since  acceptance  binds  the  drawee,  and  if 
it  is  not  accepted  the  o\\-ner  has  a  right  of  action  against  the 
drawer  or  indorser  on  notice  and  protest,  without  waiting  for  the 
day  of  payment,  therefore  the  bank  should  present  such  a  draft 
for  acceptance  with  due  diligence.^ 

§  228.  Notary's  Duty.  —  "  When  a  note  is  put  in  bank  for 
collection,  if  not  paid  when  due,  it  is  placed  in  the  hands  of  a 
notary,  whose  duty  it  is  to  demand  paAinent.  If  not  paid  during 
bank  hours  of  the  last  day  of  grace,  the  notary  on  the  evening  of 
that  or  on  the  next  day  gives  notice  to  all  the  indorsers  if  they 
reside  in  town,  if  out  of  town  then  by  the  next  mail,  and  it  is  not 
until  after  all  this  is  done  that  he  returns  it  to  the  bank  under 
protest,  and  notice  to  the  holder  is  considered  no  part  of  his  duty."  ^ 

§  229.  Presentment  for  Payment.  —  Presentment  for  payment 
should  be  within  })usincss  hours,  and  when  a  note  is  payable  at 
a  bank,  that  means  during  its  hours  of  business  ;  but  if  a  demand 
is  made  of  the  officers  at  the  bank  after  banking  hours,  and  the 
cashier  or  teller  states  that  there  are  no  funds,  the  presentment 
is  sufficient.^     Demand  must  be  made  on  the  last  day  of  grace, 

3  Ibid.  But  see  National  Bank  of  Commerce  v.  Merchants'  National 
Bank,  91  U.  S.  92,  23  L.  ed.  208. 

••  Lenox  r.  Cook,  8  Mass.  4G0 ;  Whitehead  v.  Walker,  10  Mees.  & 
Wels.  G9G;  Robinson  v.  Ames,  20  Johns.  (N.  Y.)  14G.  See  3  Kent,  94, 
and  Mount  ;•.  First  National  Bank,  37  Iowa  457. 

1  §  228.     Johnson  ;•.  Harth,  1  Bail.  (S.  C.)  4()3. 

1  §  229.  Salt  Springs  National  Bank  v.  Burton,  58  N.  Y.  430;  First 
National  Bank  v.  Owen,  23  Iowa  185 ;   Flint  i-.  Rog-crs,  15  Me.  G7. 

463 


§  229  COLLECTION    IN    GENERAL 

in  business  hours ;   a  demand  on  any  previous  day  is  too  soon  to 
bind  the  indorser.^ 

Bays  of  Grace 

The  general  usage  is  to  allow  three  days'  grace,  but  this 
rule  may  be  varied  by  custom  in  a  particular  locality  which 
entered  into  the  contract  of  the  parties,^  or  by  express  agree- 
ment. 

§  230.  Place  of  Presentment.  —  The  presentation  of  a  draft 
for  payment  at  the  place  of  its  date  is  a  sufficient  demand  to 
charge  the  drawer  or  acceptor  after  notice  of  protest,  where  the 
place  at  w^hich  it  was  payable  is  not  stated  in  the  writing,  and 
no  proof  made  that  any  particular  place  w^as  agreed  on.^ 

Wlien  a  bill  or  note  made  payable  at  a  bank  is  present  there, 
with  the  knowledge  of  the  bank,  and  ready  to  be  delivered  upon 
payment,  such  mere  presence  is  a  sufficient  demand ;  and  if  busi- 
ness hours  pass  and  it  is  not  paid,  it  is  deemed  to  be  dishonored 
and  notice  must  be  given. ^  And  the  same  rule  holds  as  to  any 
place  at  which  paper  is  made  payable ;  ^  mere  presence,  if  known, 
is  enough,  and  it  is  not  necessary  even  that  it  should  be  in  posses- 
sion of  the  proper  officer.*  If  it  belongs  to  the  bank,  the  law 
presumes  its  presence  there  until  disproved.^  Mere  physical 
presence  in  the  bank  unknown  to  the  officers,  as  where  the  letter 
containing  the  bill  slipped  through  a  crack  in  the  cashier's  desk, 
is  not  sufficient ;  the  bill  is  not  ready  to  be  delivered  on 
payment.^ 

Where  the  maker  and  indorser  of  a  note  know  that  the  bank 
having  the  note  for  collection  has  made  the  office  of  another 
bank  its  own  for  discount,  deposit,  etc.,  and  put  its  notes  held  for 
collection  into  the  hands  of  this  other  bank,  demand  at  said  office 
is  sufficient.'^ 

2  Farmers'  Bank  v.  Duvall,  7  Gill  &  Johns.  (Md.)  78. 

3  Bank  of  Columbia  v.  Magruder,  6  Harr.  &  Johns.  (Md.)  180  ;  Renner 
V.  Bank  of  Columbia,  9  Wheat.  .581,  6  L.  ed.  166.     See  Usage. 

1  §  230.     Wittkowski  v.  Smith,  84  N.  C.  671  (1881). 

2  Bank  of  United  States  v.  Carneal,  2  Pet.  543,  7  L.  ed.  514 ;  Chicopee 
Bank  v.  Philadelphia  Bank,  8  WaU.  641,  19  L.  ed.  422 ;  Folger  v.  Chase, 
18  Pick.  (Mass.)  63. 

3  Hunt  V.  Maybee,  3  Seld.  (N.  Y.)  266. 

"  Folger  V.  Chase,  18  Pick.  (Mass.)  63 ;  State  Bank  v.  Napier,  6  Humph. 
(Tenn.)  270. 

^  See  cases  quoted  in  notes  1  and  3. 

6  Chicopee  Bank  v.  Philadelphia  Bank,  8  WaU.  641,  19  L.  ed.  422. 

7  Crews  V.  Farmers'  Bank,  31  Gratt.  (Va.)  348. 

464 


USAGE   AS   ALTERING    RULES   AS   TO    PL.\CE    OF    PRESEXTMEXT      §  231 

§  231.  Usage  as  Altering  the  Rules  as  to  Place  of  Presentment. 
—  A  custom  i^revails  in  some  places  for  a  bank  to  send  notice  by 
mail  to  the  payor  a  little  before  maturity,  requesting  him  to  come 
and  settle  at  the  proper  time.  As  applied  to  paper  made  payable 
at  the  bank,  of  course  there  is  no  difficulty,  the  law  being  as  above  ; 
but  as  to  paper  not  in  terms  payable  there  trou1)le  appears  when 
a  bank  undertakes  to  substitute  such  a  custom  of  presenting  by 
such  notice,  instead  of  making  demand  upon  the  payor  as  the  gen- 
eral rules  of  the  law  merchant  require.  In  Massachusetts  the 
usage  is  so  general  as  to  have  become  a  part  of  the  law  in  reference 
to  which  parties  are  presumed  to  contract.^  So  in  IMaine,  but 
INIaryland  and  New  Hampshire  contra.^ 

Upon  principle,  if  the  usage  were  prevalent  generally  among 
the  banks  of  a  given  place,  it  should  bind  persons  of  the  place, 
provided  the  paper  is  payable  in  that  place.^  But  if  the  usage 
is  that  of  a  particular  bank  only,  it  is  difficult  to  see  on  what 
ground  a  party  who  has  not  contemplated  that  bank  as  a  factor 
in  the  matter  can  be  held  by  such  a  custom,  merely  because  some 
holder  has  selected  that  bank  to  act  for  him  in  collection.'  It 
should  be  shown  that  the  party  knows  of  the  usage  of  the  bank, 
and  had  reason  to  suppose  the  bank  w^ould  act  in  the  matter  in 
order  to  hold  a  party  who  has  not  selected  or  adopted  that  bank 
to  act  in  collecting  the  bill,  for  nothing  less  will  lay  a  foundation 
for  a  reasonable  inference  that  such  party  contracted  in  reference 
to  such  usage.  The  case  is  entirely  diflFerent  from  those  in  which 
the  bill  is  made  payable  at  a  particular  bank,  for  then  the  parties 
to  the  bill  are  dealers  with  the  bank,  and  bound  by  its  usages, 
whether  known  to  them  or  not.-*     See  §§  9,  221. 

A  note  was  made  payable  to  a  certain  bank  or  order,  as  if  for 
discount  by  that  bank.  It  was  not  discounted  there,  however; 
but  was  sold  to  another  party,  who  deposited  it  in  the  bank.  It 
was  held  that  the  sureties  were  liable  to  pay  it.^ 

1  §  2.31.  WhitwcU  V.  Johnson,  17  Mass.  449  ;  Grand  Bank  v.  Blanehard, 
23  Pick.  (Mass.)  305;  Marine  Bank  (-.  Smith,  18  Me.  99.  Contra,  Farm- 
ers' Bank  v.  Duvall,  7  Gill  &  J.  (Md.)  78;  Moore  v.  Waitt,  13  X.  H. 
41.J. 

2  Adams  v.  Ottcrback,  15  How.  (S.  C.)  539;  Rennor  v.  Bank  of  Co- 
lumbia, 9  Wheat.  .587,0  L.  ed.  1G6;  Dorchester  &  MiUon  Bank  v.  New 
England  Bank,  1  Gush.  (Mass.)  177. 

3  See  notes  1  and  2,  and  Pearson  v.  Bank  of  Metropolis,  1  Pet.  89,  7 
L.  ed.  05. 

'  Mills  r.  Bank  of  U.  S.,  11  Wheat.  431,  0  L.  ed.  512. 
^  Ward  )'.  Northern  Bank,  14  B.  Monr.  (Ky.)  351. 

VOL.  1  —  30  465 


§  231  COLLECTION   IN    GENERAL 

Sending  a  check  by  post  to  the  drawee  is  a  good  presentment ; 
but  if  the  money  does  not  come  back  by  the  return  mail,  notice 
of  dishonor  should  be  given. ^ 

Where  A.  delivers  a  certificate  of  deposit  to  a  bankto  be  collected 
from  a  bank  in  another  place  without  any  inquiry  as  to  the  methods 
of  collection,  there  is  an  implied  understanding  that  the  established 
usage  in  making  collections  will  be  followed ;  and  if  the  bank  to 
which  it  is  delivered,  acting  accordingly  and  in  the  exercise  of  due 
care,  mails  the  certificate  to  the  payor  bank,  and  receives  the 
latter's  check  on  a  bank  in  a  third  place,  it  will  not  be  liable  to  the 
owner  of  the  certificate  if  the  payor  bank  becomes  insolvent 
before  presentation  of  the  check.^" 

If  a  bill  of  exchange  is  presented  through  a  banker,  one  more 
day  is  allowed  for  giving  notice  of  dishonor  than  would  be  allowed 
if  it  were  presented  by  the  party  himself.  But  no  additional 
time  is  allowed  for  presentment  for  payment? 

If  a  note  be  payable  at  a  particular  bank,  and  at  maturity  the 
bank  has  no  place  of  business  and  another  occupies  its  room,  it 
is  sufficient  to  present  it  for  payment  at  such  room.^ 

§  232.  Notice  of  Dishonor.  —  Where  a  bank,  not  upon  its  own 
account  but  as  agent  for  collection,  holds  indorsed  paper  of  any 
description  which  is  dishonored,  it  has  been  questioned  to  whom 
it  is  bound  to  give  notice  of  the  dishonor,  —  whether  only  to  its 
own  principal,  that  is  to  say,  the  party  from  whom  it  received 
the  paper,  or  to  the  makers  and  all  the  indorsers  thereon.  The 
decisions  have  not  from  the  outset  been  perfectly  harmonious. 
But  the  doctrine  that  the  duty  extends  to  the  notification  of  any 
persons  behind  the  party  recognized  by  the  bank  as  its  immediate 
principal  is  comparatively  little  supported.  The  chief  authority 
is  the  New  York  case  of  Smedes  v.  The  Bank  of  Utica.^  But  in 
this  case  there  was  evidence,  which  the  court  deemed  satisfactory, 
of  an  established  custom  and  general  understanding  to  this  effect 
in  New  York,  and  it  was  strictly  upon  this  evidence  that  the  de- 
cision was  really  based ;  though  the  judge  intimated  that,  if  this 
proof  had  been  omitted,  it  was  possible  that  the  court  might  have 

6  Bailey  v.  Bodenham,  10  L.  T.  n.  s.  422 ;    12  W.  R.  865. 

6a  Farmers'  Bank  and  Trust  Co.  v.  Newland,  97  Ky.  464,  31  S.  W.  38 
(1895). 

7  Alexander  v.  Burchfield,  Car.  &  M.  75 ;  3  Scott  N.  R.  555 ;  7  M.  & 
G.  1061. 

8  Lane  v.  Bank  of  West  Tennessee,  9  Heisk.  (Tenn.)  419  (1872). 
1  §  232.     20  Johns.  (N.  Y.)  372;   3  Cow.  (N.  Y.)  662. 

466 


NOTICE   OF   DISHONOR  §  232 

taken  judicial  cognizance  of  the  usage.  Thus  this  ruhng  really 
is  entitled  to  no  weight  in  a  discussion  of  the  general  jiriiiciple 
of  the  law ;  and  even  the  judge's  remark  serves  only  to  show  how 
universal  and  notorious  was  the  usage  in  his  own  State,  and  has 
not  at  all,  and  does  not  communicate  to  the  ruling,  the  character 
of  a  general  principle.  The  language  of  the  court  in  a  few  (jther 
cases,  more  especially  in  McKinster  v.  Bank  of  Utica,^  Fabens  v. 
Mercantile  Bank,^  Bank  of  Washington  v.  Triplett,''  and  West 
Branch  Bank  v.  Fulmer,^  has  been  regarded  as  sustaining  the 
same  view.  The  language  used  might  induce  the  citation  of  these 
causes  as  authorities,  but  they  can  serve  only  as  very  weak  ones,  and 
perhaps  it  would  hardly  be  an  unfair  statement  to  say  that,  so  far 
as  they  bear  upon  this  precise  point,  they  contain  little,  if  anything, 
more  than  obiter  dida.^  On  the  other  hand,  the  authorities  which 
take  the  opposite  view  are  numerous,  direct  and  weighty.^  Among 
them,  as  cited  in  the  margin,  it  will  be  noticed  that  there  are  other 
cases  decided  in  New  York ;  and  especially  should  be  noted  one, 
later  in  date  than  any  of  those  to  the  contrary  effect  occurring  in 
the  decisions  in  the  same  State.  Therein  the  court  acknowledged 
that  the  question  whether,  where  the  note  is  sent  for  collection 
merely,  it  is  a  presumption  of  law  that  the  collecting  agent  will 
notify  all  parties,  is  one  of  much  embarrassment,  and  not  clearly 
settled  in  New  York.  Previous  cases  in  the  State,  being  those  just 
cited,  have  arisen  between  a  holder  and  an  early  indorser,  and  con- 
cern the  point  whether  such  indorser  could  be  held  by  virtue  of 
a  series  of  notices  sent  day  by  day  by  each  indorser  in  turn  to  his 
predecessor.  But  the  discussion  has  never  arisen  directly  between 
the  holder  and  the  collecting  agent,  where  the  right  of  the  former 

2  9  Wend.  (N.  Y.)  46 ;   11  id.,  473.  "  23  Pick.  (Mass.)  330. 

*  1  Pet.  25,  7  L.  ed.  37.  '  3  Barr  (Pa.)  399. 

^  See  also  Curtis  v.  Leavitt,  15  N.  Y.  9 ;  Montgomery  Count  j-  Bank  v. 
Albany  City  Bank,  3  Seld.  (N.  Y.)  400;  Foster  v.  Essex  Bank,  17  IMass. 
479:    Blakeslee  v.  Hewett,  76  Wis.  341,  44  N.  W.  1105. 

7  State  Bank  v.  Bank  of  the  Capitol,  41  Barb.  (N.  Y.)  343;  Bank  of 
United  States  v.  Goddard,  5  Mason  366  ;  Phipps  v.  Millburv  Bank,  8  Met. 
(Mass.)  79;  Colt  v.  Noble,  5  Mass.  167;  Eagle  Bank  v.  Chapin,  3  Pick. 
(Mass.)  180  (see  comments  upon  this  case,  made  by  the  court  in  Phipps 
V.  Millburv  Bank,  supra) ;  Mead  v.  Engs,  5  Cow.  (N.  Y.)  303;  Howard  v. 
Ives,  1  Hill  (N.  Y.)  263;  Spencer  v.  Ballon,  18  N.  Y.  327;  Farmers' 
Bank  v.  Vail,  21  id.,  485  (cited  in  41  Barb.  343,  supra) ;  Bank  of  Mobile  v. 
Huggins,  3  Ala.  206 ;  Branch  Bank  v.  Knox,  1  id.,  148.  So  the  English 
case  of  Haynes  v.  Birks,  3  Bos.  &  P.  599.  See  also  Bank  of  United  States 
V.  Davis,  2  Hill  451 ;  Carpenter  c.  National  Shawmut  Bank,  187  Fed.  1 
(1911) ;   Gleason  v.  Thayer,  87  Conn.  248,  87  Atl.  790  (1913). 

467 


§  232  COLLECTION    IN    GENERAL 

to  recover  from  the  latter  has  turned  upon  whether  or  not  the  latter 
had  contracted,  as  part  of  his  undertaking  to  collect,  to  notify  all 
the  indorsers.  After  a  careful  consideration  of  all  the  precedents, 
the  court  conclude  that  the  collecting  bank  need  notify  only  its 
o^Ti  principal,  from  whom  it  has  immediately  received  the  paper. 
In  the  case  cited  from  Mason's  Reports  the  matter  is  subjected 
to  a  very  thorough  and  satisfactory  discussion,  as  it  is  also  in  the 
case  of  Phipps  v.  Millbury  Bank.  Where  the  weight  of  opposing 
authorities  is  so  very  disproportionately  balanced,  and  especially 
where  the  latest  among  the  authorities  all  consistently  incline  in 
favor  of  the  doctrine  which  was  already  the  stronger,  it  can  hardly 
be  considered  that  the  true  rule  is  any  longer  open  to  doubt.  It 
must  be  assumed  now  to  be  law  that  the  notification  to  the  prin- 
cipal —  i.e.  to  the  immediate  predecessor  in  possession,  the  party 
from  whom  the  bank  receives,  no  matter  what  may  be  the  nature 
of  the  title  or  interest  of  that  party  to  or  in  the  paper  —  is  suffi- 
cient to  acquit  the  bank.  But  though  this  is  settled  as  the  general 
rule,  it  is  of  course  open  to  material  variation  from  extrinsic 
causes.  A  special  agreement,  express  or  implied,  between  the 
bank  and  its  principal,  may  require  notice  to  be  given  to  all  the 
parties,  or  to  any  particular  party,  on  the  paper.  So  a  local 
usage,  as  in  New  York  City,  or  the  usage  of  the  collecting  bank, 
to  notify  indorsers  or  makers,  may  render  it  obligatory  upon  the 
bank  to  do  so,  as  a  part  of  the  contract  of  collection.  There  can 
be  no  question  that  the  court  in  the  case  of  Smedes  v.  Bank  of 
Utica  was  right  in  admitting  evidence  of  such  usage  ;  and,  of  course, 
also  m  being  governed  by  it,  since  it  was  sustained  by  satisfactory 
proof.  None  of  the  cases  in  which  this  decision  has  been  since 
commented  upon,  and  which  in  the  absence  of  proof  of  usage 
have  laid  down  an  opposite  doctrine,  have  criticised  the  correct- 
ness of  the  course  then  pursued  in  this  matter.  On  the  contrary, 
they  have  by  plain  implication  approved  it. 

Evidence  of  an  Agreement  to   Notify  All 

(a)  It  should  seem,  too,  that  the  bank  ought  to  choose  dis- 
tinctly between  the  two  courses.  For  if  it  undertakes  to  notify 
all  the  parties,  and  does  not  do  so  properly,  it  is  at  least  possible 
that  it  might  be  held  responsible  for  the  loss  arising  from  the  in- 
sufficiency. Certainly  the  fact  of  its  undertaking  to  notify  all 
would  be  very  strong  evidence  that  the  notification  of  all  was  under- 
468 


MANNER    OF   NOTICE  §  23.*^ 

stood  to  be  a  part  of  the  contract.  Indeed,  it  has  been  held  that 
the  fact  of  notification  to  a  part  only  of  the  indorsers  was  admis- 
sible in  evidence,  as  going  to  show  an  agreement  to  notify  all, 
and  the  court  only  restricted  its  force  by  saying  that  it  was  not 
conclusive  to  this  effect.* 

When   Notice  is  to  be  Given 

(h)  Each  transferee  of  a  check  has  one  day  allowed  him  in 
which  to  give  notice  of  its  dishonor  to  his  transferrer.  Nor  does 
it  make  any  diflCerence  that  any  one  or  more  of  the  transferees 
are  parties  who  have  been  simply  organs  of  transmission  without 
any  actual  interest  in  the  check.^ 

Notice  of  dishonor  may  be  given  at  once,  on  refusal  to  pay 
upon  demand  in  business  hours  of  the  last  day  of  grace;  it  is 
not  necessary  to  wait  till  the  day  is  done.^° 

If  notice  of  dishonor  is  not  given  to  an  indorser  after  being  in- 
structed to  do  so  by  the  drawer  who  has  left  with  the  bank  the 
indorser's  name  and  the  place  to  which  the  notice  is  to  be  sent 
the  bank  is  liable  for  all  resulting  damages.^"" 

Excuse 

(c)  No  notice  need  be  given  if  the  party  has  actual  knowledge 
of  the  fact  to  be  notified. ^^ 

§  233.  Manner  of  Notice.  —  The  general  rule  is  that  personal 
notice  must  be  given  to  a  party  in  the  same  place  as  the  bank,^ 
but  a  mailed  notice  is  suflScient  if  such  is  the  usage  of  the  bank 

8  state  Bank  v.  Bank  of  the  Capitol,  41  Barb.  (N.  Y.)  343. 

9  Prideaux  v.  Criddlo,  L.  R.  4  Q.  B.  455 ;  Burnham  v.  Webster,  19  IMe. 
232.  See  Jefferson  County  Sav.  Bank  v.  Hendrix,  147  Ala.  670,  39  So. 
295,  1  L.  R.  A.  (n.  s.)  246,  n.  (1905). 

10  Farmers'  Bank  v.  Duvall,  7  GiU  &  Johns.  (Md.)  78. 

If  notice  is  not  fjiven  until  after  the  drawee's  insoh'ency  the  bank 
is  liable,  not  for  the  full  amount  of  the  check  but  only  for  the  actual  amount 
of  the  loss  sustained  which  must  be  specially  avoired  and  proved.  Jef- 
ferson County  Sav.  Bank  v.  147  Ala.  670,  39  So.  295,  1  L.  R.  A.  (n.  s.) 
246,  n.  (1905) ;  Hendrix,  v.  Jefferson  County  Sav.  Bank,  153  Ala.  636, 
45  So.  136,  14  L.  R.  A.  (n.  s.)  686  (1907). 

lO"  Howard  v.  Bank  of  Metropolis.  95  App.  Div.  342  (1904),  88  N.  Y.  S. 
1070;  id.,  115  App.  Div.  326  (1906),  100  N.  Y.  S.  1003. 

"  West  Branch  Bank  v.  Fulmer,  3  Pa.  St.  399. 

1  §  233.  When  an  indorser  dwells  in  the  same  post-office  delivery,  the 
notice  must  be  personal,  or  left  at  his  residence  or  place  of  business. 
Forbes  v.  Omaha  National  Bank,  10  Neb.  338,  6  N.  393  ;  Louisiana  State 
Bank  v.  Rowel,  6  Mart.  (La.)  506  ;  Babebck  v.  Benham,  4  Hill  (N.  Y.)  139. 

409 


§  233  COLLECTION   IN   GENERAL 

at  which  a  note  is  payable ;  ^  and  an  indorser  (A.)  who  receives 
notice  by  mail  may  forward  notice  to  his  indorser  (B.)  by  mail, 
if  he  does  it  the  same  day,  so  that  it  w^ould  reach  his  indorser  the 
same  day  he  would  have  received  the  notice  sent  to  A.  if  it  had 
been  originally  addressed  to  B.  instead  of  to  A.^  In  Alabama, 
notice  that  may  be  sent  by  mail  under  the  law  merchant  is  suffi- 
ciently addressed  if  sent  to  the  residence  or  post-office  nearest 
the  residence  of  the  party  to  be  charged  at  the  time  he 
became  a  party,  without  regard  to  his  residence  at  the  time  of 
notice.'* 

When  the  protest  is  made  at  a  different  place  from  that  where 
the  parties  reside,  the  mail  may  be  properly  used.^ 

Test  of  Difference  in  Place 

(a)  As  to  the  test  of  difference  in  place,  the  United  States 
Supreme  Court  holds  that,  even  though  the  parties  get  their  mail 
at  the  same  post-office,  yet  if  the  party  to  be  notified  has  no 
residence  nor  place  of  business  in  the  town,  but  lives  two  or  three 
miles  in  the  country,  the  mail  may  be  used.^  Other  authorities 
make  the  post-office  the  test ;  if  the  parties  get  their  mail  at  the 
same  post-office,  the  mail  is  not  to  be  used  (unless  the  place  of 
payment  is  elsewhere),  for  the  post  is  not  to  be  made  a  place 
merely  of  deposit,  and  is  only  properly  used  for  transportation ;  ^ 
this,  how^ever,  is  of  course  subject  to  exception  where  a  postal 
delivery  ^  exists  in  the  city  where  the  parties  live,  or  where  it  is 

2  And  what  is  its  usage  is  a  question  of  fact  for  the  jury.  Carolina 
National  Bank  v.  WaUace,  13  S.  C.  347  (1879).  See  Gindrat  v.  Mechan- 
ics' Bank,  7  Ala.  324 ;  Usage,  §  9.  The  parties  to  a  note  payable  at  a 
bank  are  dealers  with  the  bank,  and  bound  by  its  custom  as  to  notifying 
by  mail.  Chicopee  Bank  v.  Eager,  9  Met.  (Mass.)  583;  Mills  v.  Bank  of 
United  States,  11  Wheat.  431,  6.  L.  ed.  512. 

3  United  States  National  Bank  v.  Burton,  58  Vt.  426;  Manchester 
Bank  v.  Fellows,  28  N.  H.  302 ;  Shelburne  Falls  National  Bank  v.  Towns- 
ley,  102  Mass.  177. 

^  John  V.  City  National  Bank  of  Selma,  57  Ala.  96  (1876). 

5  Hartford  Bank  v.  Stedman,  3  Conn.  489 ;  Greene  v.  Farley,  20  Ala. 
322 ;  Eagle  Bank  v.  Hathaway,  5  Met.  (Mass.)  212 ;  Warren  v.  Gilman, 
17  Me.  360. 

« Bank  of  Columbia  v.  Lawrence,  1  Pet.  578,  7  L.  ed.  269. 

^  Eagle  Bank  v.  Hathaway,  5  Met.  (Mass.)  212;  Shelburne  Falls  Na- 
tional Bank  v.  Townsley,  102  Mass.  177  ;  Louisiana  State  Bank  v.  Rowel, 
6  Mart.  (La.)  506. 

8  Shoemaker  v.  Mechanics'  Bank,  59  Pa.  St.  83;  Walters  v.  Brown, 
15  Md.  292. 

470 


SELECTION    OF   SUB-AGENT  §  23G 

the  usage  ^  of  a  bank  to  deposit  notice  in  the  post-office,  as  such 
a  usage  will  bind  those  dealing  with  the  bank. 

§  234.  Waiver  of  Demand  and  Notice.  Insolvency  no  Excuse. 
—  Indorser's  acknowledgment  of  "the  receipt  of  notice  of  i)ro- 
test  on  the  within  note  "  (a  note  delivered  to  a  savings  bank  as 
collateral  security  for  a  previous  loan)  was  held  to  release  the  bank 
from  all  obligation  to  demand  payment  or  give  notice  of  non- 
payment.^ 

(a)  Insolvency  of  the  drawee  will  not  excuse  failure  to  present 
for  payment  or  acceptance,  or  failure  to  give  notice  of  non-payment 
or  non-acceptance.  From  friends  or  unknown  resources  the 
drawee  may  have  power  to  pay,  and  only  when  a  party  cannot 
possibly  be  damaged  by  the  want  of  due  presentment  or  notice 
is  the  failure  excused.  The  mere  fact  that  he  has  not  been  injured 
is  no  defence,  if  he  viight  have  been  damaged  by  the  omission. ^ 

§  235.  Collections  that  are  not  to  be  made  in  the  Locus  of  the 
Bank.  —  When  the  paper  is  payable  in  some  other  place  than 
that  in  which  the  bank  is  located,  its  duty  is  (1st)  to  forward 
the  bill,  or  note,  or  check  in  proper  season,  to  a  sub-agent  selected 
with  due  care ;  (2d)  to  send  to  such  agent  any  instructions  bear- 
ing upon  its  duty  that  may  have  been  received  from  the  depositor 
(§  224)  ;  and  (3d)  to  make  inquiry  with  due  diligence  if  notice  of 
the  arrival  of  the  paper  does  not  come  to  it  within  such  time  as 
it  might  reasonably  be  expected.     See  §§  235,  252  d. 

§  236.  Selection  of  Sub-agent.  —  The  bank's  duty  is  to  use 
every  reasonable  precaution,  so  far  at  least  as  its  own  action  is 
concerned,  to  secure  the  collection,  if  possible  ;  and,  failing  in  this, 
the  prompt  and  accurate  performance  of  all  the  items  connected 
with  the  protest.  It  must  therefore  either  transmit  to  a  bank 
in  good  standing,  or  hand  over  to  a  notary  in  good  repute,  as  the 

sChicopee  Bank  v.  Eager,  9  Met.  583;  Mills  v.  Bank  of  U.  S.,  11 
Wheat.  431,  6  L.  ed.  512. 

1  §  234.     City  Savings  Bank  v.  Ilopson,  53  Conn.  453  (1885),  5  Atl.  (101. 

2  1  Parsons  on  Notes,  446,  528,  551,  G.30;  Story  on  Notes,  280,  367; 
Story  on  Bills,  318,  326,  346;  Daniel  on  Neg.  Inst.,  1171,  1172;  Chitty 
on  Bills,  354,  396,  490 ;  Smith  v.  Miller,  .52  N.  Y.  545 ;  Welch  v.  Taylor 
Manuf.  Co.,  82  111.  .579;   Hawley,  Dodd,  &  Co.  r.  Jette,  10  Or.  36. 

Where  the  bank  was  in  default  in  presentation  and  protest,  it  was 
held  that,  in  a  suit  for  damages  by  the  owner  of  the  note,  the  bank  might 
show  that  the  maker  of  the  note  was  insolvent,. and  that  there  had  been 
no  real  loss  to  the  holder ;  but  evidence  only  that  the  maker  was  in  em- 
barrassed circumstances  was  declared  inadmissible.  Steele  v.  Russell, 
5  Neb.  211. 

471 


§  236  COLLECTION   IN   GENERAL 

case  may  be.  And  if  it  be  proved  to  have  been  careless  in  the 
choice  of  the  agent,  and  to  have  selected  one  which  it  knew  or 
ought  to  have  known  to  be  an  improper  one,  it  will  be  answerable 
for  the  injury  resulting  therefrom.^  Ordinarily,  of  course,  it  will 
be  very  strong  evidence  of  due  care  on  the  part  of  the  bank  if  it  is 
shown  to  have  selected  the  agent  which  it  is  wont  to  employ  for 
the  transaction  of  its  own  business  of  the  same  nature,^  and  the 
courts  are  accustomed  to  speak  of  such  evidence  as  if  it  were  sub- 
stantially conclusive.  Generally  it  may  be  thus  regarded,  but  it 
is  clearly  possible  that  a  bank  may  be  shown  to  be  culpably  remiss 
in  the  selection  of  its  own  agents,  and  then  the  fact  that  the  agent 
was  employed  in  its  private  affairs  would  be  no  excuse  for  the  em- 
plo}Tnent  of  the  same  agent  in  the  affairs  of  the  customer.  The 
contract  is  not  that  the  bank  shall  employ  its  own  usual  agents, 
but  that  it  shall  employ  proper  agents. 

By  the  custom  of  London  bankers,  when  a  foreign  check  is  paid 
to  a  banker  by  a  customer,  if  the  banker  has  no  agent  at  the  place 
where  the  check  is  payable,  he  sends  it  direct  to  the  banker 
on  whom  it  is  drawn,  demanding  payment,  and  the  banker  immedi- 
ately either  remits  the  money  or  returns  the  check.^ 

Not  Proper  to  Employ  an  Agent  with  a  Manifest  Adverse  Interest. 
But  see  New    York  Case  in  {b) 

(a)  But  in  this  country  the  party  who  is  to  pay  a  check  is  not  a 
suitable  agent  for  its  collection.^"  The  sender  is  guilty  of  neg- 
ligence,^* and  custom  is  no  defence.^" 

1  §  236.  Fabens  v.  Mercantile  Bank,  23  Pick.  (Mass.)  330 ;  ^tna 
Insurance  Co.  v.  Alton  City  Bank,  25  111.  243 ;  Stacy  v.  Dane  County 
Bank,  12  Wis.  629;  Bellemire  v.  United  States  Bank,  4  Whart.  (Pa.) 
105 ;  Bowling  v.  Arthur,  34  Miss.  41 ;  Bank  of  Rocky  Mount  v.  Floyd, 
142  N.  C.  187,  55  S.  E.  95  (1906) ;  Farley  National  Bank  v.  Pollock,  145 
Ala.  321,  39  So.  612,  117  Am.  St.  Rep.  44,2  L.  R.  A.  (n.  s.)  194,  n.  (1905) ; 
Second  National  Bank  v.  Merchants'  National  Bank,  111  Ky.  930,  65 
S.  W.  4,  98  Am.  St.  Rep.  439,  55  L.  R.  A.  273  (1901). 

2  Warren  Bank  v.  Suffolk  Bank,  10  Cush.  (Mass.)  583  ;  Hyde  v.  Planters' 
Bank,  17  La.  560 ;   Baldwin  v.  Bank  of  Louisville,  1  La.  Ann.  13. 

3  Heywood  v.  Pickering,  Law  R.  9  Q.  B.  428  (1874). 

30  First  National  Bank  v.  Bank  of  Whittier,  221  111.  319,  77  N.  E.  563 
(1906) ;  Bank  of  Whittier  v.  First  National  Bank,  124  111.  App.  102  (1905). 

a''  Smith  v.  National  Bank,  191  Fed.  226  (1911). 

3<^  Bank  of  Rocky  Mount  v.  Floyd,  142  N.  C.  187,  55  S.  E.  95  (1906) ; 
Pickett  V.  Baird  Investment  Co.,  22  N.  D.  343,  133  N.  W.  1026  (1911) ; 
Winchester  Milling  Co.  v.  Bank  of  Winchester,  120  Tenn.  225,  111  S.  W. 
248,  18  L.  R.  A.  (n.  s.)  441,  n.  (1907) ;  Pinkney  v.  Kanawha  Valley  Bank, 

472 


SELECTION    OF   SUB-AGENT  §  236 

A  Chicago  bank  received  a  certified  check  for  collection,  and 
sent  it  to  the  drawee  bank.  The  latter  mailed  in  return  a  worth- 
less draft,  surrendered  the  check  to  the  drawer  as  paid,  failed, 
and  closed  its  doors.  The  Chicago  bank  was  liable  to  the  depositor 
for  the  full  amount  of  the  check.  The  debtor  cannot  be  the  disin- 
terested agent  of  the  creditor  to  collect  the  debt,  and  it  cannot  be 
considered  reasonable  care  to  select  an  agent  known  to  be  inter- 
ested against  the  principal,  to  put  the  latter  into  the  hands 
of  his  natural  adversary ;  surely  it  is  not  due  care  in  one  holding 
a  promissory  note  for  collection  to  send  it  to  the  debtor,  trusting 
him  to  pay,  delay,  or  destroy  the  evidence  of  debt,  as  his  con- 
science may  permit.  With  especial  force  does  this  reasoning 
apply  to  the  case  of  a  certified  check,  for  on  that  the  bank  is  pri- 
marily liable.* 

68  W.  Va.  254,  G9  S.  E.  1012,  1912B  Ann.  Cas.  115,  n. ;  Morris-Miller 
Co.  V.  Von  Pressentin,  03  Wash.  74,  114  Pac.  912  (1911). 

Custom  is  unreasonable  even  though  the  drawee  is  the  only  bank  in 
the  place.  Winchester  Milling  Co.  v.  Bank  of  Winchester,  swpra ;  Pinkney 
V.  Kanawha  Valley  Bank,  supra;  Farley  National  Bank  v.  Pollock,  145 
Ala.  321,  39  So.  612,  117  Am.  St.  Rep.  44,  2  L.  R.  A.  (n.  s.)  194,  n. 
(1905) ;  Jefferson  County  Sav.  Bank  v.  Hendriek,  147  Ala.  670,  39  So. 
295,  1  L.  R.  A.  (n.  s.)  246,  n.  (1905).  But  see  Hilsinger  v.  Trickett,  86 
Ohio  St.  286,  99  N.  E.  305,  1913D  Ann.  Cas.  421,  n. ;  Youmans  v. 
Blackshear  Bank,  141  Ga.  357,  80  S.  E.  1005  (1913) ;  Wilson  v.  Carlinv-ille 
National  Bank,  187  111.  222,  58  N.  E.  250,  52  L.  R.  A.  632  (1900). 

Of  course  there  can  be  no  complaint  if  the  drawer  and  holder  have 
consented  to  such  sending.  First  National  Bank  v.  First  National  Bank, 
127  Tenn.  205,  154  S.  W.  965  (1912) ;  or  if  no  damage  has  resulted. 
Morris-Miller  Co.  v.  Von  Pressentin,  63  Wash.  74,  114  Pac.  912  (1911). 

The  indorser  of  paper  so  sent  will  not  be  discharged  where  no  prejudice 
has  resulted.  Plover  Savings  Bank  v.  IMoodie,  135  Iowa  685,  110  N.  W. 
29  (1907) ;  Citizens'  Bank  v.  First  National  Bank,  135  Iowa  605, 113  N.  W. 
481,  13  L.  R.  A.  (x.  s.)  303,  n.  (1907). 

When  such  agent  performs  the  dual  function  of  collecting  and  crediting, 
the  transaction  is  closed  and  in  the  absence  of  fraud  or  mistake  is  equivalent 
to  payment.  American  National  Bank  v.  Milles,  229  U.  S.  517,  57  L.  cd. 
1310,  33  Sup.  Ct.  883  (1903).  See  also  Winchester  Milling  Co.  v.  Bank  of 
Winchester,  120  Tenn.  225,  HI  S.  W.  248,  18  L.  R.  A.  (n.  s.)  441,  n.  (1907). 

"  Drovers'  National  Bank  v.  Anglo-Araer.  P.  &  P.  Co.,  117  111.  100, 
7  N.  E.  601  (1886);  Bank  of  Rocky  Mount  v.  Floyd,  142  N.  C.  187, 
55  S.  E.  95  (1906). 

While  a  bank  in  forwarding  paper  for  collection  to  its  correspondent 
is  not  required  to  inquire  who  its  officers  are  before  sending  the  paper, 
when  it  does  actually  know  that  the  cashier  is  to  collect  the  note 
from  himself  and  the  paper  is  not  paid  or  heard  from  after  maturity, 
inquiry  should  be  made  promptly,  especially  in  a  time  of  financial 
pressure,  and  notice  given  to  the  depositor  without  unreasonable  delay. 
Second  National  Bank  v.  Merchants'  National  Bank,  HI  Ky.  930,  65 
S.  W.  4  (1901). 

473 


§  236  COLLECTION   IN   GENERAL 

(6)  Pennsylvania  also  holds  that  a  bank  on  which  a  check  is 
drawn,  though  not  certified,  is  not  a  suitable  agent  for  its  collection.^ 

In  New  York  ^  it  has  been  held  that  the  bank  at  which  a  note 
is  payable  is  a  suitable  agent  to  collect  it  from  the  maker ;  such 
a  bank  has  no  primary  liability,  and  this  in  case  there  was  no 
indorser  except  the  maker.  It  was  not  a  claim  against  the  bank, 
and  the  court  found  that  it  was  a  usual  method  of  business  to  send 
by  mail,  and  that  whether  it  was  or  was  not  negligence  to  send 
to  that  bank  at  which  the  note  was  payable,  it  was  clear  that  no 
injury  resulted  from  it  in  this  case;  the  damage  would  have  arisen 
just  the  same  if  a  third  party  had  been  agent. 

(c)  It  is  not  a  reasonable  usage  to  send  the  draft  to  the  drawee, 
and  run  the  risk  of  receiving  worthless  paper  in  return,  and  of 
sacrificing  the  claims  of  the  owner  on  prior  parties.''  An  indepen- 
dent agent  should  be  selected,  and  he  should  take  nothing  but 
money,  unless  he  has  authority  to  do  otherwise. 

§  237.  Collection  of  Checks.  —  Where  the  instrument  received 
for  collection  is  a  check,  the  duties  of  the  bank  become  somewhat 
more  complicated,  at  the  same  time  that  a  more  correct  understand- 
ing of  them  is  rendered  vastly  more  important  by  reason  of  the 
immense  amount  of  business  of  this  description  which  all  banks 
are  obliged  to  transact.  Every  bank  of  deposit  in  the  country 
is  wont  daily  to  receive  from  its  customers  upon  deposit  for  their 
credit  great  numbers  of  checks  drawn  upon  other  banks.  When- 
ever a  check  is  deposited,  and  credit  therefor  is  given  on  the  deposi- 
tor's check-book,  the  memorandum  may  be  subsequently  cancelled 
if  the  collection  should  not  be  accomplished  in  due  course.^     If 

5  Merchants'  National  Bank  v.  Goodman,  109  Pa.  St.  422,  2  Atl.  687. 

^  Indig  V.  City  Bank,  80  N.  Y.  100.  See  also  Western  Wheeled  Scraper 
Co.  V.  Sadilek,  50  Neb.  105,  69  N.  W.  765  (1897) ;  First  National  Bank  v. 
City  National  Bank,  12  Tex.  Civ.  App.  318,  34  S.  W.  458  (1896) ;  Ger- 
man National  Bank  v.  Burns,  12  Colo.  539,  21  Pac.  714;  Wagner  v. 
Crook,  167  Pa.  St.  259,  31  Atl.  576 ;  First  National  Bank  v.  Fourth  Na- 
tional Bank,  56  Fed.  967 ;  Anderson  v.  Rodgers,  53  Kan.  542,  36  Pac. 
1067  (1894),  citing  Bank  v.  Ober,  31  Kan.  599,  3  Pac.  324. 

In  making  the  payee  bank  an  agent  to  collect  the  holder  takes  the  risk 
of  loss  resulting  from  the  latter's  negligence.  Baldwin's  Bank  v.  Smith, 
215  N.  Y.  76,  109  N.  E.  138  (1915). 

^  Whitney  v.  Esson,  99  Mass.  311 ;  Bank  of  Rocky  Mount  v.  Floyd, 
142  N.  C.  187,  55  S.  E.  95  (1906).  Contra,  see  Farmers'  Bank  and  Trust 
Co.  V.  Newland,  31  S.  W.  38  (1895).  See  Hilsinger  v.  Triekett,  86  Ohio 
St.  286,  99  N.  E.  305,  1913D  Ann.  Cas.  421,  n. 

1  §  237.  National  Gold  Bank  v.  McDonald,  51  Cal.  64 ;  Midland 
National  Bank  v.  BrightweJl,  148  Mo.  358.  49  S.  W.   994  (1898) ;    Falls 

474 


COLLECTION-    OF  CHECKS  §  23S 

circumstances  should  cause  the  obligation  in  any  particular 
transaction  to  run  to  any  person  or  party  other  than  the  one  from 
whom  the  bank  receives  the  check,  the  nature  of  the  obligation 
is  not  thereby  substantially  affected ;  certainly  it  can  never  be 
increased. 

The  duty  of  the  bank  is  still  precisely  the  same  duty,  though 
it  may  prove  that  a  true  owner,  not  at  first  known  to  the  bank, 
is  the  party  who  is  really  entitled  to  claim  a  performance  of  that 
duty,  or  damages  for  its  breach.  For  the  sake  of  brevity,  we 
will  hereafter  designate  the  person,  whoever  he  may  be,  to 
w^iom  the  obligation  of  the  bank  runs,  as  the  depositor  or  the 
customer. 

§  238.  Distinction  between  the  Duty  of  the  Bank  to  the  Cus- 
tomer and  the  Duties  existing  between  other  Parties.  —  It  is 
necessary  in  the  outset  thoroughly  to  disembarrass  the  relation 
of  the  bank  to  the  customer,  and  consequently  the  whole  matter 
of  the  duties  and  liabilities  of  the  bank  in  the  premises  form  two 
wholly  distinct  and  alien  subjects ;  to  wit,  the  relation  of  the 
payee,  owner,  or  holder  of  the  paper  to  the  maker,  drawer,  or 
acceptor  thereof ;  and  the  relation  of  the  party  giving  it  in  charge 
to  the  bank  to  any  other  person  standing  earlier  in  the  progression 
of  title.  With  the  two  last  mentioned  considerations  the  collect- 
ing bank  has  nothing  whatsoever  to  do ;  it  may  ignore  them 
utterly ;  in  fact,  oftentimes  it  may  even  be  incumbent  upon  it 
to  ignore  them  utterly,  for  they  may  be  rendered  by  circumstances 
in  any  particular  case  inconsistent  with  its  own  different,  peculiar, 
and  wholly  independent  obligations  in  the  business. 

The  reiteration  of  this  doctrine  must  be  pardoned  by  reason 
of  its  importance.  The  common  law,  speaking  through  a  great 
multitude  of  decisions,  has  laid  down  the  rules  which  govern  the 
presentment  of  checks  as  between  the  drawer,  the  indorsers,  and 
the  various  subsequent  holders ;  and  there  is  complication  enough 
in  the  topic.  The  common  law  has,  in  like  manner,  laid  down 
the  principles  controlling  the  presentment  of  checks  by  a  collecting 
bank  as  between  the  bank  and  the  depositor ;  and  in  this  topic 
also  there  is  independent  and  ample  complication.  The  entangle- 
ment of  the  two  would  result  in  a  senseless  and  inextricable  con- 
fusion. If,  then,  one  deposits  a  check  in  a  bank,  there  is  a  certain 
time  within  which  the  bank  is  bound  to  that  depositor  to  ])resent 

City  Woolen  Mills  v.  Louisville  National  Bank,  145  Ky.  64,  140  S.  W.  60 
(1911). 

475 


§  238  COLLECTION   IN   GENERAL 

the  check  to  the  drawee  for  payment.  It  may  be  that  a  present- 
ment within  a  shorter  hmit  of  time  would  be  necessary  to  enable 
the  payee  to  hold  the  drawer,  or  to  enable  the  holder  to  hold  his 
indorser,  in  case  of  non-payment ;  or  it  may  be  that  presentment 
after  that  time  would  suffice  for  both  these  purposes.  Neither 
of  these  facts  modifies  or  affects  the  time  within  which  the  bank 
is  bound  to  its  customer  to  present.  By  the  ordinary  rule  of  com- 
mon law,  this  time  is  until  the  close  of  banking  hours  on  the 
business  day  next  following  that  on  which  the  bank  comes 
into  possession  of  the  check.^  This  is  the  general  rule,  and  of 
course  is  liable  to  occasional  modifications,  which  will  be  noticed 
hereafter. 

§  239.  It  may  be  well  to  illustrate  more  fully  the  principles 
above  laid  down ;  for  they  are  fundamental  and  important.  A. 
and  B.  are  both  living  in  the  same  town,  and  keep  their  bank  ac- 
counts at  the  C.  and  D.  banks  respectively,  also  in  the  same 
town.  A.  gives  his  check  upon  the  C.  bank  to  B.  on  Monday. 
B.  deposits  it  in  the  D.  bank  on  Tuesday.  The  D.  bank  presents 
it  for  payment  to  the  C.  bank  on  Wednesday.  In  this  case  the 
D.  bank  will  have  done  its  full  duty  by  B.  under  the  rule  of  the 
common  law  above  laid  down.  It  will  have  presented  for  payment 
on  the  day  after  it  received  the  check.  So,  if  the  C.  bank  were 
paying  checks  all  day  Tuesday,  but  stopped  payment  on  Wednes- 
day morning,  B.  would  have  no  remedy  against  the  D.  bank 
for  laches  or  neglect  of  duty.  Neither  could  he  look  to  A. ;  for 
A.  had  a  right  to  have  payment  of  his  check  demanded  upon 
Tuesday,  and  depositing  it  in  the  bank  could  not  be  allowed  to 
extend  his  risk  over  Wednesday  also.  If  A.  did  not  wish,  or  was 
not  able,  to  deposit  on  Monday,  he  should  either  have  made  de- 
mand himself  on  Tuesday,  instead  of  depositing,  or  he  should 
have  deposited  under  a  special  agreement  with  his  bank  that  it 
was  either  to  demand  payment  on  Tuesday,  or  else  itself  to  assume 
the  risk  of  the  customary  postponement  till  the  following  day. 
In  like  manner,  if  A.  and  B.,  and  their  respective  banks,  were  in 
two  distant  towns,  and  A.  delivered  or  sent  to  B.  his  check,  the 
common  law  would  declare  in  what  manner  and  within  what  time 

1  §  238.  Byles  on  Bills,  p.  *20  ;  Boddington  v.  Schlencker,  4  B.  &  Ad. 
752;  1  Nev.  &  Man.  540 ;  Alexander  y.  Burchfield,  Car.  &  M.  75  ;  3  Seott, 
N.  R.  555 ;  7  Man.  &  Gr.  1061 ;  Hare  v.  Henty,  10  C.  B.  n.  s.  65 ;  Rick- 
ford  V.  Ridge,  2  Camp.  537 ;  Moule  v.  Brown,  4  Bing.  N.  C.  266 ;  5  Scott 
694;  Martin  v.  Home  Bank,  30  App.  Div.  498  (1898). 

476 


TIME   OF   PRESEXTMEXT   OF   CHECKS  §  240 

B.  must  despatch  his  check  to  the  C.  bank  for  payment.  The 
cases  generally  hold  that  the  check  must  be  mailed  so  as  to  go  by 
the  mail  of  the  day  following  its  receipt,  in  ordinary  cases.  But 
this  is  the  rule  as  between  A.  and  B.  only,  and  the  breach  of  it 
would  only  operate  to  imperil  B.'s  right  of  action  against  A.  But 
if  B.  deposits  in  his  bank,  his  bank  has  the  right  to  forward  the 
check  to  the  C.  bank  through  its  wonted  channel  of  correspondence  ; 
and  it  is  not  ordinarily  obliged  to  start  it  upon  this  progress  until 
the  day  after  it  receives  it.     See  §  245. 

§  240.  Time  of  Presentment  of  Checks.  —  A  check  must  be 
presented  within  a  reasonable  time,  which  is  settled  in  ordinary 
cases  to  be  before  close  of  business  hours  on  the  day  following 
its  receipt.^ 

Check  Taken  by  Agent 

But  "  when  a  check  is  taken  instead  of  money,  by  one  acting 
for  others,  a  delay  of  presentment  for  a  day,  or  for  any  time 
beyond  that  within  which  with  proper  and  reasonable  diligence 
it  can  be  presented,  is  at  the  peril  of  the  party  thus  retaining  the 
check  and  postponing  presentment,  as  between  him  and  the  per- 
sons in  interest  whom  he  represents."  ^  And  where  loss  occurs 
because  such  a  check  is  not  presented  on  the  day  of  its  reception, 
the  agent  is  liable.^ 

Lord  EUenboroiigh 

Lord  Ellenborough  well  said  that  it  would  be  impossible  for 
any  banker,  receiving  checks  by  mails  due  at  various  hours  all 
through  the  day,  to  keep  an  army  of  clerks  ready  to  present 
them,  or  forward  them,  all  upon  the  day  of  receipt.  "  Bankers 
would  be  kept  in  a  continual  fever,  if  they  were  obliged  to  send 
out  a  check  the  moment  it  is  paid  in."  The  arrangement  of  pre- 
senting or  forwarding  on  the  next  following  day  "  appears  sub- 

1  §  240.  Burkhalter  v.  Second  National  Bank,  42  N.  Y.  538;  Turner 
V.  Bank  of  Fox  Lake,  3  Keyes  (N.  Y.)  425;  23  How.  Pr.  (N.  Y.)  399; 
Turner  v.  Wislon,  11  Met.  (Mass.)  51;  Plover  Savings  Bank  v.  Moodie, 
135  Iowa  685,  110  N.  W.  29  (1907). 

2  Smith  ;'.  Miller,  43  N.  Y.  176.     See  next  note. 

3  First  National  Bank  v.  Fourth  National  Bank,  77  N.  Y.  320  ;  89  id., 
412;  Bank  of  New  Hanover  v.  Kenan,  76  N.  C.  340;  Bank  of  Mount 
Airy  v.  Greensboro  Loan  etc.  Co.,  1.59  N.  C.  85,  74  S.  E.  747  (1912); 
Standish  Trust  Co.  v.  Commercial  National  Bank,  166  N.  C.  112,  81 
S.  E.  1074  (1914) ;  Bank  of  Commerce  t;.  Miller,  105  111.  Ap^.  224  (1912). 

477 


§  240  COLLECTION   IN    GENERAL 

servient  to  general  convenience,  and  not  contrary  to  the  law 
merchant,  which  merely  requires  checks  to  be  presented  with 
reasonable  diligence."  * 

Time  of  Forwarding 

§  241 .  In  like  manner,  each  bank  in  the  chain  of  progress  has: 
a  right  to  delay  forwarding  until  the  business  day  next  following, 
the  day  of  its  own  receipt.  So  if  C.  bank  and  D.  bank  are  in  two 
provincial  towns,  and  D.  bank  has  no  correspondent  in  the  place 
where  C.  bank  is  situated,  it  may  send  to  its  correspondent  in 
the  nearest  large  town  or  city  whose  facilities  for  collecting  from  C. 
bank  are,  or  might  reasonably  be  supposed  to  be,  greater  and  more 
available.  This  course  of  proceeding  on  the  part  of  B.'s  bank 
may  be  perfectly  sufficient  as  an  acquaintance  of  its  duty  and  lia- 
bility to  B.  Yet  it  may  also  be  perfectly  consistent  with  B.'s  loss  of 
his  remedy  against  A.  in  case  pa^Tnent  of  the  check  should  be  lost 
by  reason  of  its  arriving  at  C.  bank  later  by  this  process  than  it 
would  have  arrived  if  sent  according  to  those  ordinary  require- 
ments of  the  common  law  which  govern  the  relations  of  drawer 
and  payee.  It  will  be  seen,  therefore,  that  the  deposit  of  a  check 
in  the  holder's  bank  for  collection  may  in  a  certain  conjunction 
of  circumstances  result  in  his  total  loss  of  the  amount,  without 
any  right  of  action  against  any  person  or  corporation  for  reim- 
bursement. Several  facts  must  combine,  it  is  true,  to  produce 
this  conjunction,  to  wit :  first,  the  presentment  by  the  collecting 
bank  to  the  drawee  bank  for  payment  must  be  later  than  it  w^ould 
have  been  had  the  ordinary  rule  of  presentment  as  between  drawer 
and  payee  been  followed ;  second,  it  must  appear  that  the  check 
would  have  been  paid  had  it  been  presented  within  the  time  set 
by  this  rule,  or,  at  least,  that  the  bank  was  paying  during  that 
time,  and  that  the  drawer's  account  was  good  for  the  sum  called 
for;  third,  payment  must  be  refused,  and  the  refusal  must  be 
by  reason  of  the  failure  of  the  bank  occurring  subsequent  to  such 
time  and  before  actual  presentment,  or  by  some  other  like  reason 
beyond  the  control  of  the  drawer. 

Time  Rule  Varied 

§  242.    But  the  common  rule  giving  to  the  bank  the  whole  of 
the  day  following  its  receipt  of  the  check  is  liable  to  be  materially 
4  Riekford  v.  Ridge,  2  Camp.  537. 
478 


BANKS   LIABLE    FOR    LOSS  §  243 

qualified  through  various  causes.  The  time  may  be  shortened  or 
extended,  either  (1)  by  express  instructions  pjiven  by  the  depositor, 
or  an  express  understanding  had  between  him  and  the  bank,  in 
reference  to  the  particular  transaction ;  ^  or  (2)  by  the  uniform 
course  of  dealing  previously  pursued  between  himself  and  the  bank 
in  the  conduct  of  similar  business ;  or  (3)  by  the  known  usage  of 
the  individual  bank  in  such  matters,  provided  the  usage  is  one 
which  the  courts  can  properly  sustain  ;  or  (4)  by  the  general 
usage  of  banks  and  custom  of  the  banking  business  in  the  city  or 
town  where  the  bank  is  situated. 

§  243.  Bank  liable  for  Loss  resulting  from  Failure  to  follow  the 
Usual  Course.  —  The  customer  is  entitled  to  expect  and  require 
of  his  bank  that  it  shall  not  capriciously  or  needlessly  deviate 
from  the  established  system,  whatever  that  may  be;  and  if  it 
does  so  deviate,  and  a  loss  is  the  result,  he  may  look  to  the  bank 
for  compensation.  For  example,  if  the  bank  neglects  to  send  the 
check  through  the  clearing-house  at  the  customary  time  and  in 
the  ordinary  manner,  and  elects  rather  to  keep  it  till  a  later  hour 
and  present  it  at  the  counter,  then,  if  it  would  have  been  paid 
through  the  clearing-house  but  is  refused  at  the  counter,  this 
conduct  of  the  bank,  being  contrary  to  its  wont  in  such  business, 
will  render  it  liable  to  the  depositor  of  the  check  for  its  amount.^ 
But  the  bank  must  always  make  the  presentment  directly  to  the 
drawee,  and  cannot  send  it  through  other  banks  or  agents  of  any 
description,  presentment  through  the  clearing-house  being  for  this 
purpose  a  presentment  direct  to  the  drawee.  There  can  be  no 
real  necessity  for  the  employment  of  any  intermediate  agencies, 
where  the  collecting  bank  and  the  drawee  bank  are  both  in  the 
same  place.  If  the  collecting  bank,  without  distinct  permission, 
sees  fit  to  have  recourse  to  them,  it  does  so  at  its  own  risk  of  all 
the  consequences  which  may  result.^  This  rule  of  course  does 
not  operate  to  abridge  the  rights  of  banks  to  make  any  of  those 

1  §  242.  In  New  York,  "peculiar  circumstances"  together  \nth  the 
knowledge  and  concurrence  of  the  depositor  were  held  to  justify  a  delay  in 
presentment  by  the  collecting  bank.  Jacobsohn  v.  Belmont,  7  Bosw. 
(N.  Y.)  14.     See  EUiott  v.  Peet,  192  Fed.  699  (1912). 

1  §  243.  Boddington  v.  Schlencker,  4  B.  «fe  Ad.  752 ;  Alexander  v. 
Burchfield,  Car.  &  M.  75. 

The  bank  mav  show  that  no  loss  has  resulted.  Fort  Dearborn  National 
Bank  v.  Security  Bank,  87  ISIinn.  81,  91  N.  W.  257  (1902):  Inter-State 
National  Bank  v.  Ringo,  72  Kan.  116,  83  Pac.  119,  115  Am.  St.  Rep.  176, 
3  L.  R.  A.  (N.  s.)  1179,  n.  (1905) ;   EUiott  v.  Peet,  192  Fed.  699  (1912). 

2  Moule  V.  Brown,  4  Bing.  N.  C.  266 ;  5  Scott  694. 

479 


I  243  COLLECTION   IN   GENERAL 

transfers  of  debits  and  credits  among  themselves  in  the  course 
of  clearing  which  usage  has  introduced  for  the  purpose  of  facili- 
tating the  settlement  of  their  mutual  accounts  in  the  most  con- 
venient manner. 

Custom 

A  question  arising  as  to  the  custom  of  the  bankers  of  London 
in  presenting  checks  for  collection,  testimony  was  offered  to  show 
a  custom  of  "  all  London  bankers  east  of  St.  Paul's  "  to  present 
for  pajnnent  upon  the  same  day  on  which  they  receive  the  check. 
Lord  Ellenborough  rejected  this  testimony  very  contemptuously. 
"It  is  not  competent  to  bankers  to  lay  down  one  rule  for  the 
eastward  of  St.  Paul's  and  another  for  the  westward.  They  may 
as  well  fix  upon  St.  Peter's  at  Rome,"  ^ 

A  custom  will  not  be  binding  upon  a  party  who  has  no  reason 
to  anticipate  that  he  is  to  be  brought  within  its  operation.  For 
example,  where  an  indorsed  check  drawn  on  a  bank  in  Albany 
was  cashed  at  the  Mohawk  Bank  in  Schenectady,  and  forwarded 
thence  to  the  bank  in  Albany  for  collection,  the  court  said  that 
they  must  lay  out  of  the  question  certain  special  findings  of  the 
jury  as  to  the  usual  course  of  exchanges  between  the  bank  at 
Schenectady  and  the  bank  at  Albany,  since  there  was  "  no 
pretence  that  this  check  was  drawn  or  indorsed  with  a  view  to 
its  being  negotiated  or  cashed  at  the  Mohawk  Bank,  or  that  there 
was  any  usage  of  trade  from  which  the  defendants  had  reason 
to  suppose  it  would  be  collected  through  that  bank."  * 

§  244.  The  Fundamental  Rule  underlying  all  the  decisions  in 
regard  to  time  of  presentment,  forwarding,  and  so  forth,  is  that 
reasonable  diligence  must  be  observed."  Upon  the  facts  of  every 
case,  then,  must  depend  the  actual  length  of  time  that  is  to  be 
considered  reasonable. 

Consequently,  where  the  question  comes  before  a  jury,  a  diver- 
sity in  decisions  may  be  expected ;   it  can  only  be  said  that  this 

3  Rickford  v.  Ridge,  2  Camp.  537. 

*  Mohawk  Bank  v.  Broderick,  13  Wend.  (N.  Y.)  133. 

"  §  244.  A  stipulation  on  the  deposit  slip  that  the  bank  is  not  to  be 
held  liable  until  the  draft  is  collected  does  not  exempt  the  bank  from 
liability  for  its  own  negligence  or  that  of  its  agents  and  is  not  a  waiver 
of  the  right  of  the  depositor  -with  regard  to  presentment,  demand  and 
notice  of  dishonor.  Harter  v.  Bank  of  Brunson,  92  S.  C.  440,  75  S.  E.  696 
(1912) ;  Winchester  Milling  Co.  v.  Bank  of  Winchester,  120  Tenn.  225, 
111  S.  W.  248,  18  L.  R.  A.  (n.  s.)  441,  n.  (1907). 

480 


"  CROSSED  "    CHECKS   TO    BE    PAID    ONLY    AS    CROSSING    DIRECTS      §  245 

rule  of  presenting  or  forwarding  on  the  day  following  receipt  has 
come  to  be  regarded  as  satisfactory  in  the  majority  of  cases  where 
no  circumstances  interfere  to  change  the  rule.  In  New  York  it  has 
been  held  that,  if  the  facts  are  established  beyond  dispute,  the  ques- 
tion whether  upon  them  the  presentment  was  made  within  reason- 
able time  becomes  one  of  law  for  the  court. ^ 

§  245.  "  Crossed  "  Checks  to  be  paid  only  as  the  Crossing 
directs.  —  In  England  it  has  been  intimated,  if  not  directly  decided, 
that  if  the  payee  of  the  check  had  stipulated  with  the  drawer 
that  the  name  of  the  payee's  bankers  should  be  "  crossed  "  on 
the  check,  this  would  have  amounted  to  an  agreement  by  the 
drawer  that  the  usual  course  of  presentment  of  the  check  through 
bankers  might  be  followed.  In  such  case,  if  this  method  involved 
a  delay  greater  than  the  law  ordinarily  allows  as  between  drawer 
and  payee,  the  former  would  nevertheless  not  be  acquitted  by  the 
failure  of  his  bankers  before  presentment,  though  they  had  con- 
tinued to  pay  through  the  whole  period  of  time  which  the  payee 
would  otherwise  have  been  entitled  to  for  presentation.^  In 
this  country  the  system  of  -"crossed  checks",  strictly  so  called,  is 
unknown.  But  of  late  the  germ  of  a  similar  custom  has  begun 
to  manifest  itself.  Occasionally  checks  have  stamped  or  written 
upon  them  some  form  of  words  which  is  intended-  to  secure  their 
pa\Tnent  exclusively  through  the  clearing-house.  No  especial 
form  has  as  yet  been  generally  accepted,  and  the  legal  effect 
of  none  of  those  in  use  has  ever  been  passed  upon.  It  is  safe  to 
say,  however,  that  there  is  no  question  but  that  the  drawer  could 
embody  in  his  order  a  direction  to  his  bank  to  pay  only  upon 
presentation  of  the  instrument  in  the  usual  course  through  the  clear- 
ing-house, and  that  such  a  direction  would  be  as  valid  and  as 
binding  upon  the  bank  as  a  direction  to  pay  only  to  the  order  of 
a  particular  person.  If  the  check  be  payable  to  the  order  of  A. 
B.,  it  is  probable  that  the  privilege  of  including  such  instructions 
in  his  order,  when  indorsing  over,  might  be  accorded  to  him  ;  cer- 
tainly indorsements  in  this  form  are  very  frequent,  and  no  bank 
would  be  safe  in  disregarding  them.  Supposing  the  direction 
to  be  properly  given,  the  collecting  and  the  paying  bank  must 
both  respect  it,  and  the  English  cases  above  mentioned  would  be 

1  Mohawk  Bank  v.  Broderiek,  13  Wend.  (N.  Y.)  133;  Gough  i-.  Staats, 
id.,  549. 

1  §  245.  Alexander  v.  Burchfield,  Car.  &  M.  75;  3  Scott,  N.  R.  555; 
7  Man.  &  Gr.  1061. 

VOL.  1  —  31  481 


§  245  COLLECTION   IN   GENERAL 

precedent  directly  in  force.  It  would  amount  to  an  express  desig- 
nation by  the  drawer,  or  the  payee,  of  the  manner  in  which  alone 
payment  is  authorized  to  be  demanded  or  made.^" 

Bobbett  drew  a  check  on  his  banker,  M.,  payable  to  order, 
crossed  it  "London  and  County  Bank",  and  for  value  sent  it 
to  the  payee,  from  whom  it  was  stolen  and  his  indorsement  forged. 
Pinkett,  a  taker  in  good  faith,  ignorant  of  the  forgery,  gave  it  to 
his  country  bankers;  and  their  agent,  the  London  and  Joint 
Stock  Bank,  presented  and  received  payment  for  it  from  M.,  who 
did  not  perceive  or  else  disregarded  the  crossing.  P.,  on  hearing 
that  it  was  paid,  gave  value  for  it  to  a  customer.  Meanwhile  B., 
at  the  payee's  request,  had  sent  him  a  second  check  for  the  same 
amount,  which  was  also  paid  by  M.,  and  B.'s  account  debited  with 
both  checks.  In  an  action  by  B.  against  P.  for  the  amount  of  the 
first,  for  money  had  and  received,  there  was  a  finding  that  P.  and 
M.  and  the  payee  had  been  guilty  of  negligence  as  to  the  pay- 
ment. Held,  that  the  action  was  maintainable.  M.'s  payment  to 
a  banker  other  than  the  one  named  in  the  crossing  was  improper.^ 

§  246.  Initiation  of  Suits  and  Rights  of  Action.  —  Louisiana 
holds  that  the  scope  of  a  collecting  bank's  agency  does  not  extend 
to  the  initiation  of  suits  against  the  debtor  upon  commercial 
paper  of  which  pa>Tnent  is  refused.^  Indeed,  it  is  conceivable 
that  the  bank  might  be  seriously  prejudiced  by  the  institution 
of  such  proceedings  ;  for  the  fact  might,  under  some  circumstances, 
be  evidence  going  to  show  that  the  bank  had  itself  adopted  the 
paper,  and  therefore,  whether  it  were  paid  or  not,  owes  the  amount 
of  it  to  the  original  holder.^ 

A  note  given  in  charge  to  a  bank  for  collection,  and  so  indorsed 
as  to  place  the  apparent  and  technical  title  in  the  bank,  if  not 
withdrawn  after  non-pa:yTnent  and  protest,  may  be  sued  upon 
by  the  bank  in  its  own  name.2«     But  unless  specially  so  instructed, 

i»  Farmers'  Bank  v.  Johnson,  134  Ga.  486,  68  S.  E.  85,  137  Am.  St. 
Rep.  242,  30  L.  R.  A.  (n.  s.)  697,  n.  (1910). 

2  Bobbett  V.  Pinkett,  1  L.  R.  Ex.  D.  368  (1876).  The  negotiabihty 
of  a  check  is  not  affected  by  21  &  22  Vict.  c.  79,  §  2,  which  enacts  that 
the  drawee  shall  pay  to  no  other  person  than  the  banker  named  in  the 
crossing.  Smith  v.  Union  Bank  of  London,  L.  R.  10  Q.  B.  291 ;  afBrmed 
1  Q.  B.  D.  31  (1875). 

1  §  246.  Crow  v.  Mechanics  &  Traders'  Bank,  12  La.  Ann.  692 ;  Ryan 
V.  Manufacturers  &  Merchants'  Bank,  9  Daly  (N.  Y.)  308  (1880). 

2  Wetherill  v.  Bank  of  Pennsylvania,  1  Miles  (Pa.)  399. 

2«  Regina  Flour  Mill  Co.  v.  Holmes,  156  Mass.  11,  30  N.  E.  176  (1892), 
citing  Whitten  v.  Hayden,  9  Allen  408  ;  Spofford  v.  Norton,  126  Mass.  533. 

482 


INITIATION    OF   SUITS   AND    RIGHTS    OF   ACTION  §  246 

it  is  not  the  duty  of  the  bank  to  bring  suit  under  sueh  eircum- 
stances.2*  j^  would  seem,  therefore,  that  its  doing  so  will  be  j)urely 
a  gratuitous  undertaking  upon  its  part,  for  whieh  it  might  perhaps 
be  allowed  its  actual  and  necessary  disbursements,  but  certainly 
nothing  more  in  the  way  of  compensation  for  its  trouble  in  attending 
to  the  proceedings.^ 

But  in  New  York  (in  whicli  State  it  will  be  remembered  that  it 
is  held  that  the  first  bank  whieh  receives  paper  for  collection  is 
responsible  for  the  conduct  and  doings  of  all  subsequent  banks 
and  agents  through  whose  hands  the  paper  must  pass  in  the  pro- 
cess of  collection)  it  has  been  ruled  that  this  first  bank  has  such 
an  interest  in  the  paper  as  to  give  it  a  right  of  action  to  recover 
full  damages  for  any  injury  resulting  by  reason  of  any  default 
on  the  part  of  any  subsequent  agent,  in  a  suit  against  such  agent, 
although  no  steps  have  been  taken  by  its  own  principal  to  hold 
itself  liable  to  respond  to  him  for  his  loss.^  Whether  or  not  this 
principle  would  be  sustained  in  States  which  do  not  hold  the  first 
bank  to  that  liability  to  which  it  is  held  in  New  York  is  perhaps 
doubtful,  though  certainly  very  improbable. 

In  Minnesota,  by  statute,  an  indorsement  to  "  B.  for  collection  " 
gives  no  title  on  which  the  bank  can  sue.^  At  common  law,  the 
beneficial  owner  of  a  bill  to  bearer,  or  indorsed  in  blank,  can  sue 
in  the  name  of  any  real  party  who  will  allow  his  name  to  be  used ; 
and  the  maker  cannot  object  that  the  plaintiff  is  not  the  real 
party  in  interest.* 

In  Kentucky  when  a  bank  receives  a  draft  for  collection  it  has 
no  right  of  action  against  another  bank  to  which  it  forwarded 
the  draft  for  collection,  because,  by  direction  of  the  drawer,  it 
delivered  the  attached  bill  of  lading  before  the  draft  was 
paid.^ 

2«>  Freeman  v.  Citizens'  National  Bank,  78  Iowa  150,  42  N.  W.  632. 

3  Sterling  v.  Marietta  &  Susquehanna  Trading  Co.,  11  Serg.  &  R. 
(Pa.)  179. 

*  Commercial  Bank  v.  Union  Bank,  19  Barb.  (N.  Y.)  391 ;  1  Kern. 
(N.  Y.)  203. 

6  Rock  Co.  National  Bank  v.  Hollister,  21  Minn.  385. 

But  an  unrestricted  indorsement  of  a  check  confers  on  the  indorsee 
the  legal  title  and  the  right  to  sue  thereon  althougli  the  check  is  taken  for 
collection.  Citizens'  State  Bank  v.  Tessmau,  121  Minn.  34,  140  N.  W. 
178,  45  L.  R.  A.  (s.  s.)  606  (1913). 

8  Morton  v.  Rogers,  14  Wend.  (N.  Y.)  575. 

^  Commercial  National  Bank  v.  First  National  Bank,  158  Ky.  392,  165 
S.  W.  398  (1914). 

483 


§  247  COLLECTION   IN    GENERAL 

§  247.  Only  Good  Money  to  be  received.  —  Except  by  agree- 
ment or  usage,  a  bank  has  no  right  to  take  anything  but  money  ^ 
in  payment  of  paper  it  holds  for  collection."  If  it  takes  a  check, 
it  is  agent  of  the  drawer  in  collecting  the  check,  and  not  until 
the  money  is  obtained  has  it  fulfilled  its  duty  as  agent  of  the  holder 
of  paper.^  So  that  although  it  has  had  such  check  certified, 
and  has  credited  the  amount  to  the- owner  of  the  paper  it  is  agent 
to  collect,  yet  if  it  becomes  insolvent  before  actually  receiving 
the  money  on  such  check,  the  owner  can  claim,  in  preference  to 
the  general  creditors ;  proceeds  received  subsequent  to  insolvency 
being  held  in  trust. ^ 

Mode  of  Dealing 

(a)  Where  E.  had  for  two  j^ears  frequently  sent  paper  to  A. 
for  collection,  and  nearly  always  received  in  return,  not  money, 
but  drafts,  drawn  by  the  merchant  from  whom  the  collections 

were  made,  E.  was  held  to  be  prevented,  by  this  long  course  of 

f . 

1  *  §  247.  When  a  bank  receives  in  payment  a  check  by  the  drawee 
upon  funds  in  the  bank  to  his  credit,  and  the  bank  charges  the  amount 
of  the  check  to  the  drawee  it  is  equivalent  to  the  reception  of  money. 
Peters  Shoe  Co.  v.  Murray,  31  Tex.  Civ.  App.  259,  71  S.  W.  977  (1903). 

"  The  bank  has  no  impUed  authority  to  accept  only  part  payment. 
Curkeet  v.  Steinhoff,  130  Wis.  146,  109  N.  W.  975  (1906).  But  if  the  part 
payment  is  received  and  retained  by  the  owner  of  the  note  it  amounts  to  a 
ratification  and  a  complete  discharge  of  liabiUty.  Southwest  National 
Bank  v.  Justice,  157  N.  C.  373,  72  S.  E.  1016  (19il). 

If  the  customer  pays  what  the  bank,  at  his  request,  has  informed  him 
was  due  the  bank  cannot  subsequently  recover  an  attorney's  fee  especially 
when  he  had  no  knowledge  that  the  note  was  in  the  hands  of  an  attorney 
or  that  he  had  rendered  any  service  in  the  matter.  Security  State  Bank 
V.  Fussell,  36  Okla.  527,  129  Pac.  746  (1913). 

1  Ward  V.  Smith,  7  WaU.  447,  19  L.  ed.  207 ;  Farmers'  Bank  and  Trust 
Co.  V.  Newland,  97  Ky.  472,  31  S.  W.  38  (1895) ;  Bank  v.  Cummings,  89 
Tenn.  620,  18  S.  W.  115  (1890) ;  Morris  v.  Eufaida  National  Bank,  106 
Ala.  388, 18  So.  11  (1894) ;  Donogh  v.  Gillespie,  21  Ont.  App.  292  ;  Hazlett 
V.  Commercial  National  Bank,  132  Pa.  St.  118,  19  Atl.  55  ;  Fifth  National 
Bank  v.  Ashworth,  123  Pa.  St.  212,  16  Atl.  596 ;  Tootle  v.  Cook,  4  Colo. 
App.  Ill,  35  Pac.  193 ;  Bank  v.  Union  Trust  Co.,  149  111.  343,  367  N.  E. 
1029;  Bradley  Lumber  Co.  v.  Bradley  County  Bank,  206  Fed.  41  (1913) ; 
City  National  Bank  v.  Cooper,  91  S.  C.  91,  74  S.  E.  366  (1911) ;  Gow- 
ling  V.  American  Express  Co.,  102  Mo.  App.  366,  76  S.  W.  712  (1903) ; 
Bank  of  Indian  Territory  v.  First  National  Bank,  109  Mo.  App.  665,  83 
S.  W.  537  (1904) ;  Landa  v.  Traders'  Bank,  118  Mo.  App.  356, 94  S.  W.  770 
(1906) ;  Winchester  Milling  Co.  v.  Bank  of  Winchester,  120  Tenn.  225, 
111  S.  W.  248,  18  L.  R.  A.  (n.  s.)  441,  n.  (1907).     See  next  note. 

2  Levi  V.  National  Bank,  5  Dill.  104 ;  German  American  Bank  v.  Third 
National  Bank,  18  Alb.  L.  J.  252. 

484 


ONLY    GOOD   MONEY    TO    BE    RECEIVED  §  247 

dealing,  from  recovering  from  A.  on  account  of  a  draft  that  was 
dishonored.^ 

Substituted   Note 

(b)  If  a  bank  takes  a  new  note  for  the  one  it  is  engaged  to 
collect,  and  then  becomes  insolvent,  this  substituted  note  can  be 
recovered  by  the  owner  of  the  first,  but  the  receiver  cannot  be 
compelled  to  pay  the  amount  of  the  first  note/ 

Preserving  the  Liability  of  Prior  Parties  when  a  Check  is  Taken 

in  Payment 

(c)  When  the  holder  of  negotiable  paper  takes  a  check  in 
payment  of  it,  he  should  take  care  to  present  the  check  with 
such  diligence,  that,  if  it  is  not  paid,  he  may  return  it  to  the  drawer 
and  reclaim  the  bill  or  note  in  time  to  make  a  proper  demand  and 
protest,  so  as  to  preserve  the  liability  of  the  drawer  and  indorsers. 
For  example,  in  case  of  a  foreign  bill,  he  would  have  to  present 
the  check  the  same  day,  for  a  protest  on  the  day  following  would 
not  be  good.  In  case  of  an  ordinary  draft  on  demand,  he  must 
present  and  protest  before  the  close  of  the  day  following  his  receipt 
of  the  bill,  so  that  he  may  preserve  the  liability  of  the  prior  parties 
by  presenting  the  check  he  took  in  payment  upon  the  same  day 
if  it  was  taken  the  day  following  his  receipt  of  the  draft,  or  upon 
the  day  succeeding  the  taking  of  it  in  pajTnent  if  this  was  upon 
the  very  day  of  receiving  the  draft.^ 

A  bank  or  other  agency  may  in  the  same  way  preserve  the  lia- 
bility of  former  parties  when  a  check  is  taken  in  payment  of 
paper  it  holds  for  collection ;  but  it  does  not  follow  that  it  will 
free  itself  from  all  responsibility  by  such  preservation  of  liability, 
for,  the  taking  of  the  check  in  pa^Tnent  being  in  excess  of  authority, 
any  loss  that  results  will  have  to  be  borne  by  the  agent,^  as  if  a 

3  New  York  Daily  Register,  Jan.  7,  1885. 

If  the  draft  is  received  in  accordance  with  tlie  usual  custom  of  lianks, 
as  conditional  payment  there  is  no  liability.  Hilsinger  r.  Trickett,  86 
Ohio  St.  286,  99  X.  E.  30."),  1913D  Ann.  Cas.  421,  n.  And  in  Bank  of 
Commerce  v.  INIiller,  10.5  111.  App.  224  (1902)  the  court  said  that  the  bank 
did  not  act  improperly  in  taking  a  check  for  the  draft  instead  of  money. 

^National  Bank  r."Ellicott,  31  Kan.  173,  1  Pac.  593. 

5  Turner  v.  Bank  of  Fox  Lake,  3  Keyes  (N.  Y.)  425;  First  National 
Bank  v.  Fourth  National  Bank,  77  N.  Y.  320,  89  N.  Y.  412. 

6  Burkhalter  v.  Second  National  Bank,  42  N.  Y.  538;  Smith  r.  Miller, 
43  N.  Y.  171. 

485 


§  247  COLLECTION    IN    GENERAL 

check  thus  taken  would  have  been  paid  if  presented  the  same 
day,  but  is  dishonored  the  next,  and  although  the  liability  of  the 
drawer  of  the  draft  is  preserved,  yet  is  worthless  because  of  his 
insolvency,  the  bank  is  liable  to  the  holder.  It  is  the  bank's 
duty  to  receive  only  money ;  if  it  takes  a  check,  and  by  delay  in 
presenting  it  loss  occurs,  it  is  liable.  If  the  check  was  worthless 
when  it  was  given,  or  became  worthless  before  it  could  be  pre- 
sented by  the  exercise  of  reasonable  diligence,  and  the  bank  has 
so  acted  as  to  preserve  the  liability  of  former  parties,  no  loss  has 
occurred  by  negligence  in  taking  or  presenting  the  check.^  But 
if  the  check  would  have  been  paid  if  presented  without  unreason- 
able delay,  yet  afterward  is  dishonored,  the  loss  is  clearly  the 
result  of  negligence. 

It  is  clearly  held  in  New  York  "^  and  Alabama  '^"  that,  if  a  bank 
takes  a  check  in  payment  of  paper  it  holds  for  collection,  it  must 
present  the  check  the  same  day,  if  it  is  possible  by  reasonable 
diligence ;  and  if  it  fails  to  do  so,  and  the  check  would  have  been 
good  on  that  day,  but  is  bad  on  the  next,  the  bank  is  liable. 

A  bank  holding  a  check  for  collection,  and  having  it  certified 
instead  of  demanding  payment,  becomes  liable  to  the  owner  for 
the  amount  of  the  check  with  interest  from  the  date  of  certification.^ 

Ratification 

Where  the  principal  takes  the  check  from  the  collecting  agent, 
who  has  received  it  instead  of  money,  it  is  a  ratification  of  the 
agent's  deviation,^  unless  it  is  done  in  ignorance  of  some  material 
fact  affecting  the  matter,  as  if  the  drawer  of  the  check  had  failed 
before  the  principal  received  the  check.^° 

Where  the  payee  of  a  check,  though  never  having  indorsed 
the  same  for  collection,  subsequently  accepts  part  of  the  proceeds 
of  an  unauthorized  collection  and  a  promissory  note  in  settlement 
of  her  claim,  with  full  knowledge  of  all  the  material  facts,  the  bank 
through  which  the  collection  is  negotiated  is  not  liable.^"" 

''  First  National  Bank  of  Meadville  v.  Fourth  National  Bank  of  New 
York,  16  Hun  (N.  Y.)  332;  citing  Smith  v.  Miller,  43  N.  Y.  171;  s.  c. 
52  N.  Y.  545. 

7-  Morris  v.  Eufaula  National  Bank,  106  Ala.  388,  18  So.  11  (1894). 

8  Essex  Co.  National  Bank  v.  Bank  of  Montreal,  7  Biss.  193. 

9  Rathbun  v.  Citizens'  Steamboat  Co.,  76  N.  Y.  376. 

10  Walker  v.  Walker,  5  Heisk  (Tenn.)  425. 

i»«  Hughes  V.  The  Neal  Loan  and  Banking  Co.,  97  Ga.  383,  23  S.  E.  823 
(1895). 

486 


DISPOSAL   OF    PROCEEDS  §  248 

Payment  in  Depreciated  Currency 

(d)  When  a  bank  is  employed  to  make  a  collection,  it  has  no 
authority  to  take  payment  in  any  description  of  depreciated 
currency,  even  though  the  same  may  constitute  the  principal 
currency  in  which  the  ordinary  transactions  of  business  are  con- 
ducted at  the  place.  If  it  accepts  such  depreciated  currenc\-,  it 
is  nevertheless  liable  to  pay  the  full  face  amount  to  its  principal 
in  good  money.  The  only  description  of  money  which  the  bank  is 
justified  in  receiving  is  either  that  which  is  legal  tender,  or  bank 
bills  which  are  actually  redeemed  on  presentment  at  the  counter 
of  the  bank  issuing  them  for  their  full  face  value  in  legal  tender.i^ 
But  if  any  especial  circumstances  should  exempt  a  bank  from  the 
operation  of  this  rule,  and  should  justify  it  in  receiving  current 
funds,  though  depreciated,  then,  if  the  bank  returns  these  specific 
and  identical  funds  actually  received  by  it  to  the  principal,  it  is 
thereby  acquitted.  If,  however,  it  gives  the  principal  credit 
for  them  generally  on  account,  then  any  subsequent  depreciation 
in  them  which  may  take  place  before  the  bank  makes  actual 
paj-ment  to  the  principal  will  be  the  loss  of  the  bank.  Its  duty 
is  to  account  to  the  principal,  in  such  a  case,  for  the  full  real  value 
of  the  funds  received  by  it  for  the  collection  as  that  value  was  at 
the  date  of  the  collection. ^^ 

§  248.  Disposal  of  Proceeds.  —  After  the  collection  has  been 
made,  the  bank  becomes  a  simple  contract  debtor  for  the  amount, 
less  the  commission,  if  any  has  been  charged.*^ 

If  the  party  for  whom  the  collection  is  made  is  a  regular  depositor, 
the  sum  will  be  properly  placed  to  his  credit  upon  his  general 
deposit  account, 1  unless  a  peculiar  usage  or  special  instructions 

"  Ward  ('.  Smith,  7  Wall.  447,  19  L.  ed.  207. 

12  :Marine  Bank  v.  Fulton  Bank,  2  Wall.  252,  17  L.  ed.  785. 

0  §  248.  Security  Savings  etc.  Co.  v.  King,  69  Or.  228,  138  Pac.  465 
(1914) ;  Hilburn  v.  Mercantile  National  Bank,  39  Colo.  189,  89  Pac.  45 
(1907). 

The  custom  of  banks  is  to  mingle  collection  money  with  their  general 
funds  and  to  send  their  own  cheeks  in  remittance,  and  banks  and  others 
sending  paper  for  collection  are  presumed  to  know  of  the  custom,  and, 
in  the  absence  of  special  instructions  to  the  contrary,  intend  to  abide  by  it. 
Young  V.  Teutonia  Bank  etc.  Co.,  134  La.  879,  64  So.  806  (1914). 

In  the  absence  of  instructions  a  forwarding  bank  becomes  the  ordinary 
creditor  of  a  collecting  bank  and  has  no  right  to  a  preference  upon  in- 
solvency.    Young  V.  Teutonia  Bank  etc.  Co.,  135  La.  66,  64  So.  984  (1914). 

1  Marine  Bank  v.  Rushmore,  28  111.  463 ;  Akin  v.  Jones,  93  Tenn.  360, 
27  S.  W.  669  (1894),  citing  Howard  &  Co.  v.  Walker,  8  Pickle  456;   First 

487 


§  248  COLLECTION   IN    GENEKAL 

demand  some  different  course  of  dealing.^"  If  the  party  has  no 
deposit  account,  the  bank  simply  owes  him  the  amount  on  demand.^ 
But,  if  it  chooses,  the  bank  may  credit  him  with  it  as  if  it  were  an 

National  Bank  v.  Wilmington,  77  Fed.  401 ;  Commercial  Bank  v.  Arm- 
strong, 148  U.  S.  50,  37  L.  ed.  363,  13  Sup.  Ct.  533  (1893) ;  Pennington 
V.  Third  National  Bank,  114  Va.  674,  77  S.  E.  455,  43  L.  R.  A.  (n.  s.) 
781,  n.  (1913). 

When  a  check  is  drawn  by  K.  to  the  order  of  the  cashier  of  a  private 
bank  and  dehvered  to  C.  for  deposit  in  the  bank  for  collection,  the  bank 
has  no  right  to  credit  the  proceeds  of  the  cheek  to  C.  in  the  absence  of  in- 
debtedness to  it  by  C,  and  permit  him  to  draw  against  it,  but  it  is  Hable 
to  K.  for  the  proceeds.  Kuder  v.  Greene,  72  Ark.  504,  82  S.  W.  836  (1904). 
When  a  bank  makes  collections  after  it  is  garnisheed,  the  money  in 
the  hands  of  the  bank  is  tangible  property  subject  to  attachment  and  does 
not  constitute  a  mere  debt  due  the  sender  of  the  draft.  Nashville  Produce 
Co.  V.  Sewell,  121  Ga.  278,  48  S.  E.  945  (1904). 

The  fact  that  the  check  was  made  payable  to  X.  as  guardian  and  by  X. 
regidarly  indorsed  in  blank  is  not  sufficient  to  arouse  suspicion  that  the 
proceeds  belong  to  the  ward.  Hood  v.  Kensington  National  Bank,  230 
Pa.  St.  508,  79  Atl.  714  (1911). 

If  the  customer  had  no  title  to  the  check  the  bank  is  liable  at  common 
law  to  account  to  the  owner  of  the  check  for  the  proceeds  thereof ;  but 
under  section  82  of  the  Bills  of  Exchange  Act,  1882,  the  banker  has  a 
protection  even  though  he  credits  the  customer  with  the  amount  of  the 
cheek  before  it  is  cleared.  Akrokerri  Mines  v.  Economic  Bank  (1904), 
2  K.  B.  465;  Capital  and  Counties  Bank  v.  Gordon,  1903  A.  C.  240; 
affirming  (1902)  1  K.  B.  242. 

If,  upon  the  dehvery  of  the  draft  for  collection,  there  was  an  agreement 
between  its  payees  and  their  creditor  that  the  amount  due  the  creditor 
should  be  credited  to  his  account  it  amounts  to  an  equitable  assignment, 
and  the  title  to  the  money  upon  its  collection  passes  to  the  creditor. 
Zilke  V.  Woodley,  36  Wash.  84,  78  Pac.  299  (1904). 

1"  Sherwood  v.  Savings  Bank,  103  Mich.  109,  61  N.  W.  352 ;  Wallace  v. 
Stone,  65  N.  W.  113(1895) ;  citing  /n  re  Johnson,  103  Mich.  109, 61 N.  W.  352. 
2  Tinkham  v.  Heyworth,  31  111.  519 ;  Planters'  Bank  v.  Union  Bank, 
16  Wall.  483,  21  L.  ed.  473 ;  Duncan  v.  Magette,  25  Tex.  245 ;  Peters 
Shoe  Co.  V.  Murray,  31  Tex.  Civ.  App.  259,  71  S.  W.  977  (1903) ;  Hil- 
singer  v.  Trickett,  86  Ohio  St.  286,  99  N.  E.  305  (1912). 

One  who  sends  a  note  to  a  bank  for  collection,  the  sum  of  which  when 
collected  is  not  to  be  placed  to  one's  credit,  is  not  a  depositor,  and  is  not 
entitled  to  a  preference  under  section  215  of  the  constitution  of  Alabama 
upon  the  insolvency  of  the  bank.  Nixon  State  Bank  v.  First  State  Bank, 
180  Ala.  291,  60  So.  868  (1913). 

When  a  bank  to  which  a  draft  has  been  sent  for  collection  receives 
payment  of  the  same  without  any  restrictions  it  receives  it  as  agent  for 
the  one  who  sent  it,  and  the  bank  has  only  one  duty  to  perform,  viz.  to 
remit  the  money  to  him  for  whom  it  had  made  the  collection  as  soon  as 
the  money  is  paid  to  it.  And  if  garnishment  is  served  upon  it  before  the 
money  is  forwarded  it  must  show,  in  order  to  escape  liability,  that  the 
garnishment  was  served  before  it  had  opportunity  to  remit  in  the  ordinary 
course  of  business.  Commerce  Trust  Co.  v.  Bank  of  Willow  Springs,  161 
Mo.  App.  431,  143  S.  W.  531  (1912). 


DISPOSAL   OF   PROCEEDS  §  24S 

ordinary  payment  on  deposit,  and  thus  initiate  and  establish  the 
rchition  of  banker  and  depositor  between  itself  and  him.  For 
though  this  may  operate  to  plaee  the  bank  under  obligations  and 
duties  towards  him  whieh  would  not  otherwise  have  existed,  yet 
these  are  all  for  his  advantage,  and  his  own  right  to  withdraw  the 
whole  sum  instantly  upon  demand  is  in  no  respect  altered,  if  he  does 
not  wish  to  ratify  the  option  of  the  bank  and  to  become  an  ordinary 
depositor.2  j,^  Wisconsin  the  proceeds  are  always  held  in  trust.^ 
When  a  draft  is  forwarded  to  a  bank  for  collection  and  remittance, 
and  collection  is  made,  and  the  proceeds  placed  in  the  vaults  of 
the  bank,  a  draft  for  the  amount  less  charges  for  collection  being 
forwarded  in  payment,  such  proceeds  do  not  become  a  trust  fund 
in  the  hands  of  the  bank.^" 

Depreciation  of  Proceeds  of  Collection 

If  the  bank  elects  to  retain  the  proceeds  as  a  special  deposit, 
or  remit  them  at  once,  it  will  not  lose  in  case  of  depreciation  of 
the  funds.  It  may  discharge  itself  at  any  time  by  payment  of 
the  specific  funds  received,  but  if  it  credits  the  proceeds,  it  must 
answer  for  the  amount  credited  in  an  equal  amount  of  good  money 
at  the  time  of  demand,  and  so  will  lose  by  whatever  depreciation 
of  the  bank  bills  constituting  the  proceeds  may  have  occurred 
between  making  the  collection  and  paying  the  deposit.* 

3  McLeod  V.  Evans,  66  Wis.  401,  28  N.  W.  Rep.  173. 

^  Bowman  v.  National  Bank,  9  Wash.  614,  38  Pac.  211  (1894) ;  Young 
V.  Teutonia  Bank,  134  La.  879,  64  So.  806  (1914) ;  Gonyer  v.  Williams,  168 
Cal.  452,  143  Pae.  736  (1914). 

There  cannot  be  a  trust  fund  when  the  collecting  bank's  correspondent 
has  collected  a  note  and,  by  a  series  of  daily  balances,  rendered  it  impossible 
to  trace  the  proceeds  of  the  note  with  precision.  Ni.xon  State  Bank  v. 
First  State  Bank,  180  Ala.  291,  60  So.  868  (1913). 

When  a  draft  or  note  is  sent  to  a  bank  for  collection  by  one  who  has 
no  deposit  there  the  bank  holds  the  money,  when  collected,  as  a  trust 
fund  for  the  depositor  who,  in  case  of  the  bank's  insolvency,  is  entitled  to 
full  payment  from  the  money  in  the  bank  at  the  time  of  its  insolvency  if 
there  is  sufficient  to  pay  all  deferred  creditors;  and,  if  not,  then  to  his 
pro  rata  share.  Plane  iUg.  Co.  v.  Auld,  14  S.  D.  512,  86  N.  W.  21,  86 
Am.  St.  Rep.  769,  n.  (1901).  But  in  order  to  claim  a  preference  it  must 
be  clearly  shown  that  the  relation  of  debtor  and  creditor  do  not  exist. 
The  relation  would  exist  if  the  coUeetiuK  bank  pave  the  agent  who  for- 
warded the  check  for  collection  credit  upon  its  books,  even  though  the 
remittance  was  not  to  be  made  until  some  considerable  time  after  collec- 
tion. McCormick  Harvesting  Mach.  Co.  v.  Yankton  Sav.  Bank,  15  S.  D. 
196,  87  N.  W.  974  (1901). 

*  Marine  Bank  v.  Fulton  Bank,  2  Wall.  252,  17  L.  ed.  785 ;  Phoenix 
Bank  v.  Rislev,  111  U.  S.  125,  28  L.  ed.  374,  4  Sup.  Ct.  322. 

489 


§  248  COLLECTION   IN    GENERAL 


Insolvency  Revokes  Power  to  Credit  Proceeds 

(a)  After  a  bank  has  suspended,  it  ought  not  to  receive  pay- 
ments upon  business  paper  previously  deposited  with  it  for  col- 
lection ;  or  at  least  not  in  such  a  manner  that  the  money  so  received 
by  it  will  pass  into  its  general  assets,  and  the  owner  of  the  paper 
will  be  placed  in  the  position  of  one  of  its  creditors,  entitled  only 
to  take  his  dividend.  The  subsequent  discharge  of  the  bank, 
in  bankruptcy  or  insolvency,  will  not,  it  is  said,  bar  the  right  of 
the  owner  of  such  paper  to  recover  in  full  from  the  bank  the  amount 
received  by  it.^  Proceeds  received  after  the  bank  becomes  in- 
solvent are  held  in  trust,  and  may  be  recovered  in  full.^ 

^  Jockusch  V.  Towsey,  51  Tex.  129. 

^  Havens's  Petition,  8  Bened.  309 ;  Levi  v.  National  Bank  of  Missouri, 
5  Dill.  104 ;  First  National  Bank  v.  First  National  Bank  of  Richmond,  76 
Ind.  561  (1881) ;  Peters  Shoe  Co.  v.  Murray,  31  Tex.  Civ.  App.  259,  71 
S.  W.  977  (1903) ;  Pennington  v.  Third  National  Bank,  114  Va.  674,  77 
S.  E.  455  (1913).  And  it  is  immaterial  that  remittance  was  made  as 
directed  by  a  draft,  but  which  was  not  paid,  or  that  the  funds  were 
mingled  with  the  funds  of  the  bank.  Western  German  Bank  v.  Norwell, 
134  Fed.  724  (1905).  But  no  interest  on  such  proceeds  may  be  recovered. 
Butler  V.  Western  German  Bank,  159  Fed.  116  (1908). 

But  see  Young  v.  Teutonia  Bank  etc.  Co.,  134  La.  879,  64  So.  806 
(1914) ;  Hutchinson  v.  National  Bank,  145  Ala.  196,  41  So.  143  (1906). 
And  see  Goshorn  v.  Murray,  197  Fed.  407  (1912),  when  there  is  no  knowl- 
edge of  the  insolvency. 

If  collection  is  made  only  a  few  minutes  before  a  bank  closes  its  doors 
it  holds  such  proceeds  in  trust  even  though  a  draft  is  at  once  drawn 
therefor  and  forwarded.  Brown  v.  Sheldon  State  Bank,  139  Iowa  83,  117 
N.  W.  289  (1908). 

If  a  check  is  received  after  a  bank  has  closed  its  doors  it  may  be  re- 
covered from  the  receiver  of  the  bank.  Pulmos  County  Bank  v.  Bank  of 
Rideout,  165  Cal.  126,  131  Pac.  360,  47  L.  R.  A.  (n.  s.)  552,  n.  (1913). 

When  the  check  is  signed  in  blank  by  the  depositor  the  title  is  trans- 
ferred to  the  bank  and  the  proceeds  thereof,  in  the  absence  of  knowledge 
of  insolvency  at  the  time  of  deposit,  does  not  become  a  trust  fund.  Gonyer 
V.  WilUams,  168  Cal.  452,  143  Pac.  736  (1914). 

When  a  bank  receives  a  check  with  instructions  "  to  collect  and  remit "  , 
the  proceeds,  when  collected,  are  a  trust  fund  and  may  be  recovered  from 
the  receiver  of  the  collecting  bank.  Holder  v.  Western  German  Bank,  132 
Fed.  187  (1904) ;  id.,  136  Fed.  90  (1905). 

In  the  absence  of  fraud  on  the  part  of  the  officers  of  the  bank  while  the 
bank  was  a  going  concern,  it  had  a  right  as  to  creditors  to  make  collections 
and  mingle  the  proceeds  with  its  general  assets,  and  when  so  mingled  the 
trust  relationship  ceased  and  the  obligation  to  pay  or  remit  arose.  But, 
of  course,  a  different  rule  prevails  after  a  bank  has  suspended  business  and 
closed  it  doors.  Corporation  Commission  v.  Merchants'  etc.  Bank,  137 
N.  C.  697,  50  S.  E.  308  (1905). 

It  must  be  shown  that  the  proceeds  in  some  form  went  into  the  assets 

490 


DISPOSAL   OF    PKOCEEDS  §  248 

Collection  by  a  bank  of  a  debt  sent  to  it  for  collection  in  a 
check  upon  itself,  is  equivalent  to  collection  in  money  even  if  the 
bank  failed  the  same  day.^" 

When  a  bank  on  the  day  of  its  failure  credits  the  owner  with 
the  amount  of  a  draft  then  unmatured  and  uncollected,  it  holds 
the  entire  amount  subsequently  collected  on  the  draft  in  trust 
as  agent  of  the  owner.^*" 

But  if  the  proceeds  are  collected  and  credited  before  insolvency, 
the  owner  camiot  recover  in  preference  to  the  other  creditors^ 

And  even  though  a  check  has  been  sent  for  the  amount,  it  will 
not  avail  to  secure  the  owner  in  those  States  which  refuse  to  recog- 
nize a  check  as  an  assignment.^ 

And  if  the  proceeds  have  come  to  the  possession  of  a  bona  fide 
holder  for  value,  they  cannot  be  recovered,  as  where  the  E.  Bank 
received  in  good  faith  and  in  payment  of  C.'sdebt  to  it,  the  pro- 
ceeds of  paper  intrusted  to  C.  for  collection.^ 

Proceeds  of  Forged  and  Raised  Paper 

(6)  If  a  negotiable  instrument  having  a  forged  indorsement 
comes  to  the  hands  of  a  bank  and  is  collected  by  it,  the  proceeds 
are  held  for  the  rightful  owners  of  the  paper,  and  may  be  recovered 
by  them,  although  the  bank  gave  value  for  the  paper,  or  has  paid 

of  the  bank.  White  v.  Commercial  etc.  Bank,  60  S.  C.  122,  38  S.  E.  453 
(1900). 

See  American  Can.  Co.  v.  WiUiams,  176  Fed.  816  (1908) ;  id.,  178  Fed. 
420  (1910),  as  to  the  amount  of  recovery  when  the  proceeds  have  hteen  in- 
termingled \v\{\\  other  money. 

^  Savles  V.  Co.\',  95  Tenn.  583,  32  S.  W.  626  (1895) ;  citing  Howard  & 
Co.  V.  Walker,  8  Pickle  4.52  ;  Peters  Shoe  Co.  v.  Murray,  31  Tex.  Civ.  App. 
259,  71  S.  W.  977  (1903) ;  Pollak  Bros.  v.  Niall-Herin  Co.,  137  Ga.  23, 
72  S.  E.  415  (1911);  Corporation  Commission  ;•.  Merchants'  etc.  Bank, 
137  N.  C.  697,  .50  S.  E.  308  (1905) ;  Schafer  v.  Olson,  24  N.  D.  542,  139 
N.  W.  983,  43  L.  R.  A.  (x.  s.)  762  (1913). 

SI-  Jones  V.  Killveth,  49  Ohio  St.  401,  31  N.  E.  346  (1892). 

7  Bank  r.  Russell,  2  Dill.  215;  People  v.  City  Bank,  93  N.  Y.  582; 
Hallan  v.  Tillinghast,  19  Wash.  20,  52  Pac.  329  (1898) ;  Billingsley  v. 
Pollock,  69  Miss.  761,  13  So.  828  (1892) ;  Sayles  v.  Cox,  95  Tenn.  .580.  32 
S.  W.  626  (1895);  citing  Akin  v.  .Jones,  93  Tenn.  352,  27  S.  W.  669; 
Goshorn  v.  Murrav,  210  Fed.  880  (1914) ;  Peters  Shoe  Co.  v.  Murray,  31 
Tex.  Civ.  App.  2.59,  71  S.  W.  977  (1903) ;  American  National  Bank  v. 
Owensboro  Sav.  Bank,  146  Ky.  194,  142  S.  W.  239,  38  L.  R.  A.  (n.  s.)  146, 
n.  (1912). 

8  People  V.  Merchants  &  Mechanics"  Bank,  78  N.  Y.  269;  Gonyer  f. 
WiUiams,  168  Cal.  452,  143  Pac.  736  (1914). 

9  Charlotte  Iron  Works  v.  American  Exchange  National  Bank,  34 
Hun  (N.  Y.)  26. 

491 


§  248  COLLECTION    IN    GENERAL 

over  the  proceeds  to  the  party  depositing  the  instrument  for  col- 
lection.^" 

When  a  correspondent  bank  presents  a  raised  draft  as  agent 
and  the  drawee  pays  it  by  mistake,  the  latter  cannot  recover  the 
money  from  the  collecting  bank  which  acted  in  good  faith,  without 
notice,  and  has  paid  over  the  money  to  its  principal  before  know- 
ing of  the  mistake.^^ 

Where  A.  purchases  a  draft  drawn  on  the  B.  Bank,  and  sub- 
sequently a  person  representing  himself  to  be  A.  presents  the  draft 
to  the  C.  Bank  and  requests  its  collection,  the  draft  having  been 
raised,  the  C.  Bank  in  directing  the  collection  of  the  draft  for  its 
account  assumes  the  character  of  principal,  so  far  as  the  B.  Bank 
is  concerned.  As  the  B.  Bank  makes  payment  of  the  draft  to  the 
C.  Bank  as  owner  thereof,  and,  being  guilty  of  no  negligence,  it 
can  recover  the  money. ^^ 

When  a  correspondent  bank  receives  the  proceeds  of  a  check  sent 
to  it  for  collection  and  on  the  same  day  pays  them  back  on  being 
told  that  the  check  was  a  fraudulent  one,  the  collector  bank  is 
liable  for  the  payment  of  the  proceeds  to  the  transmitting  bank 
and  cannot  set  up  as  a  defense  that  the  cashier  of  the  transmit- 
ting bank  had  knowledge  of  the  fraudulent  character  of  the 
check.13 

§  249.  When  the  First  Bank  becomes  the  Customer's  Debtor. 
—  The  theory  that  the  banks  and  agents  subsequent  to  the  first 
bank  are  independently  direct  agents  of  the  holder  of  the  paper, 
and  immediately  liable  to  him,  is  obviously  inconsistent  with 
holding  that  the  receipt  of  the  sum  due  by  any  subsequent  bank 
is  in  law  the  receipt  by  the  first  bank,  and  at  once  renders  the  first 
bank  answerable  for  the  amount.  Yet  any  feature  in  the  dealing 
of  the  first  bank  with  any  of  the  parties,  which  manifests  an 
understanding  or  intention  on  the  part  of  that  bank  to  adopt  the 
receipt  of  the  subsequent  agent  as  being  its  own  receipt,  will  be 
seized  upon  by  the  courts  as  a  ground  for  holding  it  directly  an- 
swerable to  the  depositor  of  the  paper.     In  the  case  of  Mackersy  v. 

i^Boyce  v.  Brockway,  31  N.  Y.  490;  Talbot  v.  Rochester,  1  Hill 
(N.  Y.)  295;  Johnson  v.  First  National  Bank,  6  Hun  (N.  Y.)  124;  Cran- 
dall  V.  Sehroeppel,  1  Hun  (N.  Y.)  557;  Meyer  v.  Rosenheim,  115  Ky. 
409,  73  S.  W.  1129  (1903). 

11  National  Park  Bank  v.  Seaboard  Bank,  114  N.  Y.  28,  20  N.  E.  632. 

12  National  Park  Bank  v.  Eldred  Bank,  90  Hun  (N.  Y.)  285. 

"  Monongahela  National  Bank  v.  First  National  Bank,  226  Pa.  St.  270, 
75  Atl.  359,  26  L.  R.  A.  (n.  s.)  1098,  n.  (1910). 

492 


WHEN    THE    FIRST    BANK    BECOMES    THE    CUSTOMER'S    DEBTOR       §  249 

Ramsays/  elsewhere  fully  stated,  there  appears  to  have  been  a 
distinct  agreement  between  the  parties  that  the  first  bank  should 
pay  the  depositor  so  soon  as  it  was  notified  of  the  payment  having 
been  actually  made  to  the  correspondent  abroad.  In  Tabor  v. 
Perrot  ^  there  was  no  such  agreement ;  but  the  conduct  of  the 
first  bank  in  ordering  the  foreign  collecting  bank  to  give  it  credit 
for  the  sum,  and  hi  drawing  bills  in  its  own  behalf  against  this 
credit,  was  regarded  as  constituting  a  complete  appropriation  of 
the  amount  to  its  own  use,  rendering  it  directly  responsible  to  the 
depositor  of  the  paper,  from  the  moment  that  the  credit  was  given 
to  it  in  accordance  with  its  order. 

Where  the  bank  pays  the  amount  of  the  paper  to  the  depositor 
under  the  belief,  arising  from  the  circumstances,  that  its  corre- 
spondent has  successfully  effected  the  collection,  if  it  should  after- 
ward turn  out  that  the  collection  has  not  in  fact  been  thus  effected, 
such  bank  may  recover  back  from  the  depositor  the  amount  so 
paid  to  him,  on  the  ground  that  it  was  a  payment  made  under 
mistake  of  fact.^"  So  if  the  payment  was  made  by  any  bank, 
other  than  the  collecting  bank  itself,  to  its  predecessor  in  the  series 
of  agents.^  In  the  courts  of  New  York  and  of  the  United  States 
the  first  bank  is  liable  as  soon  as  the  money  is  paid  either  to  it  or 
to  its  sub-agent.^ 

When  a  bank  receives  a  check  for  collection  and  it  is  certified  by 
the  drawee  by  mistake  and  a  draft  for  the  amount  remitted  to  the 
bank  by  its  correspondent,  on  which  payment  is  stopped  and  the 
payee  notified  before  it  reaches  the  bank,  the  bank  is  not  chargeable 
to  the  depositor  as  the  agreement  of  collection  was  that  it  should 
only  be  liable  when  actual  funds  or  solvent  credits  should  come  into 
its  possession,  which  means  the  real  funds  inuring  from  a  collection 
of  the  check  free  from  embarrassment  and  convertible  into  cash.^ 

1  §  249.  9  Clark  &  F.  (Eng.)  818.  See  also  Landa  v.  Traders'  Bank, 
118  Mo.  App.  350,  94  S.  W.  770  (1906). 

2  Gall.  565. 

2"  First  National  Bank  v.  Behan,  91  Ky.  562,  16  S.  W.  368  (1891). 

The  crediting  as  cash  the  check  left  for  collection  does  not  make  the 
bank  liable  if  the  check  is  subsequently  dishonored.  Security  Savings  Co. 
V.  King,  69  Or.  228,  138  Pac.  465  (1914). 

3  Bank  of  Orleans  v.  Smith,  3  Hill  (N.  Y.)  560;  East  Haddam  Bank 
V.  Sco\nl,  12  Conn.  303 ;   Mechanics'  Bank  v.  Earp,  4  Rawle  (Pa.)  384. 

<Hyde  v.  First  National  Bank,  7  Biss.  156.  See  Hoover  v.  Wise. 
1  Otto  308;  Ayrault  v.  Pacific  Bank,  47  N.  Y.  570;  Smith  r.  National 
Bank,  191  Fed.  226  (1911)  ;  National  Revere  Bank  v.  National  Bank  of 
Republic,  172  N.  Y.  102,  64  N.  E.  799  (1902). 

»  Security  Savings  Co.  v.  King,  69  Or.  228,  138  Pac.  465  (1914). 

493 


§  250  COLLECTION   IN    GENERAL 

§  250.  Liabilities  of  the  Various  Banks  directly  to  the  Owner. 
—  If  commercial  paper  is  deposited  in  a  bank  for  collection,  and 
is  by  that  bank  transmitted  to  any  other  bank  or  agent,  or  through 
any  series  of  banks  or  agents,  till  it  reaches  the  possession  of  the 
last  bank  or  agent,  whose  duty  it  becomes  actually  to  make  the 
collection,  can  the  bank  or  agent  actually  making  the  collection 
be  held  directly  by  the  owner  of  the  paper  to  pay  the  amount, 
less  charges  and  expenses,  to  him?  If  his  demand  of  payment 
is  refused,  without  sufficient  excuse,  may  he  sue  the  bank  or 
agent  ?  If  the  paper  is  transmitted  through  several  banks,  is 
each  one  of  them  directly  liable  to  the  owner  for  its  prompt  and 
accurate  forwarding  to  the  next  bank  or  agent  ? 

Some  of  the  opinions  —  those  only  of  course  which  hold  that 
the  first  bank,  or  any  bank  in  the  series,  is  not  liable  for  the  act 
of  any  subsequent  bank  or  agent,  but  only  for  the  due  performance 
of  the  especial  task  allotted  to  itself  —  regard  each  bank,  and  the 
notary  too,  if  a  notary  is  employed,  not  as  the  sub-agent  of  its 
predecessor  or  of  the  first  bank,  but  as  the  direct  agent  of  the 
owner  of  the  paper,  for  the  purpose  of  doing  the  precise  act  which 
falls  to  its  share  in  the  chain  of  proceeding.  Thus,  if  the  paper 
is  transmitted  through  three  banks  to  a  fourth,  which  has  to 
collect,  and  is  by  that  fourth  bank  delivered  to  a  notary  to  be 
protested,  it  is  not  correct,  according  to  the  doctrine  of  these  cases, 
to  regard  the  second,  third,  and  fourth  banks,  and  the  notary,  as 
sub-agents  of  the  first  bank,  neither  to  regard  the  notary  as  the 
sub-agent  of  the  fourth  bank.  But  each  successive  party  is  deemed 
to  be  an  independent  agent  directly  of  the  owner  of  the  paper, 
having  for  the  scope  of  its  agency,  in  the  case  of  any  one  of  the 
first  three  banks,  only  the  transmission  to  the  next ;  in  the  case 
of  the  fourth  bank,  the  collection,  or,  in  default  of  payment,  the 
delivery  to  a  proper  party  for  protest ;  and  in  the  case  of  the 
notary,  the  various  acts  which  go  to  make  up  a  legal  protest. '^ 
This  view  makes  the  owner's  right  of  action  exclusive ;  the  first 
bank  having  no  right  to  sue  any  other.^  But  some  of  the  other 
class  of  cases,  which  regard  all  the  subsequent  banks  and  the  notary 
as  sub-agents,  each  of  its  predecessor  and  all  of  the  first  bank, 
allow  a  double  right  of  action  against  the  one  through  whose 
default  loss  accrues ;    for  these  cases  declare  that  the  defaulting 

^  §  250.     Lawrence  v.  Stonington  Bank,  6  Conn.  521 ;  Mechanics'  Bank 
V.  Earp,  4  Rawle  (Pa.)  .384 ;   Reeves  v.  State  Bank,  8  Ohio  St.  465. 
2  Farmers'  Bank  v.  Owen,  5  Cranch  C.  C.  504. 

494 


LIABILITIES    OF   THE    VARIOUS    BAN'KS    DIRECTLY    TO    OWNER      §  250 

agent  may  be  sued  directly  by  the  owner  of  the  paper,  who  is  the 
original  principal  in  the  whole  series ;  and  at  the  same  time  it  is 
a  necessity,  resulting  from  the  fact  of  the  sub-agency,  that  suits 
may  also  be  brought  by  that  first  agent  who  stands  to  all  the  sub- 
sequent ones  in  the  relation  of  an  immediate  principal.^  It  makes 
no  difference  that  the  first  bank  is  regarded  as  liable  for  all  the 
sub-agents.  This  gives  the  owner  a  right  of  action  against  the 
first  bank,  but  does  not  deprive  him  of  the  collateral  right  to  sue 
the  defaulting  sub-agent  directly  and  primarily  if  he  wishes.  He 
simply  has  his  election  whether  he  will  pursue  his  remedy  against 
the  one  or  the  other.* 

Those  cases,  however,  which  hold  the  New  York  rule  with 
greatest  strictness,  and  carry  it  to  its  fullest  consequences,  deny 
the  right  of  the  owner  to  sue  the  sub-agent,^  except  that  where 
the  transmitting  bank  becomes  insolvent  before  the  agent  bank  re- 
ceives payment  of  the  note,  and  the  agent  bank  has  not  acquired 
a  right  to  the  note  or  its  proceeds  as  a  bona  fide  holder  for  value, 
the  owner  may  recover  the  note,  or  the  proceeds  if  collected.^" 

(§  565.) 

The  mere  crediting  of  the  account  of  the  remitting  bank  by  a 
correspondent  who  makes  the  collection  does  not  preclude  the 
owner  of  the  paper  from  recovering  the  proceeds  from  the  corre- 
spondent,^ but  a  continual  course  of  dealing  between  the  collecting 

3  Wilson  I'.  Smith,  3  How.  763,  11  L.  ed.  820. 

*  Bank  of  Orleans  v.  Smith,  3  Hill  (N.  Y.)  560,  per  Nelson,  C.  J.,  who 
takes  pains  to- show  that  this  does  not  conflict  with  Allen  v.  Merchants' 
Bank,  22  Wend.  (N.  Y.)  215.  In  New  York,  in  cases  where  the  collect- 
ing bank  is  held  Uable  for  the  default  of  a  notary  employed  by  it,  the 
measure  of  damages  which  the  holder  of  the  paper  can  recover  from 
the  bank  on  the  ground  of  such  default  of  the  notary  is  the  amount  of  the 
note  and  interest.  If  the  holder  has  sued  an  indorser,  and  has  failed  to 
recover  by  reason  of  the  default  of  the  notary,  he  cannot  increase  the 
damages  by  adding  the  expenses  of  the  suit.  For  the  action  against  the 
bank  is  based  upon  the  imphed  undertaking  of  the  bank  to  give  the  notice, 
and  not  upon  any  false  representation  that  the  notice  has  been  duly  given. 
Downer  ;-.  Madison  City  Bank,  6  Hill  (N.  Y.)  648. 

5  Hyde  v.  First  National  Bank,  7  Biss.  1.56.  See  Hoover  v.  Wise, 
1  Otto  308,  23  L.  ed.  392  ;  Ayrault  v.  Pacific  Bank,  47  N.  Y.  570  ;  Smith  v. 
National  Bank,  191  Fed.  226  (1911);  Martin  v.  Hibernia  Bank,  127  La. 
301,  53  So.  .572  (1910). 

5a  Bank  of  Clark  Co.  v.  Oilman,  84  Hun  (N.  Y.)  486. 

Where  tlie  transmitting  bank  assigns  and  ceases  business  before  the 
collection  of  the  draft  the  agency  is  terminated  and  prevents  the  collect- 
ing bank  from  applying  the  proceeds  to  a  draft  owed  to  it  by  the  transmit- 
ting bank.  Morris  v.  Alabama  Carbon  Co.,  139  Ala.  620,  36  So.  764  (1904). 

« Branch  v.  United  States  National  Bank,  50  Neb.  479,  70  N.  W.  34 

495 


§  250  COLLECTION   IN    GENERAL 

bank  and  its  sub-agent  may  pass  title  of  the  proceeds  of  collection 
to  the  sub-agent  7 

§  251.  Liability  to  the  Real  Party  in  Interest.  —  In  case  of  any 
default  on  the  part  of  any  bank  engaged  in  conducting  the  col-  ' 
lection,  whereby  it  would  ordinarily  lay  itself  open  to  a  suit  by  the 
party  who  deposited  the  paper  for  collection,  suit  may  also  be 
brought,  instead,  by  any  real  party  in  interest,  though  his  name 
was  not  mentioned  and  the  fact  of  his  interest  was  entirely  unknown 
to  the  bank  at  the  time  of  its  receiving  the  paper.  The  naked 
fact  that  such  person  had  a  real  beneficial  interest  in  having 
the  bank  do  its  duty  in  the  premises,  and  must  therefore  be  an 
actual  loser  in  some  shape  by  its  failure  to  do  so,  gives  the  right 
of  action.^ 

§  252.  Causes  of  Liability.  —  If  a  bank  fails  to  do  its  duty  in 
the  matter  of  collection  with  reasonable  skill  and  care,^  it  is  liable 
for  the  damage  resulting  ^  to  any  party  interested  in  the  paper, 
whether  his  name  appears  on  the  paper  or  not.^     It  will  be  no 

(1897) ;  Commercial  National  Bank  v.  Hamilton  National  Bank,  42  Fed, 
880. 

7  Franklin  County  Bank  v.  Beal,  49  Fed.  606 ;  First  National  Bank  v. 
First  National  Bank,  55  Neb.  303. 

The  relation  between  the  transmitting  bank  and  collecting  bank  is 
that  of  principal  and  agent  and  the  direction  of  the  principal  to  the  agent 
to  transmit  in  New  York  exchange  does  not  change  the  relation  to  debtor 
and  creditor  and  thus  permit  the  owner  of  the  draft  to  sue  the  transmitting 
bank  for  the  money  collected  by  the  agent  wliich  became  insolvent  before 
remittance.     Holder  v.  Western  German  Bank,  132  Fed.  187  (1904). 

1  §  251.     McKinster  v.  Bank  of  Utica,  9  Wend.  (N.  Y.)  46 ;  11  id.,  473. 

1  §  252.  Fabens  v.  Mercantile  Bank,  23  Pick.  (Mass.)  330;  Baihe  v. 
Augusta  Savings  Bank,  95  Ga.  281,  21  S.  E.  717  (1894) ;  Bank  of  Com- 
merce V.  Ingram,  33  Okla.  46,  124  Pac.  64  (1912). 

2  McKinster  v.  Bank  of  Utica,  9  Wend.  (N.  Y.)  46  ;  11  id.,  473 ;  Hobart 
National  Bank  v.  McMurrough,  24  Olda.  210,  103  Pac.  601  (1909). 

'  The  measure  of  damages  wiU  be  the  amount  of  actual  loss  which  he 
has  sustained.  Bank  of  Washington  v.  Triplett,  1  Pet.  25,  7  L.  ed.  37 ; 
McKinster  v.  Bank  of  Utica,  9  Wend.  (N.  Y.)  46 ;  Tyson  v.  State  Bank, 
6  Blackf.  (Ind.)  225;  St.  Louis  Carbonating  Co.  v.  Lookeba  State  Bank, 
35  Olda.  434,  130  Pac.  280  (1913) ;  Hendrix  v.  Jefferson  County  Sav. 
Bank,  153  Ala.  636,  45  So.  1.36,  14  L.  R.  A.  (n.  s.)  686  (1907) ;  Jefferson 
County  Sav.  Bank  v.  Hendrix,  147  Ala.  670,  39  So.  295,  1  L.  R.  A.  (n.  s.) 
246,  n.  (1905) ;  Bank  of  Rocky  Mount  v.  Floyd,  142  N.  C.  187,  55  S.  E. 
95  (1906) ;  Bank  of  Mount  Airy  v.  Greensboro  Loan  etc.  Co.,  159  N.  C. 
85,  74  S.  E.  747  (1912). 

For  pleadings,  burden  of  proof,  and  evidence  in  suit  of  a  customer 
against  a  collecting  bank  for  negligent  failure  to  collect,  see  Sahlien  v. 
Bank,  90  Tenn.  227,  16  S.  W.  373  (1890),  citing  Bruce  v.  Baxter,  7  Lea 
477;  CoUier  v.  PuUian,  13  Lea  114;  Morris  v.  Eufaula  National  Bank, 
106  Ala.  387, 18  So.  11  (1894),  citing  Industrial  Trust  Title  Co.  v.  Weakley, 

496 


CAUSES    OF    LIABILITY  §  252 

defence  for  the  bank  to  assert  that  it  was  not  accustomed  to 
undertake  collections,  and  that  the  error  arose  from  its  want  of 
familiarity  with  the  ordinary  course  of  proceedings.  Having  un- 
dertaken the  business,  it  is  liable  for  the  results  of  an  improper 
performance  of  it.^  It  has  been  already  stated  that  the  bank 
cannot  set  up  want  of  consideration.^ 

It  has  been  held,  also,  that  where  a  bank  demands  and  receives 
payment  of  a  dishonored  note  from  an  indorser,  and  he,  seeking 
in  his  turn  to  recover  from  a  prior  indorser,  fails  to  do  so  by  reason 
of  a  default  by  the  bank  in  not  making  a  proper  demand  upon  the 
maker,  which  insufficiency  was  unknown  to  the  paying  indorser 
when  he  made  the  payment,  he  shall  recover  back  the  amount 
of  his  payment  from  the  bank. 

Irregular  Acceptance 

(a)  If  the  paper  is  returned  to  it  by  its  correspondent  as  un- 
collectible it  must  in  its  turn  promptly  send  the  paper  back  with 
this  information  to  the  owner.^  If  it  is  the  duty  of  the  bank  to 
procure  the  acceptance  of  a  draft  or  bill,  it  is  bound  to  procure 
an  absolute  and  outright  acceptance,  legally  binding  upon  the  ac- 
ceptor, at  least  so  far  as  concerns  the  form  and  circumstance  of 
the  act  itself  of  accepting.  If  it  takes  any  acceptance  which  is 
irregular  in  form,  and  which  therefore  fails  to  hold  the  party 
drawn  upon,  and  rests  satisfied  with  this  without  at  once  notifying 
its  principal,  it  will  be  liable  itself  to  pay  the  amount  of  the  paper, 
if  otherwise  the  amount  would  be  lost  to  the  depositor  by  reason 
of  his  inability  to  hold  the  proper  party  as  acceptor.'^  If  the  bank 
takes  the  check  of  the  party  who  is  bound  to  pay  the  paper,  and 
thereupon  surrenders  the  paper  to  him,  it  assumes  the  responsi- 
bility for  the  check  proving  good.  If  it  is  not  paid,  the  bank  is 
still  obliged  to  pay  the  amount  to  the  person  from  whom  it  received 
the  paper.^ 

103  Ala.  458,  15  So.  854 ;  Fox  v.  Davenport  National  Bank,  73  Iowa  649, 
35  N.  W.  G88  ;  Oil  Well  Co.  v.  Exchange  National  Bank,  131  Pa.  St.  101,  IS 
Atl.  935. 

*  Ivory  V.  Bank  of  State  of  Missouri,  30  Mo.  475. 

5  Halls  ;•.  Bank  of  the  State,  3  J.  S.  G.  Rich.  (S.  C.)  366. 

6  Van  Wart  v.  WooUev,  3  Barn.  &  Cres.  439;  Wingate  v.  Mechanics' 
Bank,  10  Barr  (Pa.)  104;  McKinster  v.  Bank  of  Utica,  9  Wend.  (N.  Y.) 
46;    11  ui.,  473. 

^  Walker  ;'.  Bank  of  State  of  New  York,  9  N.  Y.  582. 
8  Commercial  Bank  v.  Union  Bank,  1  Kern.  (N.  Y.)  203 ;    Kirkhara  v. 
Bank  of  America,  26  App.  Div.  (Hun,  N.  Y.)  110  (1898). 

VOL.  1  —  32  497 


§  252  COLLECTION   IN   GENERAL 

In  Citizens'  Bank  v.  Houston  ^"  it  was  held  that  when  a  bank 
which  receives  from  the  payee,  for  collection,  a  check  upon  another 
bank,  which  check  is  duly  protested  and  notice  of  dishonor  given, 
subsequently  surrenders  said  check  to  drawer  and  accepts  in  lieu 
thereof  a  check  on  another  bank,  with  protest  fees  added,  which 
latter  check  is  also  protested,  the  collecting  bank  does  not  thereby 
become  liable  to  the  payee,  he  having  suffered  no  damage  from  the 
act,  which  was  in  good  faith. 

(6)  But  if  the  bank  can  show  that  it  has  conducted  itself  in  the 
transaction  in  strict  accordance  with  the  customary  and  established 
mode  of  transacting  such  business,  it  seems  that  this  might  suffice 
to  acquit  it  of  all  responsibility  for  any  mishap.^''  For  it  has  been 
held  in  England  that  a  banker  who  gave  up  bills  indorsed  to  him 
for  collection,  upon  receiving  the  acceptor's  check,  which  was 
subsequently  dishonored,  could  not  be  charged  with  negligence 
because  the  transaction  was  not  an  unusual  one.^  It  may  be 
doubted  whether  it  would  free  a  banker  from  liability  if  he  should 
simply  show  a  frequent  habit  of  parting  with  paper  upon  receiving 
the  check  of  the  debtor  ;  or  whether  he  would  not  have  to  go  further, 
and  show  positively  that  it  was  understood  in  all  such  transactions 
that  the  banker  discharged  his  full  duty  to  his  customer  by  so 
doing.  Otherwise,  the  usage  might  amount  only  to  a  usage  of 
bankers  to  assume  a  liability  to  their  customers  in  such  cases. 

If  a  bank  fails  to  use  due  diligence  in  presenting  paper  for  ac- 
ceptance, it  is  liable.^"  And  notice  of  dishonor  must  be  duly  given, 
even  though  the  presentment  for  acceptance  which  resulted  in 
the  dishonor  was  not  legally  requisite ;  for  example,  the  holder 
of  a  draft  payable  at  a  future  day  is  not  required  to  present  it  for 
acceptance,  but  if  it  is  presented,  notice  of  the  dishonor  must  be 
promptly  given  to  the  drawer  or  indorser,  or  he  will  be  discharged. ^^ 
See  §  258,  Duty  to  present. 

Failure  to  Protest.     Violation  of  Instructions 

(c)  Where  a  bank  fails  to  protest  a  draft  taken  in  part  payment 
of  paper  left  for  collection,  it  is  liable  for  the  damage  consequent 

8"  Citizens'  Bank  v.  Houston,  98  Ky.  141,  32  S.  W.  397  (1895). 
8*  Davis  V.  First  National  Bank,  118  Cal.  600,  50  Pac.  666  (1897). 
9  RusseU  V.  Hankey,  6  T.  R.  12. 

1"  Allen  V.  Suydam,  20  Wend.  (N.  Y.)  321 ;    Exchange  National  Bank 
V.  Third  National  Bank,  112  U.  S.  290,  28  L.  ed.  722,  5  Sup.  Ct.  141. 
"  Walker  v.  Bank,  9  N.  Y.  582 ;  Bank  v.  Triplett,  1  Pet.  25,  7  L.  ed.  37. 

498 


CAUSES   OF   LIABILITY  §  252 

on  its  negligence.^2  go  where  it  omitted  to  protest  a  draft  im- 
properly accepted  in  such  a  way  as  to  bind  no  one  as  acceptor.*' 
And  where  the  instructions  were  "  to  return  at  once  without 
protest  if  not  paid  ",  and  in  violation  of  this  order  it  was  kept 
seven  days  though  not  paid,  and  then  returned,  the  depositor 
having  been  in  the  meantime  paid  on  the  representation  of  the 
drawee,  who  was  also  president  of  the  defendant  bank,  the  latter 
was  held  for  the  damage  resulting  from  its  disobedience  of  instruc- 
tions.^^  This  case  does  not  seem  very  strong.  The  loss  does 
not  to  ordinary  vision  flow  naturally  from  the  failure  to  obey, 
but  from  the  negligence  of  the  plaintiff  in  taking  the  word  of  the 
drawee. 

Failure  to  Inquire 

(d)  A  bank  mailed  paper  it  had  received  for  collection  to  the 
drawee ;  it  miscarried,  and  the  drawee  failed  nineteen  days  after. 
For  twenty-eight  days  after  sending  the  paper  the  bank  made 
no  inquiry  about  it,  and  gave  the  depositor  no  notice  concerning 
it,  till  two  days  more  had  elapsed.  The  bank  was  held  liable  for 
its  negligence.^^ 

So  where  a  check  was  forwarded  by  the  depositary  on  the  third, 
and  in  the  regular  course  of  events  it  should  have  received  on  the 
fourth  word  of  its  arrival  but  did  not,  and  did  not  know  until  the 
16th  that  the  check  was  lost,  of  which  it  notified  the  holder  on  the 
18th,  the  bank  was  held  liable  for  its  negligence  in  omitting  to 
inquire  in  regard  to  the  check,  whereby  loss  occurred, ^^  the 
drawee  having  funds  of  the  drawer  until  the  20th. 

12  Capitol  State  Bank  v.  Lane,  52  Miss.  677.  See  Louisville  Banking 
Co.  V.  Asher,  112  Ky.  138,  65  S.  W.  133,  99  Am.  St.  Rep.  283  (1901), 
failure  to  protest  note. 

13  Walker  v.  Bank,  9  N.  Y.  582. 

"  Merchants  &  Manufacturers'  National  Bank  v.  Stafford  National 
Bank,  44  Conn.  564  (U.  S.  Dist.  Ct.).  See  St.  Louis  Carbonating  Co.  ;•. 
Lookeba  State  Bank,  35  Okla.  434,  130  Pae.  280  (1913) ;  Lord  v.  Ilingham 
National  Bank.  186  Mass.  161.  71  N.  E.  312  (1904). 

15  Trinidad  National  Bank  v.  Denver  National  Bank,  4  Dill.  290 ; 
Hobart  National  Bank  v.  McMurrough,  24  Okla.  210,  103  Pae.  601  (1909) ; 
Bank  of  Commerce  v.  Ingram.  33  Okla.  46,  124  Pae.  64  (1912). 

In  South  Carolina  where  the  collecting  bank  made  no  inquiry  for  several 
months  it  was  liable  for  the  loss  even  though  the  deposit  slip  on  which  the 
draft  was  deposited  contained  the  provision  that  the  bank  was  not  to  be 
held  liable  until  the  draft  was  collected.  Harter  v.  Bank  of  Brunson,  92 
S.  C.  440,  75  S.  E.  696  (1912). 

"  Shipsey  v.  Bowery  National  Bank,  59  N.  Y.  485.   See  Second  National 

499 


I  252  COLLECTION    IN    GENERAL 

If  notice  is  actually  received  in  time  by  an  indorser  from  any 
source,  although  the  bank  was  negligent  and  did  not  send  the 
notice  it  should,  it  is  not  liable  for  such  neglect,  for  no  damage 
is  caused  by  it.^^ 

A  bank  failing  to  notify  the  depositor  of  a  check  upon  itself  of 
the  non-payment  of  the  same,  is  liable.^^ 


Negligent  Loss 

(e)  A  letter  containing  a  bill  for  collection  slipped  through  a 
crack  in  the  cashier's  desk  at  the  bank,  and  remained  undiscovered 
till  after  maturity.  The  court  said  that  the  bill  was  not  pre- 
sented in  the  sense  of  the  law,  though  physically  present  at  maturity, 
and  the  acceptor  had  no  funds ;  that  the  loss  carried  with  it  the 
presumption  of  negligence  on  the  part  of  the  bank,  and  if  it  could 
be  explained  and  rebutted  the  facts  for  this  purpose  were  pecul- 
iarly within  the  knowledge  of  its  officers,  and  it  must  produce 
them.^^  The  bank  was  held  liable  to  the  holder,  who  had  by  the 
disappearance  of  the  bill  lost  his  remedy  against  the  drawer  and 
indorser.  The  bank  as  agent  must  do  all  that  the  owner  would 
be  required  to  do  to  protect  his  rights,  and  is  liable  to  the  owner 
for  failure  in  such  duty.^"  But  failure  to  collect  a  draft  or  to  re- 
turn it  where  there  is  an  attachment  or  legal  proceeding  against 
the  owner  of  the  draft,  jus  tertii,  exonerates  a  bank  from  negli- 
gence.^^ 

A  bank  which  fails  to  present  a  certificate  of  deposit  for  thirty- 
six  days  after  its  receipt  is  liable  for  any  loss,  and  if,  in  the  mean- 
Bank  V.  Merchants'  National  Bank,  111  Ky.  930,  64  S.  W.  4,  98  Am.  St. 
Rep.  439,  55  L.  R.  A.  273  (1901). 

1'  Hallowell  v.  Curry,  41  Pa.  322. 

18  Bank  of  New  Hanover  v.  Kenan,  76  N.  C.  340. 

19  Chicopee  Bank  v.  Philadelphia  Bank,' 8  Wall.  641,  19  L.  ed.  422. 

=0  Davey  v.  Jones,  42  N.  J.  Law  30 ;    Beale  v.  Parrish,  20  N.  Y.  407 ; 
Paint  Co.  v.  National  Bank,  4  Utah  353  (1886). 

21  Davis  V.  First  National  Bank,  118  Cal.  600,  50  Pac.  666  (1897). 

If  the  funds  of  a  draft  sent  by  a  bank  for  collection  and  remission  of 
proceeds  have  been  attached  while  in  the  hands  of  the  collecting  bank 
the  latter  owes  the  forwarding  bank  a  greater  duty  than  it  owes  to  its 
depositor,  and  is  bound  to  defend  the  title  of  the  forwarding  bank  or  else 
unequivocally  notify  such  bank  to  come  in  and  defend  itself ;  ard  when 
the  agent  is  guilty  of  negligence  or  bad  faith  it  cannot  avail  itself  of  a 
letter  of  indemnity  given  by  the  forwarding  bank  in  order  to  obtain  the 
proceeds  of  the  collection.  Krafift  v.  Citizens'  Bank,  139  App.  Div.  645 
(1910),  124  N.Y.  S.  214. 
500 


I 


MISTAKES   OF   FACT  §  255 

time,  It  has  paid  the  certificate  it  cannot  recover  the  amount 
so  paid,  upon  its  non-acceptance." 

Where  the  owner  of  money  employs  C,  a  banker,  to  obtain  his 
money  on  deposit  in  a  bank  in  Italy  and  delivers  the  pass  book 
to  C,  who  delivers  it  to  a  defendant  with  a  falsely  executed  power 
of  attorney  authorizing  it  to  draw  the  money,  and  the  bank  ad- 
vanced the  money  to  C,  who  converted  it  to  his  own  use,  it  is  not 
liable  if  it  acted  in  accordance  with  its  usual  custom.^ 

§  253.  Liability  for  Default  of  a  Branch.  —  Where  a  branch 
bank  was  negligent  in  not  serving  notice  of  dishonor  sent  to  it 
by  the  mother  bank,  the  latter  was  held.^ 

§  254.  When  the  Depositor  is  in  Fault.  —  If  the  rule  of  the 
bank  is  that  costs  of  protest  must  be  deposited  along  with 
paper  put  in  the  bank  for  collection,  and  in  consequence  of  the  fact 
that  this  is  omitted  the  bank  fails  to  protest  and  give  notice,  it 
is  not  liable,^  nor  is  it  responsible  for  the  miscarrying  of  a  note 
because  the  depositor  failed  to  give  the  correct  address  of  the 
bank  where  it  was  to  be  paid.- 

Where  a  depositor  of  a  draft  for  collection,  which  is  credited 
to  him,  knows  of  the  failing  condition  of  the  drawee  and  does  not 
impart  his  information,  the  bank  is  discharged  from  liability.^ 

§  255.  Mistakes  of  Fact.  —  If  a  bank  mistakes  the  date  of  a 
note  and  presents  it  for  collection  too  soon,^  or  sends  notice  to 
the  wrong  person,  though  one  of  the  same  name  as  the  real  in- 
dorser  but  living  in  a  different  county ,2  it  is  liable  for  the  loss, 
resulting. 

Where  a  certificate  was  deposited  for  collection  and  a  receipt 
given  which  stated  that  the  certificate  was  due  December  18, 
whereas  it  was  due  on  demand  and  the  bank  collected  it  at  once, 
the  depositor  cannot  require  the  bank  to  pay  interest  which  would 
have  accrued  had  the  paper  been  held  until  December  18.  There 
was  no  agreement  that  the  paper  should  be  held  and  there  was 

^  Bank  of  Mount  Airy  v.  Greensboro  Loan  etc.  Co.,  159  X.  C.  85,  74 
S.  E.  747  (1912). 

^  Chiarollo  v.  Savoy  Trust  Co.,  144  App.  Div.  141  (1910),  125  N.  Y.  S. 
1069. 

1  §  253.     Bird  v.  Louisiana  State  Bank,  93  U.  S.  9G,  23  L.  ed.  818. 

1  §  254.     Pendleton  v.  Bank,  1  T.  B.  Mon.  (Ky.)  171. 

2  Chapman  ;>.  Union  Bank,  32  How.  Pr.  (N.  Y.)  95. 

3  Freeholders  of  Middlesex  v.  State  Bank,  32  N.J.  Eq.  467. 

1  §  255.     Bank  of  Delaware  Co.  v.  Bromhall,  38  Pa.  St.  135. 

2  IMount  V.  First  National  Bank,  37  Iowa  457 ;  Borup  v.  Nininger, 
5  Minn.  523. 

501 


§  255  COLLECTION   IN   GENERAL 

no  negligence  or  violation  of  instructions,  and  interest  cannot  be 
claimed. 2" 

Where  a  bank  mistook  a  note  that  was  really  negotiable  for 
a  non-negotiable  one  (because  it  contained  provisions  beyond 
those  usually  found  in  notes,  saying,  "  being  in  part  payment 
for  a  portable  engine,  which  engine  shall  be  and  remain  the  prop- 
erty of  the  owner  of  this  note  until  the  amount  hereby  secured 
is  fully  paid  "),  and  did  not  properly  protest  and  notify,  it  was 
held  responsible.^ 

A  bill  of  exchange  was  sent  to  a  bank  for  collection.  The 
bank  thought  it  was  a  check,  and  not  entitled  to  grace,  and  pre- 
sented and  protested  it  on  the  day  of  maturity.  This  discharged 
the  indorser,  and  the  bank  was  held  to  make  good  the  loss.^  The 
indorser  in  this  case  had  notified  the  bank  that  the  instrument 
had  grace,  which  strengthened  the  case  against  the  bank. 

A  mere  nominal  error,  not  calculated  to  mislead,  or  which 
does  not  in  fact  mislead,  is  not  fatal,  as  where  a  draft  was  signed 
Burton  and  Sowles,  and  notice  was  addressed  O.  A.  Burton,  and 
under  it  Edward  A.  Sowles,  although  not  accurate,  it  was  held 
sufficient.^ 

If  the  collecting  bank  has  knowledge  of  the  address  of  a  party 
to  be  notified,  it  must  impart  it  to  its  agent  or  notary.®  But  it  is 
not  required  of  the  owner  that  he  shall  send  the  address  of  an 
indorser  known  to  him  to  the  bank,  with  a  note  deposited  for 
collection.  If  the  agent  and  the  notary  use  due  diligence,  and 
cannot  discover  the  address,  the  bank  can  send  the  notice  to  the 
owner,  and  he  may  forward  it,  and  if  the  agent  and  notary  use 
proper  care  and  come  to  the  conclusion  that  a  party's  address  is 
M.,  and  send  notice  there,  such  notice  is  sufficient,  though  never 
received,  the  real  address  being  N.,  and  the  owner  plaintiff  having 
knowledge  of  this  fact."^ 

§  256.  Mistake  of  Law.  —  Generally  a  mistake  of  law  is  no 
excuse,  but  when  a  question  has  not  yet  been  decided,  and  there 
is  no  uniform  practice  to  guide  the  bank,  it  is  not  responsible  for 
mistaking  ivhat  icill  he  the  future  decision  of  the  laio  ;  it  is  only  the 

2«  Ide  V.  Bank,  73  Iowa  58,  34  N.  W.  749. 

3  Mott  V.  Havana  National  Bank,  22  Hun  (N.  Y.)  354. 

*  Georgia  National  Bank  v.  Henderson,  46  Ga.  487. 

5  United  States  National  Bank  v.  Burton,  58  Vt.  426,  3  Atl.  756. 

6  Bartlett  v.  Isbell,  31  Conn.  296 ;  Borup  v.  Nininger,  5  Minn.  552. 

7  Ransom  v.  Mack,  2  HiU  (N.  Y.)  592;  Belden  v.  Lamb,  17  Conn. 
441. 

502 


PRESENTMENT  FOR  ACCEPTANCE  §  258 

law  that  is  established  that  is  presumed  to  be  known.  A  post 
note  was  presented  and  notice  given  on  the  day  of  maturity; 
this  discharged  the  indorsers.  The  question  whether  a  post  note 
shall  have  grace  or  not  being  doubtful,  no  uniform  usage  existing 
and  the  law  not  having  been  established  by  decision,  the  bank 
was  not  responsible.^ 

§  257.    A  Brief  Statement  ^  of  the  General  Principles  of  the  Law 
Merchant,  regarding,  — 

§  258.    Presentment  for  Acceptance. 

§  259.    Presentment  for   Payment. 

§  260.    Protest. 

§261.    Notice  of   Dishonor,  and 

§§  262, 203.    Excuses  for  Failure  to   Present  or   Notify. 

§258.  Presentment  for  Acceptance. —  (a)  What  Paper; 
(b)  When;  (c)  Where;  (d)  By  Whom;  (e)  To  Wliom ;  (/)  How; 
ig)  Effect  of ;   and  (h)  Failure,  its  Excuse  and  Effect. 

(a)  What  Paper.  —  All  bills  payable  at  sight  or  after  an  uncertain 
event,  as  after  sight  or  demand,  must  be  presented  for  acceptance  \\ithout 
unreasonable  delay,  unless  they  contain  a  waiver  ("acceptance  waived"). 
Bills  payable  on  demand,  or  a  certain  time  after  a  fixed  date,  need  no 
presentment  for  acceptance ;  but  when  payable  at  a  future  day  it  is  usual 
to  present  for  acceptance  with  diligence,  because,  if  accepted,  the  accept- 
or's liability  is  assured,  if  not,  the  holder  must  protest  and  notify,  and 
has  an  immediate  right  of  action  against  the  drawer  and  indorsers. 
And  if  there  is  an  express  direction  to  present  given  to  the  payee  or 
holder  of  a  bill  payable  at  a  fixed  time,  or  if  it  is  put  into  the  hands  of  an 
agent  to  negotiate,  it  must  be  presented  for  acceptance. 

(b)  When.  —  During  business  hours,  within  a  reasonable  period  after 
the  bill  is  received,  taking  into  account  the  means  of  communication,  the 
fluctuations  in  the  rate  of  exchange,  the  putting  of  the  bill  into  circula- 
tion (delay  of  a  year  might  not  be  negligent  if  the  bill  were  in  circula- 
tion), and  any  other  circumstances,  as  war,  sickness,  or  accident,  which  in 
common  reason  affects  the  question. 

Of  course,  presentment  for  acceptance  must  be  previous  to  the  day  on 
which  the  paper  is  due,  or  it  is  merged  in  presentment  for  payment. 

Business  hours,  if  the  paper  is  payable  at  a  bank,  mean  its  banking 
hours;  if  not  at  a  particular  bank,  but  generally  "at  bank",  the  usual 
banking  hours  of  the  place  of  payment;    if  at  any  other  "place  of  busi- 

1  §  2.56.     Mechanics'  Bank  r.  ISIerchants'  Bank,  6  Met.  (Mass.)  13. 

'  §  2.57.  So  far  as  not  verified  in  the  chapters  on  Collection  and  Checks, 
these  rules  are  easily  found  in  the  standard  books,  as  Daniel  on  Negotiable 
Instruments,  Parsons  on  Bills  and  Notes,  or  Sharswood's  Byles.  The  ob- 
ject here  is  to  give  in  a  very  condensed  form  the  essence  of  Presentment, 
Protest,  and  Notice,  for  easy  reference  and  a  bird's-eye  view  of  matters  a 
comprehension  of  which  is  necessary  to  an  understanding  of  banking  cases. 

503 


§  258  COLLECTION   IN    GENERAL 

ness",  the  hours  during  which  such  places  are  usually  open;  in  other 
cases,  business  hours  continue  till  the  hours  of  rest  usual  in  the  com- 
munity. 

Presentment  is  always  sufficient  if  it  is  properly  responded  to. 

If  the  drawee  of  a  bill  is  not  at  his  house  or  counting-room,  the  holder 
may  wait  a  reasonable  time  for  his  return ;  a  call  next  day  has  been  held 
reasonable. 

(c)  Where.  —  Presentment  for  acceptance  must  be  made  at  the  dwell- 
ing or  the  place  of  business  of  the  drawee,  without  regard  to  the  place  of 
payment,  and  this  although  the  drawee  has  removed  his  domicil  from 
the  place  to  which  the  bill  is  addressed. 

(d)  By  Who>n.  —  The  holder  or  his  authorized  agent. 

(e)  To  Whom.  —  The  drawee  or  his  authorized  agent. 

(/)  Hoio.  —  The  presenter  should  actually  exhibit  the  bill  to  the 
drawee,  though  the  drawer  and  indorsers  may  be  bound  without  such 
formality,  if  the  drawee  is  able  to  and  does  give  an  intelligent  answer  as 
to  acceptance  of  it  from  knowledge  previously  acquired. 

ig)  Effect.  —  (1)  If  accepted,  the  drawee  becomes  liable  for  the 
amount,  the  acceptance  operates  as  a  legal  assignment  of  the  amount  of 
the  holder,  if  the  drawing  of  the  bill  did  not  have  that  effect.  (2)  If 
not  accepted,  the  holder  must  protest  and  notify  the  drawer  and  indorsers, 
and  then  may  sue  them  without  waiting  until  the  maturity  of  the  paper ; 
and  if  a  State  law  forbids  suit  till  maturity,  the  United  States  courts  will 
not  be  affected  by  the  statute,  the  question  being  one  of  general  commer- 
cial law,  and  well  settled  besides. 

(h)  Failure,  E.rcuse  for.  —  (1)  When  the  drawing  of  the  bill  is  a  fraud 
on  the  holder.  (2)  When  the  residence  of  the  drawee  cannot  with  rea- 
sonable diligence  be  discovered,  the  bill  may  be  treated  as  dishonored. 

Effect  of  unexcused  failure  to  present  properly  is  to  destroy  the  holder's 
remedy  on  the  bill,  and  also  on  the  debt  for  which  the  bill  was  received. 

§  259.  Presentment  for  Payment.  —  (a)  When ;  {b)  Where ;  (c)  By 
Whom ;    (d)   On  Whom ;    (e)  How. 

(a)  When.  —  Within  business  hours,  according  to  the  custom  of  the 
place  where  payable.     See  above.  As  to  the  day,  — 

1st.  A  bill  or  note  payable  at  a  fixed  time  must  be  presented  on  the 
day  of  maturity.  One  day  before  or  after  is  of  no  effect  to  charge  the 
drawer  or  indorser. 

2d.  As  to  the  maker  of  a  note  or  acceptor  of  a  bill,  (1)  if  payable  at 
a  particular  place,  presentment  should  be  on  the  day  of  maturity,  for  if 
not,  the  holder  will  have  to  make  good  any  loss  to  the  maker  or  acceptor 
resulting  from  the  delay ;  (2)  otherwise,  demand  of  payment  at  any  time 
during  the  running  of  the  statute  of  limitations  is  sufficient. 

3d.  Bills  payable  on  demand  must  be  presented  during  business  hours 
on  the  next  business  day  following  their  delivery,  if  the  drawee  is  in  the 
same  place  as  the  payee ;  if  in  a  different  place  they  must  be  sent  by  the 
regular  mail  of  the  day  following  receipt  to  some  one  in  the  place  of 
the  drawee,  and  the  person  to  whom  it  is  sent  has  the  secular  day  follow- 
ing the  one  in  wliich  the  paper  has  reached  him  by  due  course  of  mail 
in  which  to  present  it.  This  is  the  general  rule  as  to  reasonable  time  in 
such  cases,  but  circumstances  may  vary  it. 

4th.  Checks  (1)  as  between  drawer  and  payee  must  be  presented  for 
payment  in  accordance  with  the  rule  given  in  the  last  paragraph,  or  the 
drawer  will  be  discharged  to  the  extent  of  the  damage  caused  to  him  by 
the  delay,  but  no  further.     (2)  As  to  an  indorser,  the  indorsement  is  eon- 

504 


PRESENTMENT    FOR    PAYMENT  §  259 

sidered  a  new  dra^\'ing,  and  the  same  lime  rule  holds,  but  with  a  differ- 
ence in  the  effect  if  presentment  is  not  made  within  the  said  time.  An 
indorser  is  entirely  discharged  by  such  failure.  (3)  As  between  drawer 
and  any  indorsee  or  holder,  the  presentment  must  be  made  within  the 
same  time  as  it  would  have  to  be  by  the  payee  himself,  and  with  the 
same  effect  in  case  of  failure.  That  is,  the  drawer  is  absolutely  respon- 
sible only  during  the  day  following  receipt  of  the  check  by  the  payee,  or 
by  his  agent,  to  whom  it  is  duly  forwarded  as  above,  and  no  matter  how 
many  times  the  check  may  be  indorsed  or  transferred,  this  time  cannot 
be  enlarged. 

5th.  Note  payable  on  demand  is  regarded  by  the  best  writers  as  a  con- 
tinuing security,  especially  if  given  for  a  loan  or  payable  "with  interest", 
and  the  rules  of  the  last  two  paragraphs  do  not  apply ;  but  it  will  be  a 
question  for  the  jury  on  all  the  facts  whether  the  presentment  was  rea- 
sonable or  not.  (Sharswood's  Byles,  388.)  The  authorities,  however,  are  in 
irreconcilable  conflict,  and  the  question,  when  it  arises  in  any  particular 
State,  should  be  examined  in  the  liglit  of  the  djcisions  in  that  State. 

6th.  Grace.  (1)  Non-negotiable  paper  has  no  grace.  (2)  Bills  pay- 
able "at  sight"  are  the  subject  of  great  conflict.  The  weight  of  author- 
ity is  in  favor  of  grace;  reason  is  not  involved;  it  is  a  mere  matter  of 
formal  law,  which  may  be  settled  equally  well  either  way,  the  only  thing 
of  importance  being  to  settle  it.  (3)  All  other  bills  of  exchange  and 
negotiable  notes  have  grace,  except  those  expressly  payable  without  it 
and  those  payable  on  demand  or  in  which  no  time  is  named  (in  the  last 
case  the  law  implies  that  they  are  on  demand).  (4)  Three  days'  grace  is 
the  usual  rule,  but  it  may  he  varied  by  local  usage,  or  by  statute,  enlarg- 
ing, diminishing,  or  entirely  cutting  it  off. 

7th.  The  fundamental  rule  is  that  presentment  must  be  made  in  rea- 
sonable time  under  all  the  circumstances,  and  the  above  are  merely  cases 
in  which  the  law  has  determined  what  shall  be  considered  reasonable  time 
in  those  circumstances.     See  Excuse. 

(b)  Where.  —  (1)  If  the  paper  names  a  place  of  payment,  presentment 
for  payment  must  be  made  there.  (2)  If  several  places  are  named,  the 
holder  may  elect,  and  a  presentment  at  either  is  good.  (3)  When  no 
place  of  payment  is  named,  the  place  of  dating  is  prima  facie  the  seat  of 
the  contract ;  but  the  real  place  of  performance,  controlling  the  place  of 
date  except  as  to  bona  fide  parties  for  value  without  notice,  is  the  place 
of  delivery,  as  to  the  State  whose  law  is  to  govern  the  contract.  As  to 
the  particular  house  or  spot  at  which  demand  should  be  made,  if  under  the 
principles  of  private  international  law,  the  place  of  performance  is  in 
the  State  where  the  maker  or  acceptor  has  his  domicil,  and  the  paper  is 
payable  generally,  demand  should  be  made  at  his  place  of  business  or 
residence  (whether  he  is  there  or  not  it  is  good),  or  upon  him  personally 
(demand  on  the  street  or  in  the  barn-yard  has  been  held  good).  So,  if 
between  the  time  a  note  is  made  or  a  bill  accepted,  and  the  maturity  of 
the  same,  the  maker  or  acceptor  removes  into  another  State,  the  holder  is 
not  obliged  to  go  out  of  his  State  in  order  to  make  demand  at  the  new 
domicil,  but  may  fulfil  his  duty  by  making  demand  at  the  payor's  last 
residence  or  place  of  business  in  that  State.  If  the  removal  is  to  another 
place  in  the  same  State,  the  holder  must  follow  to  that  place. 

(c)  By  Whom.  —  Any  bona  fide  holder,  or  his  agent  duly  authorized 
(by  parol  or  writing),  may  demand  payment;   for  example,  a  notary. 

If  the  holder  is  dead,  his  personal  representatives  or  their  authorized 
agent  may  present. 

505 


§  259  COLLECTION   IN    GENERAL 

(d)  On  Whom.  —  Presentment  for  payment  should  be  made  to  the 
parlij  who  is  to  pay,  or  to  his  authorized  agent.  It  is  his  duty  to  provide 
some  one  to  attend  to  his  business,  and  demand  on  his  clerk,  or  wife,  or 
other  person  most  likely  of  those  present  at  the  place  of  demand  to  be 
his  agent  for  such  purpose,  is  sufficient  in  his  absence.  And  if  no  one  is 
found  at  the  place  of  payment,  the  paper  may  be  treated  as  dishonored. 

If  there  are  several  joint  promisors  not  partners,  demand  should  be 
made  upon  each. 

If  the  joint  promisors  are  partners,  demand  on  any  one  is  enough,  even 
though  the  firm  is  dissolved. 

If  the  payor  is  dead,  demand  should  be  made  upon  his  personal  repre- 
sentative, if  one  has  been  appointed  ;  if  not,  then  at  the  proper  place,  and 
the  bill  treated  as  dishonored. 

(e)  How.  —  The  bill  or  note  must  be  in  possession  of  the  party  making 
demand,  and  ready  to  be  deUvered,  and  this  fact  must  be  clearly  indi- 
cated to  the  maker,  drawee,  or  acceptor  (which  is  best  done  by  actual 
exhibition  of  it,  which  the  party  who  is  to  pay  has  a  right  to  demand  in 
order  that  he  may  be  assured  that  he  is  paying  to  the  proper  person,  and 
that  the  paper  will  be  deUvered  to  him  on  payment).  But  any  circum- 
stance which  renders  this  manner  of  presentment  useless  excuses  its 
absence,  as  if  the  payor  refuse  to  honor  the  demand  on  other  grounds. 

When  a  bill  or  note  is  payable  at  a  particular  place,  as  a  business  house 
or  at  a  bank,  it  is  sufficient  demand  if  the  paper  is  present  in  the  bank  at 
the  proper  time. 

§  260.  Protest,  or  formal  steps  taken  to  fix  the  liability  of  drawer  or 
indorser,  and  supply  reliable  evidence  of  dishonor.  —  (a)  What  Paper ; 
(b)  When;    (c)  Where;    (d)  By  Whom ;    (c)  How. 

(a)  What  Instruments.  —  In  England  and  the  United  States  the  general 
rule  is  that  only  in  case  of  foreign  bills  is  protest  necessary,  but  in  many 
States  statutes  provide  that  inland  bills  and  promissory  notes  may  be 
protested ;  and  it  has  been  held  at  common  law  that  there  is  no  good 
reason  for  making  a  distinction  between  foreign  bills  and  notes  payable 
in  another  State  which  have  been  indorsed. 

A  check  drawn  in  one  State  and  payable  in  another  is  a  species  of  for- 
eign bill,  and  should  be  protested  to  charge  an  indorser,  and  inland  checks 
may  be  protested  under  the  statutes  above  mentioned  as  inland  bills. 

(b)  When.  — •  (1)  Protest  should  be  made  when  the  instrument  above 
named  as  requiring  it  is  dishonored  by  non-acceptance  or  non-payment. 
(Absence  from  residence  or  place  of  business,  leaving  no  one  to  pay,  is 
dishonor  in  case  of  presentment  to  acceptor  for  payment ;  but  absence 
when  a  bill  is  presented  for  acceptance  is  no  dishonor,  for  the  drawee  may 
have  had  no  notice  of  the  bill.  If  a  bill  has  been  presented  for  accept- 
ance and  refused,  no  presentment  for  payment  or  protest  for  non-pay- 
ment is  necessary  except  in  case  of  acceptance  supra  protest.)  (2)  The 
"noting"  must  be  done  upon  the  day  of  maturity  of  the  paper;  but  the 
"extension"  or  complete  certificate  of  protest  may  be  filled  out  at  any 
subsequent  time.      (See  "How"  below.) 

(c)  Where.  —  For  non-acceptance,  it  should  be  at  the  place  of  present- 
ment for  acceptance.  For  non-payment,  it  should  be  at  the  place  of 
payment. 

(d)  By  Whom.  —  It  should  be  made  by  a  notary  public  if  one  can  be 
found,  otherwise  by  some  respectable  person  of  the  place  where  the  paper 
is  dishonored,  with  proper  witnesses,  though  the  latter  are  probably  not 
necessary. 

506 


NOTICE    OF   DISHONOR  §  261 

(e)  How. —  (1)  The  bill  or  note  must  be  presented  for  acceptance  or 
payment,  as  the  case  may  be,  hy  the  notary  (or  other  person  making  the 
protest)  in  person  (so  that  his  testimony  may  not  be  hearsay).  (2)  Dur- 
ing the  very  day  on  which  the  presentment  is  made  by  him,  he  must 
"note  the  protest,"  i.e.  make  a  minute  on  the  bill  or  in  his  book  of  registry, 
consisting  of  the  date,  the  refusal,  the  charges  of  protest,  and  his  ini- 
tials. (3)  The  "extension"  or  complete  certificate  of  protest  may  be 
made  at  any  time  from  a  "noting"  properly  made  on  the  day  of  ma- 
turity of  the  paper.  (4)  The  certificate  should  state  the  time,  place,  and 
manner  of  presentment,  to  whom  and  by  whom  it  was  made,  and  the 
facts  of  demand  and  dishonor.  (It  is  also  usual  to  state  the  reasons  given 
for  refusal,  and  the  name  of  the  party  ordering  protest ;  but  these  are  not 
essentials.)  (5)  The  certificate  should  be  authenticated  by  the  notarial 
seal;  courts  take  judicial  note  of  this,  and  such  seal  is  prima  facie  evi- 
dence of  the  authenticity  of  the  certificate.  If  not  under  notarial  seal,  it 
must  be  proved  that  the  certificate  was  properly  made,  and  that  it  is  suf- 
ficient without  seal  in  the  State  where  made.  (6)  The  certificate  is  prima 
facie  evidence  of  the  facts  stated  in  it  so  far  as  they  come  within  the 
notary's  official  duty  in  making  presentment,  demand,  and  protest. 
See  (4).     Giving  notice  is  not  within  this  scope. 

§  201.  Notice  of  Dishonor.  —  (a)  When ;  (b)  By  Whom ;  (c)  To 
Whom ;    (d)  How  and  What. 

(a)  When.  —  (1)  The  act  to  be  done  by  the  notifier  may  be  done  at 
once  after  dishonor,  without  waiting  till  the  close  of  business  hours  on 
the  day  of  payment.  (2)  But  notice  given  or  sent  before  dishonor  is  pre- 
mature. (3)  Personal  notice  may  be  given  at  any  time  up  to  the  close  of 
the  day  after  dishonor  and  before  the  close  of  business  hours,  if  given  at 
the  place  of  business  ;  or,  if  at  the  dwelling,  then  any  time  before  the  usual 
hours  of  rest.  (4)  Notice  by  mail  must  be  deposited  in  time  to  go  by  some 
mail  of  the  next  business  day  following  dishonor,  unless  there  is  no  mail 
that  day  or  the  only  mail  is  closed  before  early  and  convenient  business 
hours  of  that  day  (seven  o'clock  being  the  probable  time),  in  which  cases 
the  letter  must  be  put  in  the  office  in  time  for  the  next  mail  after  the  said 
day  following  dishonor.  Kent  says  it  is  enough  to  mail  the  letter  on  said 
day  following,  though  not  in  time  to  go  by  any  mail  of  that  day ;  but  the 
weight  of  authority  is  against  him.  See  Daniel,  §  1040;  1  Parsons 
N.  &  B.  508 ;  3  Kent  lOG.  (5)  Each  party  who  receives  notice  has  the 
period  named  in  (4)  to  send  notice  to  his  predecessors,  measuring  the 
period  not  from  dishonor,  but  from  the  time  of  receiving  notice  himself, 
with  the  proviso  that  notice  received  on  Sunday  or  other  non-business 
day  is  considered  as  received  upon  the  next  business  day,  and  need  not  be 
opened  until  then. 

(b)  By  Whnm.  —  il)  Notice  must  be  given  the  holder  or  by  some 
party  wliosc-  liability  has  been  fixed,  or  by  the  agent  of  such  a  person. 
(If  the  holder  notifies  the  fourth  indorser,  and  he  the  third,  and  so  on, 
the  notices  all  enure  to  the  benefit  of  the  holder ;  and  if  the  holder  notifies 
all  the  indorsers,  and  tlie  third  pays  the  holder,  such  third  indorser  is 
substitut(>d  to  the  rights  of  the  holder,  and  may  recover  of  the  second 
or  first  indorser,  though  the  third  had  not  sent  any  notices  himself.  Such 
is  the  best  opinion.)  (2)  A  stranger,  or  a  party  who  has  been  discharged 
from  all  liability  on  the  paper,  cannot  notify,  and  ratification  will  not 
make  his  act  good.  (3)  If  the  holder  is  dead,  his  representative  should 
attend  to  giving  notice. 

(c)  ToWhom..  —  A.     (1)  The  party  primarily  liable,  the  maker  of  a 

.-)07 


§  261  COLLECTION   IN    GENERAL 

note  or  acceptor  of  a  bill,  is  not  entitled  to  notice  of  dishonor;  it  is  his 
duty  to  provide  for  payment  anyway.  No  party  to  non-negotiable  paper 
has  a  right  to  notice.  The  protection  of  these  rules  of  mercantile  law- 
has  been  extended  as  yet  only  to  the  favorites  of  commerce.  One  who 
transfers  paper  by  mere  delivery,  without  indorsement,  as  collateral 
security,  is  not  entitled  to  notice,  and  will  not  be  released  from  the  debt 
secured,  except  so  far  as  he  can  show  that  he  has  been  damaged  by  failure 
to  present,  etc.  (2)  The  drawer  of  a  bill,  and  any  indorser  of  a  bill  or 
negotiable  note,  is  entitled  to  notice  of  dishonor.  —  B.  (3)  Notice  to  the 
agent  of  the  drawer  or  indorser  authorized  to  receive  it  is  sufficient. 
(4)  If  the  party  to  be  notified  is  a  partnership,  notice  to  one  partner  is 
sufficient.  (5)  If  bankrupt,  notice  to  either  himself  or  his  assignee  would 
probably  be  good ;  but  it  is  safest  to  notify  both.  (6)  If  dead,  and  the 
notifier  knows  it,  notice  should  be  sent  to  his  "legal  representative",  and 
notice  to  one  of  several  executors  or  administrators  is  sufficient ;  if  he  has 
no  legal  representative,  notice  sent  to  the  residence  of  the  deceased  is  suf- 
ficient. (7)  If  dead,  and  the  notifier  does  not  know  it,  and  his  igno- 
rance is  not  the  result  of  negligence,  a  notice  addressed  to  the  deceased 
is  good. 

{d)  What  and  How.  —  (1)  The  notice  must  carry  information  that  cer- 
tain specified  paper  is  dishonored,  and  that  the  person  notified  is  looked  to 
for  payment.  The  latter  clause  explains  why  it  is  that  mere  knowledge 
of  dishonor  not  communicated  by  one  entitled  to  call  for  payment  is  not 
notice.  Of  the  two  elements  of  notice  such  a  communication  only  con- 
tains one.  (2)  Notice  may  be  verbal  or  written ;  and  although  the  single 
statement  that  a  bill  is  dishonored  coming  from  the  proper  source  is  suffi- 
cient as  the  intent  to  hold  the  person  notified  is  inferred,  or  the  state- 
ment that  the  person  is  looked  to  to  pay  a  bill  is  sufficient,  as  carrying  the 
inference  that  it  is  dishonored,  yet  it  is  better  that  the  notice  should  be 
in  writing,  and  contain  a  clear  statement  identifying  the  paper,  and  an- 
nouncing that  it  has  been  presented  and  dishonored,  and  that  the  holder 
or  notifier  looks  to  the  person  notified  to  pay  said  paper.  (3)  It  makes 
no  difference  how  notice  be  sent,  whether  by  messenger  oi;  mail,  if  it 
actually  reaches  the  party  in  time.  (4)  A  special  messenger  is  always  a 
proper  method  of  sending  notice.  (5)  The  mail  may  be  used  whenever  the 
party  to  be  notified  resides  or  does  business  in  a  different  place  from  that 
where  the  notifier  resides  (but  see  6  y,  below),  or  where  the  bill  or  note  is 
payable ;  also  where  the  said  places  are  not  different,  if  there  is  a  postal 
delivery,  and  the  letter  is  put  in  the  office  early  enough  to  go  to  its  destina- 
tion the  same  day  by  the  regular  carriers.  What  is  the  test  as  to  differ- 
ence of  place  is  a  question  on  which  authorities  differ,  some  holding  that 
the  post-office  is  to  be  used  only  for  transportation,  not  for  deposit,  and 
therefore  all  who  get  their  mail  at  the  same  post-office  are  deemed  to 
live  in  the  same  place ;  others,  among  them  the  United  States  Supreme 
Court,  say  that  where  the  person  to  be  notified  has  no  place  of  business 
or  residence  in  town,  but  lives  three  or  four  miles  out,  the  post-office 
may  be  used,  though  the  notifier  gets  his  mail  at  the  same  office.  The 
letter  should  be  addressed  to  the  proper  party  at  the  post-office  at  or 
nearest  to  his  place  of  business  or  his  residence,  as  the  notifier  elects,  unless 
the  party  gets  his  mail  at  some  other  office,  and  then  the  address  should  be 
to  it.  Whenever  it  is  proper  to  use  the  mail,  a  notice  properly  addressed 
and  mailed  in  proper  time  fixes  the  liability,  whether  it  is  ever  received 
or  not,  for  the  post-office  is  agent  of  the  addressee.  (6)  (x)  When  the 
parties  live  in  the  same  place,  which  is  also  the  place  of  payment  or  ae- 

508 


WHAT   EXCUSES    NON-PRESEi\TMENT    OR    WANT    OF    NOTICE      §  262 

ceptance,  as  the  case  may  be,  the  notice  must  be  personal,  verbal,  or  writ- 
ten;  or  a  written  notice  must  be  left  at  tiie  dwelling  (or  boarding-house) 
or  place  of  business  of  the  one  to  be  notified  ;  and  if  the  party  is  not  found 
at  such  place,  it  is  sufficient  to  leave  the  notice  with  any  one  on  the  prem- 
ises ;  if  such  place  is  closed,  notice  is  excused,  iy)  It  is  held  by  good 
authority,  that,  in  case  the  party  to  be  notified  resides  at  the  place  of 
payment,  personal  service  must  be  made,  although  the  notifier  resides 
elsewhere.  (See  Bowling  v.  Harrison,  G  How.  248;  contra,  Philipe  v. 
Harberlee,  45  Ala.  608.)  (z)  If  the  parties  reside  in  the  same  place,  but 
the  place  of  acceptance  or  payment,  and  therefore  of  protest,  is  elsewhere, 
the  mail  may  be  used.  These  rules  make  the  matter  of  personal  service 
depend  on  the  identity  of  the  domicil  of  the  party  to  be  notified  with  the 
place  of  acceptance  or  payment,  as  the  case  may  be ;  and  this  identity  is 
determined  as  in  (5). 

§  2G2.  What  excuses  Non-Presentment  or  Want  of  Notice. — 
(1)  Anything  wliich  obstructs  or  suspends  commercial  communication  be- 
tween the  parties,  as  irar  between  the  nation  of  the  holder  and  that  of  the 
acceptor,  or  between  the  nation  of  the  holder  and  that  of  the  drawer,  will 
interfere  with  and  excuse  notice,  or  any  accident,  or  epidemic,  or  revolu- 
tion, or  positive  prohibition  of  intercourse,  or  great  fire,  or  other  obstruc- 
tion of  commerce.  Necessity  excuses  all  things ;  and  the  holder  is  only 
required  to  use  reasonable  and  ordinary  care  and  diligence,  and  if  it  ap- 
pears that  any  calamity,  as  a  storm,  actually  prevented  due  diligence  from 
making  the  presentment  or  giving  due  notice,  the  failure  is  excused  until 
the  obstruction  ceases.  So  in  case  of  a  check,  if  the  drawee  bank  is  re- 
strained from  paying  out  money  by  order  of  court,  presentment  and 
notice  are  excused.  (2)  When  there  is  no  person  legally  liable  primarily, 
as  when  the  acceptor  or  maker  is  dead,  and  no  representative  appointed, 
presentment  is  excused,  though  some  cases  say  it  must  even  then  be  made 
at  the  residence  of  the  deceased,  and  notice  must  be  given  as  if  dishon- 
ored in  all  such  cases.  (3)  When  due  diligence  cannot  find  out  the  resi- 
dence or  place  of  business  of  the  party  to  whom  presentment  should  be 
made  or  notice  given,  the  duty  is  suspended  until  such  time  as  the  neces- 
sary facts  can  be  discovered.  But  when  the  maker  or  acceptor  cannot  be 
found,  the  bill  is  to  be  treated  as  dishonored,  and  notice  given  to  the 
drawer  and  indorsers.  Notice  is  excused  by  innocent  ignorance  of  the 
address  of  the  one  to  be  notified,  not  by  failure  to  find  the  one  to  whom 
presentment  should  be  made.  (4)  When  the  holder  or  his  agent  is  pre- 
vented by  sickness,  or  by  the  shortness  of  time  between  the  transfer  of  the 
paper  to  him  and  its  maturity,  presentment  and  notice  are  excused,  in  the 
former  case  as  to  all  parties,  in  the  latter  as  to  the  immediate  transferrer, 
until   such   time   as   reasonable   diligence   can   overcome   the   difficulty. 

(5)  When  the  maker  or  acceptor  has  absconded,  no  demand  is  neces- 
sary;    but  notice  must  be  given.      (Massachusetts  contra,  as  to  demand.) 

(6)  Any  express  or  impHed  waiver  of  demand  or  notice  is  an  excuse,  as 
if  the  drawer  or  an  indorser  agrees  to  waive  notice,  or  so  acts  as  to  induce 
the  holder  to  believe  that  he  waives  it,  and  so  stops  himself,  it  is  an 
excuse  as  to  such  drawer  or  indorser.  (7)  A  promise  to  pay  or  acknowledg- 
ment of  liability  by  drawer  or  indorser  after  maturity,  and  with  knowledge 
that  proper  demand  and  notice  have  not  been  given,  is  a  waiver.  And  a 
part  payment  after  maturity  is  such  an  acknowledgment.  Part  payment 
of  a  check  before  maturity  is  a  waiver  of  demand  and  notice.  (S)  If  the 
drawer  have  no  reasonable  expectation  that  the  V>iU  will  be  honored,  or 
that  he  will  be  able  to  secure  funds  to  meet  it,  it  is  not  necessary,  as 

509 


§  2G2  COLLECTION    IN    GENERAL 

against  him,  to  present  or  notify ;  but  as  against  innocent  indorsers 
the  usual  formalities  are  necessary.  A  declaration  by  the  drawer  that  the 
paper  will  not  be  honored  excuses  presentment  and  notice.  So,  if  the 
drawer  of  a  check  have  no  funds,  or  insufficient  funds,  or  withdraws  his 
deposit,  or  orders  the  bank  not  to  pay  the  check,  no  presentment  and 
notice  is  necessary  as  to  him,  —  he  can  suffer  no  loss  by  its  absence  ;  but 
as  to  an  indorser  such  facts  are  no  excuse,  unless  he  knew  of  the  drawer's 
fraud,  and  so  participated  in  it.  (9)  If  any  party  has  received  money 
(or  perhaps  security,  though  this  is  the  subject  of  conflict)  to  pay  the 
paper  from  the  party  who  is  ordinarily  primarily  liable,  as  against  him 
demand  and  notice  are  excused  altogether ;  for  he  is  now  the  one  who 
should  pay  the  bill  in  the  first  place. 

§  263.  No  Excuse.  —  The  loss  of  the  paper,  or  the  fact  that  the 
drawee  or  maker  is  dead  or  has  removed,  or  that  he  is  insolvent,  or  that 
the  drawer  or  indorser  has  been  appointed  executor  or  administrator  to 
the  maker  or  acceptor,  or  that  no  damage  has  actually  resulted  to  the 
drawer  or  indorser,  will  not  excuse  failure  to  present  and  give  notice. 
But  in  case  of  a  check,  the  drawer  is  discharged  only  so  far  as  actually 
damaged. 


510 


CHAPTER    XVII 

THE  LIABILITY  OF  A  BANK  FOR  THE  NEGLIGENCE  OF  ITS 
CORRESPONDENT,  OR  OF  A  NOTARY,  OR  OTHER  AGENT 
IN  COLLECTIONS.     ALSO  OF  "COLLECTION  AGENCIES" 

§§  265,  266.  Notary. 

Bank  not  liable  for,  generally,  if  it  uses  due  care  in 

selection. 
In  some  States  it  is  liable,  if  it  permanently  employs 

him. 
In  some  States  Bank  is  not  liable  for  his  default  in 
■  official  duty. 

ii  In  others,  bank  is  liable  for  official  default  of  notary, 

\  as  well  as  for  negligence  in  a  matter  which  might 

i  have  been  done  by  any  ordinary  agent. 

\  §  266.  Care  in  selecting  notary. 

i  §  267.  Collection  Agencies. 

I  Hoover  v.  Wise,  and  other  eases, 

i  Correspondent. 

Liability  for. 
§  268.  Great  conflict  of  opinion.     Question  stated. 

§  269.  Special  agreement  governs  and  may  render  a  bank 

not  liable  for  the  acts  of  its  sub-agent. 
§  270.  Usage  may  decide. 

§  271.  Bank  is  everywhere  liable  if  it  does  not  select  its 

agents  with  due  care. 
It  is  not  due  care  to  send  paper  to  the  drawee  for 
collection. 
§  272.  New  York  holds  the  first  bank  responsible, 

§  273.  On  the  ground  that  the  contract  covers  all  the  means 

employed. 
§  274.  Massachusetts  holds  the  bank  not  responsible, 

§  275.  On  the  grounds  that  usage  gives  authority  to  employ 

sub-agents,  which  are  therefore  the  agents  of  the 
holder,  and  not  of  the  first  bank,  and  that  there  is 
no  sufficient  consideration  for  the  bank  to  under- 
take the  risk  of  its  correspondent's  negligence. 
§  276.  Discussion  of  the  question  from  the  ground  up  tends 

to  support  the  New  York  rule. 
§§  272,  277-280.         Cases  affirming  the  liability  :   England,  New  York, 
United  States,  Arkansas,  Ohio,  Indiana.  Louisiana, 
Michigan,  New  Jersey,  Minnesota,  South  Carolina, 
Utah. 

511 


§  265  THE    LIABILITY    OF   A    BANK 

§§274,281-287.  Authorities  denying  the  liability:  Massachusetts, 
Connecticut,  Kansas,  Illinois,  Iowa,  Maryland, 
Wisconsin,  Missouri,  Tennessee,  Louisiana,  Penn- 
sylvania, Kentucky,  Nebraska;  C.  J.  Marshall 
and  Chancellor  Walworth. 

§  265.  Liability  for  Negligence  of  Notary.  —  In  Mississippi,  the 
bank  is  not  liable  if  the  paper  is  given  to  a  notary  in  time  for  him 
to  discharge  his  duties.^  In  those  States  which  do  not  hold  a  bank 
for  the  negligence  of  its  correspondent,  the  same  reasons  would 
prevail  against  its  liability  for  a  notary's  def ault ;  ^  unless  the 
bank  makes  a  particular  notary  its  permanent  employee,  as  in  a 
Missouri  case,  where  the  bank  appointed  him  to  act  for  it  for  a 
year,  and  took  a  bond,  as  from  one  of  its  own  officers.^  This  is 
the  doctrine  also  in  England,  New  York,  Ohio,  Alabama,  Indiana, 
and  one  United  States  decision. 

Louisiana  on  the  same  facts  holds  the  bank  not  responsible. 
So  Massachusetts,  Maryland,  Mississippi,  Connecticut,  Penn- 
sylvania, Georgia,  and  Iowa  hold.^ 

In  New  York,  the  bank  is  liable  for  the  negligence  of  its  notary 
in  giving  notice  of  dishonor,  for  that  is  not  a  duty  peculiarly  belong- 
ing to  a  notary,'*"  but  may  be  performed  by  any  agent  of  the  bank ; 
but  for  default  in  anything  pertaining  to  his  official  duty,  as  protest, 
the  bank  is  not  liable.^    This  distinction  is  not  recognized  in  the 

1  §  265.  Tiernan  v.  Commercial  Bank,  7  How.  (Miss.)  648;  Agricul- 
tural Bank  v.  Commercial  Bank,  7  Sm.  &  M.  (Miss.)  592 ;  Bowling  v. 
Arthur,  34  Miss.  41. 

2  Warren  Bank  v.  Suffolk  Bank,  10  Cush.  (Mass.)  582';  Citizens' 
Bank  v.  Howell,  8  Md.  530.  This  view  was  taken  in  Smedes  v.  Bank  of 
Utica,  20  Johns.  (N.  Y.)  372. 

3  Gerhardt  v.  Boatman's  Savings  Inst.,  38  Mo.  60;  Van  Wart  v. 
WooUey,  3  Barn.  &  C.  439;  Allen  v.  Merchants'  Bank,  22  Wend.  (N.  Y.) 
215;  Reeves  v.  State  Bank,  8  Ohio  St.  465;  Branch  Bank  v.  Knox,  1 
Ala.  148;  Bank  of  Mobile  v.  Huggins,  3  Ala.  206;  American  Express 
Co.  V.  Haire,  21  Ind.  4 ;   Taber  v.  Perrot,  2  Gall.  565. 

4  Baldwin  v.  Bank  of  Louisiana,  1  La.  Ann.  13 ;  Hyde  v.  Planters'  Bank, 
71  La.  560.  See  Warren  Bank  v.  Suffolk  Bank,  10  Cush.  (Mass.)  582 ; 
Citizens'  Bank  v.  Howell,  8  Md.  530 ;  Bowling  v.  Arthur,  34  Miss.  41 ; 
East  Haddam  Bank  v.  Scovil,  12  Conn.  303 ;  Bellemire  v.  Bank  of  United 
States,  4  Whart.  (Pa.)  105  ;  May  v.  Jones,  88  Ga.  311,  14  S.  E.  552  (1891) ; 
First  National  Bank  v.  German  Bank,  107  Iowa  543,  78  N.  W.  195. 

^^  In  Nebraska  the  giving  notice  of  dishonor  is  an  official  duty  of  the 
notary.  WiUiams  v.  Parks,  63  Neb.  747,  89  N.  W.  395,  56  L.  R.  A.  759 
(1902). 

5  Allen  V.  Merchants'  Bank,  22  Wend.  (N.  Y.)  215 ;  Downer  v.  Madi- 
son Co.  Bank,  6  HiU  (N.  Y.)  648;  Ayrault  v.  Pacific  Bank,  47  N.  Y. 
574.  See  WiUiams  v.  Parks,  63  Neb.  747,  89  N.  W.  395,  56  L.  R.  A.  759 
(1902). 

512 


LIABILITY    FOR    NEGLIGENCE   OF    NOTARY  §  265 

cases  cited  above  from  [Maryland  and  Louisiana,  and  probably 
not  in  Massachusetts.^ 

In  South  Carolina  ^  and  in  New  Jersey  a  bank  is  held  res})onsible 
for  its  notary,^  and  in  Kansas  ^  a  sub-agent  was  held  liable  f(jr  its 
notary's  default,  though  in  that  State  there  is  no  liability  for  a 
correspondent. 

In  the  United  States  ^°  courts  and  in  Ohio,^^  a  bank  is  liable  for 
the  negligence  of  its  correspondent,  but  not  for  the  default  of  a 
notary,  for  he  is  an  independent  officer  whose  duties  are  prescribed 
by  law,  and  whom  the  bank  must  employ.  The  bank  agrees  to 
collect  if  possible ;  and  if  not,  "  to  hand  it  to  a  reputable  notary  in 
season.  We  think  this  may  be  said  to  be  the  natural  import  of  the 
act  of  delivery  by  the  one  and  taking  by  the  other,  especially  in  a 
jurisdiction  where  the  notary  can  only  act  as  an  independent 
officer."  "  The  bankers  were  no  more  liable  than  they  would  have 
been  for  the  unskilfulness  of  a  lawyer  of  reputed  ability  and  learn- 
ing, to  whom  they  might  have  handed  the  notes  for  collection  in 
the  conduct  of  a  suit  brought  upon  them." 

In  Tennessee,  a  bank  is  not  responsible  for  the  neglect  of  its 
correspondent's  notary.^^ 

Niccolls,  in  Illinois,  sent  to  Britton's  banking  firm  at  Natchez, 
Mississippi,  for  collection,  a  note  dated  at  Natchez,  informing  the 
firm  of  the  maker's  residence,  but  only  instructing  the  firm  to 
cause  the  note,  if  not  paid  on  presentment,  to  be  protested,  and 
notice  to  be  sent  to  the  indorser.  The  firm  duly  put  the  note  in 
the  hands  of  a  reputable  notary  at  Natchez,  who,  although  know- 
ing that  the  maker  resided  on  his  plantation  fifteen  miles  distant 
and  had  no  place  of  business  in  Natchez,  merely  inquired  for  him 
at  the  post-office,  city  hall,  and  court-house,  and,  not  finding  him, 
protested  the  notes  for  non-payment.  Held,  that  the  banking 
firm  was  not  liable  for  the  notary's  neglect  of  duty,  —  the  Supreme 

6  See  Warren  Bank  v.  Suffolk  Bank,  10  Cush.  (Mass.)  582,  and  Mass. 
Pub.  Stat.  c.  77,  §  22. 

7  Thompson  v.  Bank,  3  Hill  (S.  C.)  77. 

*  So  held  where  notices  of  protest  had  an  indorsee's  name  "Darcey", 
instead  of  "Davey."  Davey  v.  Jones,  42  N.  J.  Law  28  (1880) ;  Titus  i-. 
Mechanics'  National  Bank,  35  N.  J.  Law  (1871);  Paterson  Bank  v. 
Butler,  7  Hal.  (N.  J.)  2G8. 

9  Bank  v.  Ober,  31  Kan.  599,  3  Pac.  324. 

10  Britton  v.  Niccolls,  104  U.  S.  757,  26  L.  cd.  917. 
"  Bank  v.  Butler,  41  Ohio  St.  519. 

12  Bank  of  Louisville  v.  First  National  Bank  of  Knox\'illc,  8  Baxter 
(Tenn.)  101  (1874). 

VOL.  I  —  33  513 


§  265  THE    LIABILITY    OF    A    BANK 

Court  of  Mississippi,  in  Bowling  v.  Arthur,  34  Miss.  41,  holding 
that  the  notary  is  the  agent  of  the  holder.^^ 

§  266.  A  Bank  must  use  Due  Care  in  selecting  the  Notary.  — 
Ordinarily,  a  bank  which  has  to  employ  a  notary  public  would  be 
authorized  to  assume  that  any  person  bearing  the  governmental 
commission  of  office  was  a  proper  person  to  employ.  It  has  been 
held  that  this  official  character  is  inima  facie  evidence  of  satis- 
factory care  in  selection.^ 

In  fact,  it  probably  amounts  to  this,  that  the  bank  is  warranted 
in  putting  confidence  in  a  public  officer  of  whom  it  has  no  actual 
knowledge,  without  making  that  especial  inquiry  about  him  which 
it  would  be  bound  to  make  if  he  was  simply  a  private  individual 
bearing  no  credentials,  and  unknown  to  the  bank  officers.  But 
if  a  bank  knows  as  matter  of  fact,  or  ought  to  know,  that  a  partic- 
ular notary  is  for  any  reason  a  man  unfit  for  the  business  and  trust 
reposed  in  him,  the  committal  of  paper  to  his  hands  would  be  an 
act  of  carelessness  and  negligence  in  the  performance  of  its  duty, 
for  the  results  of  which  it  could  be  held  to  answer.  The  standard 
of  fitness  is  not  of  course  uniform  and  absolute  ;  we  cannot  pretend 
to  say  what  it  may  be  in  all  the  various  States  of  the  Union,  but 
we  have  some  knowledge  of  what  it  is  in  Mississippi.  The  court 
there  declared  that  it  was  not  sufficient  proof  of  a  notary's  unfit- 
ness to  show  that  he  was  a  man  of  habitually  dissipated  character ; 
but  that  it  must  be  shown  "  that  he  was  drunk  at  the  time  he  took  the 
note."  2 

The  fact  that  a  notary  is  cashier  of  and  a  stockholder  in  a  bank 
does  not  disqualify  him  for  protesting  a  bill  held  by  the  bank.^ 

§  267.  Collection  Agency  Cases.  —  Before  considering  the 
question  of  a  bank's  liability  for  its  correspondent,  we  must  dis- 
tinguish that  class  of  cases  in  which  an  agency  undertakes  to  collect 
in  distant  places,  through  its  own  permanent  employees  located 
in  such  places,  and  who  are  as  truly  its  servants  under  its  control 
and  in  its  pay  as  the  officers  or  regular  employees  in  the  principal 
location.  These  agencies  advertise  in  this  style,  "  Collections 
made  in  all  parts  of  the  United  States  and  Canada",  and  do  the 
business  for  a  compensation  whose  proportion  to  the  sum  collected 
and  work  done  will  base  a  reasonable  inference  that  the  company 

"  Britton  v.  NiccoUs,  104  U.  S.  757,  26  L.  ed.  917  (1881). 

1  §  266.     Stacy  v.  Dane  County  Bank,  12  Wis.  629. 

2  Bowling  V.  Arthur,  34  Miss.  41. 

3  Moreland's  Assignee  v.  Citizens'  Savings  Bank,  97  Ky.  217,  30  S.  W. 
C37  (1895). 

514 


LIABILITY    FOR   A    CORRESPONDENT  §  208 

undertakes  the  risk  as  a  matter  of  contract.  In  such  cases  the 
company  has  been  held  for  the  neghgence  of  its  employees  or 
agents  in  other  places,  by  the  courts  ^  of  Pennsylvania,  Alabama, 
Indiana,  and  by  the  United  States  Supreme  Court. 

In  Hoover  v.  Wise,  C.  gave  certain  notes  to  such  an  agency 
(W.)  in  New  York.  W.  sent  them  to  lawyers  in  Nebraska,  and  it 
was  held  that  the  latter  were  agents  of  W.,  not  of  C.  The  decision 
rested  mainly  on  the  ground  of  the  Pennsylvania  cases  quoted  in 
the  last  note ;  but  although  distinguishable  easily  from  the  cases 
on  the  general  question  of  responsibility  for  a  corresi)oiident,  the 
court  referred  to  some  of  the  cases  affirming  this  liability  in  New 
York  antl  Ohio,  and  then  displayed  its  research  by  remarking, 
"  There  are  doubtless  cases  to  be  found  holding  the  contrary  of 
these  views,  but  the  principle  they  decide  is  nevertheless  well 
established,"  while  at  that  time  the  fact  was  that  the  overwhelm- 
ing authority  of  the  States,  backed  by  a  clear  opinion  of  C.  J. 
^Marshall,  denied  that  principle. 

The  dissent  by  Justices  ^Miller,  Clifford,  and  Bradley  was  very 
strong,  showing  that,  even  if  the  principle  of  the  bank  cases  cited 
by  the  court  were  admitted,  it  did  not  apply  to  the  case  at  bar ; 
for  when  a  note  is  given  to  a  bank  to  collect  it  is  indorsed  to  the 
bank,  and  made  payal)le  to  it,  so  that  it  can  sue  in  its  own  name ; 
but  here  the  note  was  not  indorsed  to  W.,  who  therefore  had  no 
control  of  the  suit,  while  C.  could  exercise  full  control  in  regard  to 
the  proceedings. 

§  2G8.    Liability  for  a  Correspondent.  —  We  must  now  approach 

a  topic  wherein  will  be  encountered  a  diversity  of  opinion  which  is 

utterly  irreconcilable.     Positions  directly  adverse  to  each  other 

have  been  assumed  with  much  obstinacy.     Beyond  this  honest 

discrepancy,  a  further  vexatious  complication  is  introduced  by  the 

use  in  some  decisions,  delivered  by  high  tribunals,  of  such  dubious 

language  that  it  is  positively  impossible  to  know  precisely  upon 

which  side  to  rank  them,  or  even  whether  they  really  ought  to  be 

ranked  upon  either  side,  and  should  not  rather  be  formed  into  a 

group  and  class  by  themselves.     This  confusion  grows  out  of  the 

process  of  transmission  through  banks,  situated  in  \arious  different 

places,  of  paper  which  is  payable  in  a  town  other  than  that  in 

1  §  267.  Bradstreet  ;-.  Everson,  72  Pa.  St.  124;  jMor<ian  v.  Tencr,  S3 
Pa.  St.  30r>;  Lewis  v.  Peck  &  Clark,  10  Ala.  142;  Pollard  r.  Rowland. 
2  Blackf.  (Ind.)  22  (1826) ;  Hoover  c.  Wise,  91  U.  S.  308,  23  L.  ed.  392. 
See  Wilkinson  v.  Griswold,  12  S.  &  M.  (Miss.)  669;  Cummins  v.  Heald, 
24  Kan.  600. 

515 


§  2(38  THE    LIABILITY    OF    A    BANK 

which  the  holder  resides,  and  in  which  the  bank  of  deposit  trans- 
acts business.  The  question  concerns  the  duty  and  liability  of  the 
several  banks  preceding  in  the  chain  of  transmission  the  last  one 
which  has  to  effect  the  actual  collection.  Thus,  if  A.  living  in 
Portland  holds  a  note  payable  in  New  York  and  deposits  it  in  his 
bank  in  Portland  for  collection,  the  bank  in  Portland  may  be  sup- 
posed to  forward  it  to  its  correspondent  bank  in  Boston,  which  in 
turn  will  forward  it  to  its  correspondent  bank  in  New  York  City, 
where  finally  the  collection  is  to  be  made.  The  question  then  is, 
whether  or  not  the  Portland  bank  has  so  far  fulfilled  and  discharged 
its  duty  to  A.  by  the  due  and  sufficient  transmission  of  the  paper 
on  its  course  for  collection  that  it  is  thereby  freed  and  absolutely 
relieved  from  all  liability  for  defaults  subsequently  occurring  in 
Boston  or  in  New  York ;  or  whether,  on  the  other  hand,  the  Boston 
and  New  York  banks,  and  any  agent  employed  by  the  last  bank 
in  the  business  of  collection,  are  all  sub-agents  of  the  Portland 
bank,  in  such  a  sense  that  the  law  of  agency  rendering  it,  as  princi- 
pal, liable  to  answer  for  any  and  all  their  defaults,  will  govern  in 
the  case. 

§  269.  Special  Agreement.  —  If  there  is  an  express  contract 
upon  the  matter  of  the  first  bank's  responsibility,  of  course  the 
question  will  be  governed  by  it,  and  if  the  character  of  the 
contract  and  the  consideration  is  such  as  to  indicate  such  an 
intent,  the  first  bank  will  be  held  liable,  even  in  those  States 
where  upon  the  ordinary  contract  it  is  not  held.  For  example, 
in  Pennsylvania,  if  a  bank  receives  a  reward  for  collecting 
beyond  the  expense,  and  mere  nominal  charge  for  service  in  for- 
warding, and  employs  a  Virginia  bank  to  collect  the  note,  the 
Pennsylvania  bank  will  be  responsible  for  any  negligence  of  the 
Virginia  bank.^ 

Where  a  collection  is  placed  in  the  hands  of  a  bank  with  author- 
ity to  employ  another  bank  to  collect  it,  the  second  bank  becomes 
the  sub-agent  of  the  customer  of  the  first,  for  the  reason  that  the 
customer  authorizes  the  employment  of  such  agent  to  make  the 
collection."     See  §  272  et  seq. 

The  exchange  which  is  usually  charged  by  banks  for  the  trans- 
mission of  money  from  one  place  to  another  is  not  a  sufficient  con- 
sideration to  support  an  implied  undertaking  to  answer  for  the 

1  §  269.  Mechanics'  Bank  v.  Earp,  4  Rawle  (Pa.)  384.  See  Landa  v. 
Traders'  Bank,  118  Mo.  App.  356,  94  S.  W.  770  (1906). 

2  Beach  v.  Moser,  46  Pac.  202  (1896). 

516 


THE   NEW    YORK    RULE  §  272 

default  of  the  correspondent  selected  to  make  collections  for  cus- 
tomers according  to  the  course  of  business  of  banks.^ 

§  270.  Usage  may  determine  the  question.  If  the  law  has 
not  been  already  settled  by  judicial  determination,  so  as  to  exclude 
any  subsequent  evidence  of  usage  to  subvert  it,  the  bank  may 
absolve  itself  from  liability  for  the  acts  of  agents  other  than  itself, 
or  the  customer  may  fix  such  liability  ui)()n  the  bank,  by  showing, 
respectively,  that  such  is  the  established  usage  and  understood 
custom  in  the  place  where  the  bank,  the  extent  of  whose  duty  and 
liability  is  in  question,  is  situated.  But  the  evidence  must  show  a 
usage  having  the  strictly  legal  traits ;  it  must  be  a  real  bona  fide 
usage,  an  actual  practice,  a  general  understanding,  not  the  mere 
opinion  of  either  merchants  or  bankers.^ 

§  271.  A  Bank  is  everywhere  held  Uable  if  it  is  itself  negligent 
in  the  Selection  of  its  Correspondent.  —  See  chapter  preceding. 

When  the  Bank  has  used  Due  Care,  and  the    Matter  is  not  de- 
termined   by  Usage  or  Special  Agreement 

§  272.  The  New  York  Rule  is  that  the  first  bank  is  responsible 
for  the  negligence  of  its  correspondent  and  its  agents ;  ^  they  are 
agents  of  the  first  bank  (B).  There  is  no  privity  between  them 
and  the  holder  (C),  and  the  latter  cannot  hold  them  directly  except 
he  may  sue  the  correspondent  (M.)  for  money  had  and  received,  in 
case  M.  had  notice  of  B.'s  insolvency  before  he  (M.)  received  pay- 
ment on  the  note,  and  that  no  dealings  occurred  between  M.  and  B. 
that  could  constitute  INI.'s  possession  of  the  note  a  bona  fide  holding 
for  value  without  notice,  and  that  C.  was  the  owner  of  the  note.^ 

3  First  National  Bank  v.  Sprague,  34  Neb.  318,  51  N.  W.  846  (1892). 
1  §  270.     Allen  v.  Merchants'  Bank,  22  Wend.  (N.  Y.)  215;    Warren 
Bank  v.  Suffolk  Bank,  10  Cush.   (Mass.)  583;    Jackson  t-.  Union  Bank, 

6  Har.  &  J.  (Md.)  146.     See  Smith  u.  National  Bank,  191  Fed.  226  (1911). 

1  §  272.  Allen  v.  Merchants'  Bank,  22  Wend.  (N.  Y.)  215;  Ayrault 
V.  Pacific  Bank,  47  N.  Y.  570;  Indig  v.  Brooklyn  City  Bank,  16  Hun 
(N.  Y.)  203.     See  Montgomery  Co.  Bank  v.  The    Albany  City    Bank, 

7  N.  Y.  459;  Bank  of  Clarke  County  v.  Oilman,  81  Hun  (N.  Y.)  486; 
St.  Nicholas  Bank  v.  State  National  Bank,  128  N.  Y.  26,  27  N.  E.  849; 
National  Revere  Bank  v.  National  Bank  of  Republic,  172  N.  Y.  102, 
64  N.  E.  799  (1902). 

If  a  bank  does  not  receive  the  paper  for  collection  but  only  for  traris- 
mission  it  is  not  hablc  for  the  negligence  of  its  correspondents ;  but  in  a 
chain  of  banks,  the  first  bank  receiving  the  paper  for  collection  is  liable. 
McBride  v.  lUinois  National  Bank,  163  App.  Div.  417  (1914),  148  N.  Y.  S. 
654. 

2  Wicks  V.  Hatch,  62  N.  Y.  535 ;  Wilson  v.  Smith,  3  How.  763,  11  L.  ed. 

517 


§  272  THE    LIABILITY    OF    A    BANK 

The  New  York  rule  is  held  ^  in  England,  Arkansas,  Ohio,  Indiana, 
Louisiana,  South  Carolina,  Utah,  IMichigan,  New  Jersey,  Minne- 
sota, and  by  the  United  States  Supreme  Court. 

Grounds  of  Affirming  Liabiliiy  of  First  Bank 

§  273.  Those  authorities  which  hold  that  the  bank  first  receiving 
the  paper  is  answerable  for  the  conduct  of  any  and  all  the  subse- 
quent agents,  be  they  banks  or  notaries,  base  their  decision  upon 
the  old  and  strict  principle  in  the  law  of  agency,  that  the  first 
agent  is  liable  for  the  acts  of  all  the  sub-agents  employed  by  him. 
They  urge  that  the  bank  is  employed  to  perform  the  task  of  collec- 
tion in  any  manner  that  it  may  see  fit,  trammelled  by  no  restrictions 
or  directions  whatsoever  as  to  the  persons  or  corporations  whose 
services  it  shall  employ,  if  it  does  not  itself  wish  to  attend  to  the 
whole  transaction.  This  task  is  declared  to  be  that  which  the 
bank  undertakes  to  do.  If  it  chooses  to  use  the  medium  of  sub- 
agencies,  it  selects  those  which  it  prefers,  and  is  free  to  trust  them 
more  or  less,  and  to  instruct  them  as  it  chooses.  They  are  directly 
its  own  agents  and  employees,  and  both  law  and  justice  demand 
that  it  should  answer  for  their  conduct  to  its  own  principal.  New 
York  (and  the  other  decisions  affirming  the  liability  are  only 
reflections  of  New  York  light)  bases  its  ruling  upon  the  ground 
that  a  contract  to  do  the  business  covers  all  the  means  employed, 
and  upon  the  assumption  that,  when  a  note  is  given  to  a  bank  to 

820 ;  Strong  v.  Stewart,  9  Heisk.  (Tenn.)  137 ;  Reeves  v.  State  Bank,  8 
Ohio  St.  465  ;  MeBride  v.  Illinois  National  Bank,  163  App.  Div.  417  (1914), 
148  N.  Y.  S.  654. 

3  Van  Wart  v.  WooUey,  3  Barn.  &  C.  439 ;  Mackersy  v.  Ramsays, 
9  C.  &  F.  818;  Second  National  Bank  v.  Bank  of  Alma,  99  Ark.  386, 
138  S.  W.  472  (1911);  Reeves  v.  State  Bank  of  Ohio,  8  Ohio  St.  465; 
•  American  Express  Co.  v.  Haire,  21  Ind.  4 ;  Tyson  v.  State  Bank,  6 
Blaekf.  (Ind.)  225;  Martin  v.  Hibernia  Bank,  127  La.  301,  53  So.  572 
(1910) ;  Simpson  v.  Waldby,  63  Mich.  439,  30  N.  W.  199  ;  Titus  v.  Mechan- 
ics' National  Bank,  35  N.  J.  Law  558 ;  Streissguth  v.  National  German- 
American  Bank,  43  Minn.  .50,  44  N.  W.  497  ;  Fort  Dearborn  National  Bank 
V.  Security  Bank,  87  Minn.  81,  91  N.  W.  257  (1902) ;  Harter  v.  Bank  of 
Brunson,  92  S.  C.  440,  74  S.  E.  366  (1912) ;  City  National  Bank  v.  Cooper, 
91  S.  C.  91,  75  S.  E.  696  (1910),  citing  the  rule  on  both  sides,  and  many 
cases  and  holding  that  this  rule  is  strengthened  when  the  bank  gives 
credit  to  the  depositor  for  the  paper  sent  in  payment  of  his  draft  by  the 
collecting  bank ;  California  National  Bank  v.  Utah  National  Benk,  190 
Fed.  318  (1911) ;  Exchange  National  Bank  p.  Third  National  Bank,  112 
U.  S.  276,  28  L.  ed.  722,  5  Sup.  Ct.  141 ;  Taber  v.  Perrot,  2  Gall.  565 ; 
Hyde  v.  First  National  Bank,  7  Biss.  156;  Kent  v.  Dawson  Bank,  13 
Blatchf.  237. 

518 


THE   MASSACHUSETTS   RULE  §  274 

collect,  it  is  a  contract  to  do  the  whole  business  and  not  merely  to 
forward,  which  is  assuming  the  very  thing  to  be  proved,  and  upon 
no  argument  except  the  oft  exposed  fallacy  of  "  sufficient  reason", 
which  runs  thus :  "  There  is  no  reason  (known  to  me)  why  this 
should  not  be  so,  therefore  it  is  so,"  —  which  simply  applies  to  the 
universe  the  limitations  of  the  mind  of  the  speaker.  (See  Mill's 
System  of  Logic,  p.  464,  and  compare  Senator  Verplanck's  argu- 
ment in  the  leading  New  York  case  below.) 

§  274.  The  Massachusetts  Rule  is,^  that  when  the  first  bank 
transmits  the  note  with  proper  instructions  to  a  reputable  and 
proper  agent,  either  in  the  place  where  the  collection  is  to  be  made, 
or  in  the  place  nearest  thereto  where  it  has  a  correspondent  or 
agent  whom  it  deems  fit  to  employ  for  the  purpose  of  forwarding, 
it  has  done  its  duty,  and  is  not  responsible  for  the  negligence  of  the 
correspondent  or  its  agents. 

This  rule  is  adopted  in  Connecticut,^  Kansas,^  Illinois,''  lowa,^ 
IMaryland,''  INIississippi,^  Missouri,^  Tennessee,^  Wisconsin,^" 
Louisiana,^^    Pennsylvania,^^    Kentucky,^^"    Nebraska, ^^^    North 

1  §  274.  Fabens  v.  Mercantile  Bank,  23  Pick.  (Mass.)  330 ;  Dorches- 
ter &  M.  Bank  v.  New  England  Bank,  1  Cush.  (Mass.)  177 ;  see  Darling 
V.  Stanwood,  14  Allen  504. 

-  Lawrence  v.  Stonington  Bank,  G  Conn.  521 ;  East  Haddam  Bank  v. 
Scovil,  12  Conn.  303. 

3  Bank  v.  Ober,  31  Kan.  599,  3  Pac.  324. 

«  yEtna  Ins.  Co.  v.  Alton  City  Bank,  25  111.  243 ;  Waterloo  Milling  Co. 
V.  Kuenster  &  Co.,  158  111.  259,  41  N.  E.  906,  affirming  Waterloo  ]Milling 
Co.  V.  Kuenster  &  Co.,  58  111.  App.  61.     See  §  287. 

6  Guelick  v.  National  Bank,  56  Iowa  434,  9  N.  W.  328. 

*  Citizens'  Bank  v.  Howell,  8  ]Md.  530 ;  Jackson  v.  Union  Bank,  6 
Harr.  &  J.  (Md.)  146. 

'  Tiernan  v.  Commercial  Bank,  7  How.  (Miss.)  648 ;  Agricultural  Bank 
V.  Commercial  Bank,  7  Sm.  &  M.  (Miss.)  592;  Bowling  v.  Arthur,  34 
Miss.  41. 

^  Daly  V.  Butchers  &  Drovers'  Bank,  56  Mo.  94. 

But  if  there  is  an  agreement  to  collect  for  a  consideration  the  first 
bank  is  liable  for  the  negligence  of  its  correspondent,  even  though  there 
is  a  notice  upon  the  customer's  pass  book  that  the  bank  assumes  no  re- 
sponsihilitv  for  the  negligence  of  its  correspondent.  Landa  v.  Traders' 
Bank,  118* Mo.  App.  356,  94  S.  W.  770  (1906). 

9  Bank  of  Louisville  v.  First  National  Bank,  8  Baxter  (Tenn.)  101 ; 
Bank  v.  Cummings,  89  Tonn.  618,  18  S.  W.  115  (1890) ;  Winchester  Milling 
Co.  V.  Bank  of  Winchester,  120  Tenn.  225,  111  S.  W.  248,  IS  L.  R.  A. 
(n.  s.)  441,  n.  (1907).     See  §  287. 

1"  Stacy  V.  Dane  Co.  Bank,  12  Wis.  629. 

"  Hyde  v.  Planters'  Bank,  17  La.  560;  Baldwin  v.  Bank  of  Louisiana, 
1  La.  Ann.  13. 

12  Merchants'  Bank  i'.  Goodman,  109  Pa.  St.  422,  2  Atl.  GS7 ;    and  see 

519 


§  274  THE    LIABILITY   OF   A   BANK 

Carolina/2<=  South  Dakota,^^*^  and  in  the  decision  of  the  United 
States  Supreme  Court  in  the  case  of  the  Bank  of  Washington  v. 
Triplett/^  C.  J.  Marshall  delivering  the  opinion,  and  in  the  strong 
dissent  of  Chancellor  Walworth  in  Allen  v.  Merchants'  Bank  ^'* 
in  New  York. 

Grounds  of  the  Massachusetts  Doctrine 

§  275.  First,  although  it  is  a  well-settled  rule  that  an  agent 
is  in  general  liable  for  the  sub-agents  employed  by  him,  it  is  also 
well  settled  that  there  is  an  exception  to  the  rule  whenever  there 
is  authority,  expressly  given,  or  fairly  implied  from  the  usage  of 
trade,  or  the  exigencies  of  the  case,  to  employ  such  sub-agent.^ 

"  If  there  exists  in  relation  to  the  business  a  known  and  estab- 
lished usage  of  substitution,  the  principal  would  be  held  to  have 
expected  and  authorized  such  substitution  ",  and  "  a  substitute 
appointed  by  an  agent,  who  has  this  power  of  substitution,  becomes 
the  agent  of  the  original  principal,  and  may  bind  him  by  his  acts, 
and  is  responsible  to  him  as  his  agent." 

Now  in  the  case  of  collection,  the  usage  to  forward  to  a  sub- 
agent  is  well  established,  and  the  parties  must  be  presumed  to 
contract  in  reference  to  it.  The  customer  expects,  or  ought  to 
expect,  that  the  bank  will  pursue  the  ordinary  course  of  business 
in  such  matters ;  this  usual  course  is  well  known  to  be  simply  the 
transmission  to  another  agent  in  good  repute,  and  this  is  all  the 
bank  or  the  customer  can  be  supposed  to  contemplate  as  that  duty 
of  which  the  accurate  performance  is  guaranteed  by  the  corpora- 
tion. 

Mechanics'  Bank  v.  Earp,  4  Rawle  (Pa.)  384,  and  Bellemire  v.  U.  S.  Bank, 
4  Whart.  (Pa.)  105. 

12°  Farmers'  Bank  and  Trust  Co.  v.  Newland,  97  Ky.  470,  31  S.  W.  38 
(1895) ;  Falls  Citv  Woolen  Mills  v.  Louisville  National  Bank,  145  Ky. 
64,  140  S.  W.  66  (1911). 

i^^  First  National  Bank  of  Pawnee  City  v.  Sprague,  34  Neb.  318,  51 
N.  W.  846  (1892). 

1=^  Bank  of  Rocky  Mount  v.  Floyd,  142  N.  C.  187,  55  S.  E.  95  (1906). 

i^-i  Fanset  v.  Garden  City  State  Bank,  24  S.  D.  248,  123  N.  W.  686 
(1909). 

13  1  Pet.  25,  7  L.  ed.  37. 

14  22  Wend.  (N.  Y.)  215;  and  see  Smedes  v.  Bank  of  Utica,  20  Johns. 
(N.  Y.)  373. 

1  §  275.     Story  on  Agency,  §§  201-214. 


520 


DISCUSSION    OF    QUESTION    OF    UABILITY    FOR   CORRESPONDENT       §  276 

The  Consideration  Taken  will  not  Warrant  the  Inference  of  Intent 
to  Assume  the  Risk 

Ordinarily,  when  there  is  any  commission  paid  for  collection, 
it  is  a  very  small  one ;  but  probably  in  the  great  majority  of  cases 
the  business  is  wholly  gratuitous,  and  the  consideration  is  only 
that  slight  and  indirect  one  which  arises  from  the  anticipation  of 
enjoying  for  a  few  days  the  use  of  the  money  collected  or  from  the 
manifestation  of  a  willingness  to  oblige  customers.  Such  consid- 
erations may  well  be  regarded  as  sufficient  for  the  mere  task  of 
transmission ;  but  it  is  impossible  that  they  should  be  sufficient 
to  sustain  an  agreement  to  be  further  responsible  for  the  solvency 
and  good  conduct  and  thorough  performance  of  their  duties  on 
behalf  of  all  subsequent  banks  and  notaries,  or  other  agents  whom 
it  may  be  necessary  to  employ.  Such  an  insurance  would  call  for  a 
high  premium.  It  is  incredible  to  suppose  that  the  bank  for  a  very 
small  possible  remuneration,  much  more  for  a  wholly  contingent 
return  in  any  shape,  assumes  so  great  a  risk. 

In  cases  where  the  compensation  is  such  as  to  base  an  inference 
that  it  was  intended  to  cover  something  more  than  the  mere 
service  rendered,  or  where  there  is  no  clear  authority  for  substitu- 
tion, the  contract  to  assume  the  risk  may  be,  with  more  show  of 
reason,  implied  by  the  law.^ 

To  this  it  may  be  added,  that  the  reasoning  of  the  aflBrmative 
cases  applies  as  well  to  a  notary  as  to  a  correspondent  bank.  If 
the  contract  to  collect  is  an  agreement  "  to  do  the  business  ",  "  to 
employ  proper  means  by  whomsoever  used  ",then  a  bank  is  respon- 
sible for  a  notary's  default ;  and  yet  this  is  denied  even  in  New 
York,  the  stronghold  of  the  affirmative,  upon  the  plea  that  a  notary 
is  a  public  officer  whose  duties  are  prescribed  by  law.  This, 
however,  is  a  mere  surface  distinction ;  a  bank  is  also  a  public 
institution,  and  its  duties  are  just  as  truly  fixed  by  the  law,  and 
a  bank  is  no  more  obliged  to  select  any  particular  notary  than  it 
is  to  choose  a  particular  bank  for  its  correspondent. 

§  27G.  Discussion  of  the  Question  of  Liability  for  Correspond- 
ent. —  If  we  try  to  stand  off  and  take  a  comprehensive  view  of  this 
much  trodden  ground,  and  endeavor  to  distinguish  tlie  footsteps  of 
justice  from  those  of  other  things  that  have  the  power  of  lea\ing 

2  See  the  agency  cases  above,  and  Bank  of  Kentucky  v.  Adams  Express 
Co.,  93  U.  S.  174,  23  L.  ed.  872  ;  Loomis  r.  Simpson,  13  Iowa  532  ;  Abbott 
V.  Smith,  4  Ind.  452;   Ellis  v.  Turner,  8  T.  R.  531. 

521 


§   276  THE    LIABILITY    OF    A    BANK 

their  impressions  on  the  sands  of  time,  it  will  be  clear  at  once, 
that,  so  far  as  any  argument  can  be  based  upon  the  principles  of 
contract,  the  negative  must  receive  our  approbation. 

That  parties  contract  in  reference  to  established  usage  affecting 
the  subject  matter,  that  the  intent  of  those  who  make  the  agree- 
ment is  to  govern,  and  that  this  intent  is  to  be  collected  from  their 
words  and  acts  viewed  in  the  light  of  the  circumstances,  are  princi- 
ples too  nearly  and  plainl.y  related  to  justice  herself  to  allow  us  to 
doubt  their  lineage  for  a  moment. 

The  reasoning  of  §  275  seems  therefore  conclusive,  if  we  confine 
ourselves  to  an  a  posteriori  view  of  a  transaction  of  the  class  we 
are  considering  in  the  light  of  contract. 

(o)  Turning  to  the  general  principles  upon  which  one  may  be 
justly  held  for  the  defaults  of  others,  aside  from  any  contract  to  be 
so  responsible,  we  have  to  note  that  the  aim  of  the  law  is  to  secure 
the  public  good  by  encouraging  and  developing  such  conduct  and 
qualities  as  experience  shows  to  be  beneficial  to  the  community, 
and  preventing  and  exterminating  such  conduct  and  qualities  as 
experience  and  the  nature  of  things  show  to  be  detrimental  to  society. 
Thus,  good  faith,  prudence,  foresight,  increase  of  wealth,  are  in- 
valuable, and  the  law  is  one  means  brought  to  bear  by  the  social 
body  upon  each  individual  to  secure  such  conduct  from  him  as 
accords  with  those  qualities  and  objects,  while  fraud,  imprudence, 
lack  of  foresight,  and  waste  of  wealth  in  any  individual  being 
detrimental  to  others,  these  others  in  the  shape  of  the  State  seek 
through  law  to  repress  these  qualities  in  the  individual,  and  to 
prevent  conduct  of  which  they  are  the  sources.  The  law  is  only  a 
captain  in  the  great  army  of  forces  warring  upon  human  savagery 
and  striving  to  elevate  the  race,  by  repression  and  elimination  of 
what  is  evil  in  it,  and  development  of  what  is  good  in  it.  It  is  a 
part  of  the  effort  put  forth  by  each  individual,  and  by  each  com- 
bination of  individuals,  to  control  all  other  things  and  persons  to 
the  fulfilment  of  his  or  their  desires. 

In  the  case  of  class  legislation  good  and  evil  are  interpreted  in 
reference  to  the  benefit  or  disadvantage  of  the  ruling  class,  but  in 
the  common  law  the  question  is  between  an  individual  and  the 
whole  mass  of  the  community  beside.  Now  if  the  evil  and  the 
good  were  found  chemically  pure,  if  there  were  no  gold  with  the 
dirt,  if  a  man  of  imprudence  had  never  any  beneficial  quality  min- 
gled with  his  evil  dispositions,  the  problem  would  be  simple,  the 
blood  of  society  could  be  purified  quickly  and  easily  by  exterminat- 
522 


DISCUSSIOX   or    QUESTION    OF    LIABILITY    FOR    CORRESPOXDEXT       §  276 

ing  all  individuals  exhibiting  detrimental  qualities;  Init  as  this 
is  not  the  case,  as  good  and  evil  are  mingled  in  each  person,  there 
arises  a  necessity  for  that  proportion  between  repression  and  evil, 
or  encouragement  and  good,  which  men  call  justice;  for  if  care  is  not 
taken  to  repress  an  individual  only  in  proportion  to  the  evil  ten- 
dency manifested,  the  repression  acts  upon  his  good  qualities. 
And  if  A.,  having  certain  beneficial  qualities,  receives  more  en- 
couragement than  B.,  having  equally  beneficial  qualities,  the  excess 
really  amounts  to  so  much  scope  and  encouragement  to  A.'s 
detrimental  qualities  as  well  as  his  good  ones. 

One  method  adopted  in  the  common  law  to  secure  this  equiva- 
lence between  repression  and  evil  is  like  one  of  those  chosen  by 
nature  in  the  development  of  life ;  viz.  to  throw  the  loss  arising  in 
any  transaction  upon  the  one  who  has  in  the  course  of  the  actions 
producing  the  loss  manifested  in  greater  degree  such  qualities  as  it 
is  desirable  to  eliminate. 

This  is  imperfect ;  for  in  case  both  A.  and  B.  have  been  guilty 
of  detrimental  contributory  conduct,  the  loss  should  be  divided, 
and  in  some  States  this  is  done  in  cases  of  negligence,  but  usually 
the  common  law  refuses  to  interfere  at  all  when  both  parties  are 
substantially  in  fault,  which  leaves  the  loss  on  the  unlucky  one, 
and  serves  in  many  cases  practically  to  enable  a  rascal  to  profit 
by  his  badness,  and  although  it  is  true  the  law  cannot  waste  time 
and  money  to  benefit  another  rascal,  still  it  might  very  well  refuse 
to  allow  either  one  to  retain  the  benefit,  i.e.  confiscate  it  for  the 
public  good. 

Now  apply  this  test  of  equivalence  to  the  question  of  the  degree 
of  responsibility  to  which  any  individual  can  be  justly  held. 

If  B.'s  conduct  is  in  itself  neither  detrimental  nor  beneficial, 
in  an  appreciable  degree,  to  the  community,  as,  for  example, 
the  keeping  of  dangerous  wild  animals,  he  may  very  properly  be 
held  absolutely  for  all  loss  that  may  ensue  to  C.  without  C.'s 
fault,  whether  B.  was  careless  or  not.     This  is  the  zero  line. 

If  B.'s  conduct  is  in  its  very  nature  detrimental,  then  in  propor- 
tion to  its  tendency  to  produce  evil  consequences,  and  in  the  pro- 
portion that  a  tendency  to  subsequent  evil  action  is  manifested  by 
such  conduct,  society  should  take  measures  to  prevent  B.  from 
producing  further  evil  individually,  or  through  the  laws  of  inheri- 
tance, and  thus  results  the  criminal. 

If,  in  the  third  place,  B.'s  conduct  is  in  its  nature  beneficial,  as 
commercial  transactions  in  general  are,  but  in  the  course  of  the 

523 


§  276  THE    LIABILITY   OF    A    BANK 

business  B.  makes  some  error  of  judgment,  or  loss  occurs  through 
the  neglect  or  fault  of  one  selected  by  B.  to  aid  in  the  matter,  it  is 
clear  that  the  law  of  equivalence  or  justice  will  not  allow  B.  to  be 
held  responsible  for  a  degree  of  care  and  foresight  beyond  that 
required  of  C.  in  other  matters  of  business  alike  beneficial  in  their 
nature.  It  is  clearly  unjust  for  C.  and  his  class  to  say  to  B.  and  his 
class,  "  If  you  suffer  loss  from  my  lack  of  foresight  or  judgment,  in 
any  case  where  I  have  conducted  myself  as  a  man  of  ordinary  care 
and  prudence  would  in  the  management  of  his  own  affairs  under 
the  same  circumstances,  you  will  have  to  bear  the  loss  yourself, 
for  you  cannot  expect  me  to  be  superior  to  the  average  in  my  busi- 
ness; but  if  we  suffer  loss  from  your  error,  or  that  of  any  one 
selected  by  you,  you  will  have  to  answer  to  us  absolutely,  even 
though  you  have  been  more  careful  than  the  most  careful  of  men 
usually  are  in  their  own  business  of  similar  nature  and  danger." 
A  perfect  fulfilment  of  the  law  of  equality  would  require  that,  if  one 
is  to  be  held  absolutely  responsible  for  the  result  of  one's  actions, 
all  should  be.  If  one  is  to  be  held  only  to  such  care  as  a  man  of 
ordinary  prudence  and  foresight  exercises  in  his  own  affairs  of 
similar  moment  and  danger,  all  should  be  required  to  come 
up  to  the  same  standard,  and  no  one  punished  for  not  going 
higher. 

(6)  But  perfect  justice  is  unattainable;  we  have  to  choose 
between  injustices,  and  it  is  never  safe  to  conclude  that  a  certain 
course  is  not  a  proper  one,  and  truly  the  most  just  course,  because 
we  are  convinced  it  does  not  perfectly  accord  with  the  law  of 
equality;  we  must  further  inquire  whether  the  alternate  course 
does  not  involve  still  greater  injustice ;  and  in  the  case  before  us, 
the  law  may  very  properly  say  to  B.,  Your  business  is  of  such  an 
intricate  nature,  and  extends  over  so  wide  a  territory,  and  the 
sources  of  our  information  are  so  peculiarly  within  your  own  grasp, 
that  it  is  very  difficult  in  any  case  that  may  arise  to  determine  the 
question  whether  you  have  exercised  due  care  or  not,  while  in  C.'s 
case  it  is  a  much  simpler  question.  Practically,  therefore,  the 
only  way  to  be  sure  of  your  exercising  proper  care  is  to  make  you 
responsible  anyway,  and  so  give  you  the  strongest  motive  for 
care,  w^hich  rule,  although  it  may  work  some  injustice  to  you,  is 
like  to  work  less  injustice  to  the  whole  community  than  an  arrange- 
ment by  which,  owing  to  the  difficulty  of  proving  your  negligence, 
you  would  often  escape  the  consequences  of  actual  fault ;  while 
in  C.'s  case  such  a  departure  from  the  exact  line  is  not  necessary, 
524 


DISCUSSION    OF    QUESTION    OF    LIABILITY    FOR    CORRESPONDENT       §  276 

for  the  relative  simplicity  of  the  problem  in  his  case  makes  it 
easy  to  apply  the  standard. 

Moreover,  litigation  is  expensive,  and  it  must  be  one  object  of  the 
law  to  waste  as  little  as  possible  of  the  wealth  of  the  communily  in 
judicial  inquiry.  Now  the  degree  of  care  which  a  jjrudent  man 
would  exercise  in  your  business  is  by  its  nature  and  importance 
very  high,  and  though  strict  justice  to  you  would  not  warrant 
imposing  an  absolute  responsibility  on  you,  yet  as  we  ha\e  to 
choose  between  this  slight  injustice  to  you  of  putting  the  line  of 
your  liability  a  little  higher  than  that  of  your  neighbors,  and  the 
greater  injustice  to  the  community  of  exposing  them  to  tedious, 
inconvenient,  and  expensive  litigation,  first  here  to  determine  the 
question  of  your  care  and  then  perhaps  in  some  distant  city  with 
which  the  plaintifl"  has  no  connection,  we  are  compelled  to  select 
the  first  course,  which,  though  it  puts  a  pressure  upon  you  beyond 
the  equal  line,  has  the  merit  of  being  a  pressure  in  the  direction 
of  progress  and  the  development  of  still  greater  prudence  and 
foresight  (both  on  your  part  and  on  the  part  of  your  corre- 
spondents, for  they  can  much  more  surely  be  held  to  account  by 
you  than  by  C),  while  the  other  path  would  lead  to  the  encourage- 
ment of  fraud  and  the  waste  of  time  and  money  in  intricate 
inquiry. 

(c)  Or,  coming  again  upon  contract  ground,  although  looking 
back  at  a  completed  transaction,  it  is  impossible  to  conclude  that 
the  parties  intended  that  the  bank  should  assume  the  risk  of 
losing  the  amount  of  the  note  or  bill,  yet  if  we  turn  and  look  for- 
ward, considering  the  effect  of  the  decision  to  be  given  not  as  to 
the  justice  between  the  parties  in  the  case  giving  rise  to  the  litiga- 
tion, but  as  to  the  future  of  the  business,  we  may  well  say  to  the 
bank,  On  the  whole  the  best  and  most  convenient  arrangement  in 
such  matters  would  be  that  you  should  take  the  responsibility,  and 
make  a  reasonable  charge  for  your  risk  ;  you  have  intimate  relations 
with  these  persons  selected  by  you  in  distant  cities,  you  can  much 
more  easily  hold  them  to  account,  than  a  private  person  here  ;  your 
knowledge  of  your  correspondents  is  an  intricate  matter,  and  the 
question  of  your  care  a  difficult  one,  which  to  save  cost  it  is  well  to 
exclude  from  the  law;  therefore,  unless  you  make  an  express 
agreement  to  the  contrary,  we  shall  in  future  consider  this  to  be 
the  law,  and  you  can  conduct  yourself  accordingly.  To  accomi:)lish 
our  purpose  of  establishing  this  as  the  law,  we  must  decide  this 
case  against  you  for  a  precedent,  although,  if  we  had  not  the  future 

525 


§  276  THE    LIABILITY    OF    A    BANK 

in  mind,  but  only  decided  upon  the  facts  of  this  case,  the  judgment 
would  be  the  other  way. 

This,  we  believe,  makes  pretty  clear  the  sources  of  the  conflict 
on  this  question,  and  while  it  furnishes  a  solid  basis  for  the  New 
York  rule  in  reference  to  the  future  good  of  society  upon  considera- 
tions probably  felt  by  the  judges  in  New  York  and  in  the  United 
States  Supreme  Court  (though  the  actual  grounds  of  their  decision 
as  expressed  by  them  are  not  put  in  any  such  light  as  to  justify 
it),  the  discussion  discloses  the  invincible  reasoning  of  the  negative 
if  the  eye  is  turned  backward. 

The  same  arguments  apply,  though  with  less  force,  to  the  case 
of  a  notary. 


Cases  affirming  the  Liability  of  a  Bank  for  the   Negligence  of  its 
Correspondent  Bank 

§  277.  England.  —  In  Van  Wart  v.  ^Yoolley,^  —  the  original 
foundation  of  the  affirmance  of  the  liability  of  the  first  bank  so  far 
as  it  rests  on  authority,  — G.  in  x\merica  drew  a  bill  on  D.  in  Lon- 
don, and  A.  sent  it  to  C.  in  Birmingham  on  account  of  purchases 
made  by  C.  in  England  for  A.  in  America.  C.  put  it  into  the  hands 
of  B.,  his  bankers  in  Birmingham,  for  collection,  who  forwarded  it 
to  L.,  their  correspondent  in  London.  D.  refused  to  accept,  and 
L.  failed  to  protest  or  give  notice  of  non-acceptance.  C.  sued  B. 
for  the  negligence  of  L.  Abbot,  C.  J.,  said  :  "  Upon  this  state  of 
facts,  it  is  evident  that  the  defendants  (who  cannot  be  distin- 
guished from  and  are  answerable  for  their  London  correspond- 
ent) have  been  guilty  of  a  neglect  of  the  duty  which  they  owed 
to  their  employer,  and  from  whom  they  received  a  pecuniary 
reward  for  their  services."  It  will  be  noticed  that  this  is  a  mere 
assertion  of  the  liability,  not  an  argument  for  it,  and  is  entitled 
only  to  the  weight  naturally  attaching  to  any  utterance  of  the 
learned  justice.  If  it  were  the  decision  of  a  schoolboy  it 
would  be  valueless,  for  it  lacks  the  innate  force  of  reason.  And 
when  we  go  further  into  the  case,  we  shall  find  that  the  judge's 
ow^n  arguments  negative  his  conclusion  upon  this  first  point. 
Another  question  in  the  case  was  hoiv  much  C.  could  recover  from 
B.  If.  C  had  so  acted  as  to  relieve  A.  from  liability  to  him  on  the 
original  debt  for  which  the  bill  was  sent,  C.  was  damaged  to  the  full 

1  §  277.     3  Barn.  &  C.  439. 
526 


I 


NEW    YORK  §  278 

amount  of  the  draft ;  but  if  he  still  had  lii.s  remedy  against  A.  on 
the  debt,  he  was  daniagetl  only  by  the  delay. 

(a)  The  eourt  said  C.  had  not  so  treated  the  draft  as  to  a})solve 
A.  He  could  not  have  been  expected  to  present  the  bill  himself. 
"  It  must  have  been  understood  that  he  was  to  do  this  through  the 
medium  of  some  other  person.  He  employed  for  that  purpose  persons 
in  the  habit  of  transacting  such  business  for  himself  and  others,  and 
upon  ichose  punctual  it  ij  he  might  reasonably  rely.  In  doing  this,  ice 
think  he  did  all  that  was  incumbent  upon  him  as  between  him  and 
A. ;  that  he  is  personally  in  no  default  as  to  them,  and  is  not  an- 
swerable to  them  for  the  default  of  the  persons  whom  he  employed 
under  such  circumstances."  Now  A.  had  sent  the  bill  without 
indorsing  it,  and  was  therefore  not  entitled  to  notice  as  indorser, 
and  the  two  cjuestions  in  the  case  were  therefore  technically  some- 
what different;  but  fundamentally  both  questions  amounted 
simply  to  this:  Shall  a  person  (X.)  be  held,  in  the  absence  of 
express  agreement,  to  liability  to  M.  for  loss  occasioned  to  him 
by  the  negligence  of  another,  not  the  servant  of  X.,  when  M.  knew 
that  by  the  course  of  business  and  usage  of  trade  X.  would  liave 
to  employ  some  one,  and  X.  has  used  due  care  in  the  selection  of 
such  person  ? 

If  the  reason  given  in  Italics  was  sufficient  to  convince  the  judge 
that  substantial  justice  required  him  to  deny  such  liability  in  the 
relation  between  C.  and  A.,  should  he  not  have  at  least  given  some 
reason  why  the  same  decision  was  not  rendered  as  to  the  relation 
between  C.  and  B.,  where  ui  the  nature  of  things  the  same  argu- 
ment applies  ? 

(6)  However  void  of  expressed  reason  Van  Wart  v.  Woolley  is, 
it  is  no  doubt  law  in  England.  In  ]\Iackersy  v.  Ramsays,^  Lord 
Cottenham  said :  "If  there  was  any  negligence  in  the  conduct  of 
the  parties  actually  employed  to  receive  the  money,  it  could  only 
affect  those  by  whom  they  were  so  immediately  employed,  for 
certainly  they  were  not  the  agents  of  the  customer  "  of  the  first 
bank. 

§  278.  New  York.  —  The  nexi:  case  in  line  is  that  of  Allen  v. 
Merchants'  Bank.^  A  bill  of  exchange  payal)le  at  a  distant  place 
was  deposited  in  the  defendant  bank  for  collection.  The  bank 
forwarded  it  to  a  bank  in  that  place ;   which  second  bank  put  it 

2  Mackersy  v.  Ramsavs,  9  C.  &  F.  818. 

1  §  278.  15  Wend.  (N.  Y.)  482  (Supreme  Court);  22  Wend.  (N.  Y.) 
215  (reversal  in  Court  of  Errors). 

527 


§  278  THE    LIABILITY    OF    A    BANK 

into  the  hands  of  a  notary  to  present  for  acceptance.  His  failure 
to  give  notice  of  the  refusal  to  accept  caused  a  loss.  The  first 
trial  was  in  the  Supreme  Court,  and  there  it  was  said  that  the 
defendant  bank  undertook  only  to  forward  to  proper  parties  for 
collection ;  that  if  the  bank  to  which  it  forwarded,  or  the  notary 
employed  by  that  bank  or  other  subsequent  party,  committed  a 
default,  the  depositor  must  look  to  them  ;  they  became  his  agents 
directly,  and  could  be  held  by  him ;  but  this  defendant  bank  was 
not  responsible  to  him  for  what  happened  after  the  forwarding. 
The  cause  was  carried  by  appeal  before  the  Court  of  Errors,  and 
the  decision  of  the  Supreme  Court  was  there  reversed.  But  it 
was  reversed  by  a  small  majority ;  fourteen  senators,  as  we  under- 
stand the  report,  voting  for  the  reversal,  and  ten  being  in  favor  of 
sustaining  the  decision  of  the  lower  court.  The  case  excited  much 
interest,  and  all  the  arguments  which  could  be  conceived  on  behalf 
of  either  side  were  gathered  and  put  forward  in  their  most  forcible 
shape.  Senator  Verplanck  delivered  the  opinion  on  behalf  of  the 
majority.  Chancellor  Walworth  spoke  the  views  of  the  minority. 
A  cause  so  thoroughly  considered  was  regarded  as  conclusively 
settling  the  law  in  the  State  of  New  York.  Efforts  were  made  in 
subsequent  cases  to  obtain  an  overruling,  but  they  were  of  no 
effect.  All  subsequent  cases  ^  have  consistently  upheld  the  doc- 
trine of  Senator  Verplanck  and  his  thirteen  coadjutors,  and  the 
question  can  be  no  longer  considered  an  open  one  in  New  York. 
Though  it  should  perhaps  be  added,  that  some  eminent  judges  — 
while  they  have  stated  that  they  considered  the  question  as  res 
adjudicata,  which  it  did  not  lie  with  them  again  to  open  —  have 
used  language  which  was  doubtless  intended  to  intimate  that  the 
adjudication  was  not  wholly  satisfactory  to  them. 

(a)  Senator  Verplanck  cites  Van  Wart  v.  Woolley  as  authority, 
and  pushes  aside  Washington  Bank  v.  Triplett,  as  being  the  case 
of  an  express  contract  for  transmission  only,  and  not  for  collec- 
tion, which,  however,  we  shall  see,  was  not  really  so. 

By  way  of  reasoning,  the  senator  remarks  that  a  mere  repre- 
sentative agency  ceases  with  the  personal  acts,  but  an  agency  to 
do  the  business  covers  all  the  means  employed,  and  there  is  no 

2  Downer  v.  Madison  County  Bank,  6  Hill  (N.  Y.)  648  (by  implica- 
tion, supports  22  Wend.  215) ;  Montgomery  County  Bank  v.  Albany  City 
Bank,  and  Montgomery  County  Bank  v.  Bank  of  State  of  Nev^  York, 
7  N.  Y.  459;  Commercial  Bank  v.  Union  Bank,  19  Barb.  (N.  Y.)  391; 
1  Kern.  (N.  Y.)  203;  McBride  v.  IlUnois  National  Bank,  138  App.  Div. 
339  (1910),  121  N.  Y.  S.  1040. 

528 


OHIO  §  279 

reason  to  consider  a  deposit  for  collection  in  another  State  as  less 
an  undertaking  to  do  the  business  than  one  to  collect  in  the  same 
town ;  and  surely  a  hank  is  not  to  be  relieved  from  responsibility 
for  the  neglect  of  its  teller  in  New  York  City  on  the  ground  that  he 
was  carefully  selected,  although  the  customer  knew  the  bank 
must  collect  through  agents. 

(6)  In  this  matter  the  senator  fails  to  distinguish  between  cases 
where  the  one  employed  is  the  servant  or  yeriimnent  employee  of  the 
bank,  and  cases  where  the  person  employed  acts  independently. 

In  the  case  of  a  servant,  the  law  of  to-day  inherits  from  the  times 
of  slavery  the  rule  that  holds  the  master  responsible,  and  it  is  too 
firmly  fixed  to  be  easily  overturned  ;  but  that  does  not  justify  ex- 
tension of  such  liability  to  cases  not  within  the  iron  rule  of  prece- 
dent, unless  a  good  reason  can  be  found  for  so  doing. 

Assuming  that  a  contract  to  collect  through  a  correspondent  is 
not  a  case  of  personal  agency,  but  an  agreement  to  do  the  business 
that  "  covers  all  the  necessary  and  proper  means  for  the  accom- 
plishment of  the  object,  by  whomsoever  used  or  employed  ",  is 
begging  the  very  question  in  dispute.  Besides,  this  language  would 
cover  notaries  as  well  as  any  other  "  means  ",  and  yet,  as  we  shall 
see,  authority  is  almost  in  unison  that  the  bank  is  not  responsible 
for  the  negligence  of  a  notary  in  respect  to  demand  and  protest, /or 
he  is  an  independent  agent  whose  duties  are  prescribed  by  law,  and 
the  bank  has  done  all  in  its  power  toward  the  undertaking  when  it 
selects  a  notary  tvith  reasonable  care. 

So  also  is  a  correspondent  bank  an  independent  agent,  whose 
duties  are  just  as  truly  prescribed  by  law;  and  if  it  be  said  the 
notary's  good  conduct  is  secured  by  official  bond,  the  answer  is, 
that  this  is  not  the  ground  of  holding  the  bank  free,  for  in  some 
States,  Massachusetts  for  example,  where  the  bank  is  not  held  for 
the  negligence  of  its  notary,  no  bond  is  required  ;  and  even  if  this 
were  the  ground,  a  correspondent  bank  is  probably  on  the  average 
fully  as  responsible  financially  as  a  notary  and  his  sureties. 

The  senator's  argument  seems  wofully  deficient  in  that  it  takes 
no  note  of  the  element  of  control  in  determining  liability,  and  in 
that  it  is  mere  assertion,  and  involves  the  fallacy  of  "  Sufficient 
Reason  "  (see  iMill's  System  of  Logic,  p.  464),  that  because  he 
sees  no  reason  why  a  certain  thing  should  not  be  so,  therefore  it  is 
so,  and  clashes  with  the  whole  force  of  the  law  as  to  notaries. 

§  279.    Ohio.  —  The  court  in  Ohio  acknowledged  itself,  after  a 
review  of  some  of  the  chief  authorities,  to  be  "  rather  bewildered  by 
VOL.  1  —  34  529 


§  279  THE    LIABILITY    OF    A    BANK 

the  conflict  than  aided  " ;  but  considering  the  question  an  open 
one,  it  preferred,  on  the  whole,  to  follow  the  principle  finally- 
adopted  in  New  York.^  This  court  also  took  the  ground  of  the 
House  of  Lords  in  Mackersy  v.  Ramsays,  though  here  there  was  no 
such  special  agreement  as  to  the  time  when  credit  was  to  be  given 
to  the  owner  as  there  had  been  in  that  case.  They  say  that  pay- 
ment to  the  collecting  bank  is  payment  to  the  first  bank,  and  so 
soon  as  the  payment  is  received  by  such  collecting  bank  the  first 
bank  becomes  at  once  a  debtor  to  the  owner  of  the  paper  to  that 
amount. 

§  280.  United  States  Cases.  —  The  undertaking  to  collect  is 
not  merely  a  contract  to  send  to  a  suitable  agent,  but  is  an  under- 
taking to  respond  for  any  default  of  the  agent  selected.^ 

In  The  Exchange  National  Bank  v.  The  Third  National  Bank,i« 
the  United  States  Supreme  Court  decided  to  follow  the  New  York 
rule.  The  court  said :  The  bank's  "  undertaking  is  to  do  this 
thing,  not  merely  to  procure  it  to  be  done.  In  such  a  case,  the 
bank  is  held  to  agree  to  answer  for  any  default  in  the  performance 
of  its  contract,  and  whether  the  paper  is  to  be  collected  in  the  place 
where  the  bank  is  situated,  or  at  a  distance,  the  contract  is  to  use 
the  proper  means  to  collect  the  paper,  and  the  bank,  by  employing 
sub-agents  to  perform  a  part  of  tvhat  it  has  contracted  to  do,  becomes 
responsible  to  its  customer." 

The  nature  of  the  contract  is  the  test.  If  it  is  for  immediate 
service  of  the  agent  and  for  his  faithful  conduct  as  representing 
his  principal,  the  responsibility  ceases  with  the  limits  of  the  per- 
sonal service  undertaken,  but  where  the  contract  looks  mainly 
to  the  thing  to  be  done,  and  undertakes  for  the  due  use  of  all  proper 
means,  the  responsibility  extends  to  all  necessary  and  proper 
means,  by  whomsoever  used. 

Whenever  the  agency  is  an  undertaking  to  do  the  business,  the 
original  principal  may  look  to  the  immediate  contractor  with 
himself,  and  is  not  obliged  to  look  to  inferior  or  distant  under- 
contractors  or  sub-agents  when  defaults  occur  injurious  to  his 
interests.  "  On  any  other  rule  no  principal  contractor  would  be 
liable  for  the  default  of  his  own  agent,  where  from  the  nature  of  the 
business  it  was  evident  that  he  must  employ  sub-agents." 

1  §  279.     Reeves  v.  State  Bank,  8  Ohio  St.  465. 

1  §  280.     Kent  v.  Dawson  Bank,  13  BlatcM .  237. 

1"  112  U.  S.  276,  28  L.  ed.  722,  5  Sup.  Ct.  141.     See  California  National 
Bank  v.  Utah  National   Bank,  190  Fed.  318  (1911);    Smith  v.  National 
Bank,  191  Fed.  226  (1911). 
530 


UNITED  STATES  CASES  §  2S0 

(a)  This  is  simply  the  Xew  York  decision  over  again,  Senator 
Terplanck  verbatim  to  a  great  extent,  and  inckides  all  his  fallacies 
and  some  others,  as  we  shall  see. 

The  last  sentence  quoted  and  in  fact  the  whole  opinion  utterly 
ignores  the  well  settled  rules  of  law,  that  where  an  agent  has  au- 
thority, either  expressly  given,  or  imj)lied  from  the  usage  of  trade, 
or  the  course  of  his  own  dealings,  or  from  the  exigencies  of  the 
case,  to  employ  a  sub-agent,  and  does  so  employ  one  who  is  not 
his  own  servant,  there  is  a  privity  between  the  sub-agent  and  the 
principal,  and  the  agent  is  not  responsible  for  the  neglect  or  mis- 
conduct of  the  sub-agent,  unless  by  him  directed  or  ratified. 

The  parties  to  a  contract  are  presumed  to  contract  in  reference 
to  well  established  usage,  in  this  particular  as  in  others.-  The 
very  question  is  whether  the  contract  to  collect  can  be  fairly  con- 
strued to  be,  by  the  understanding  of  the  parties,  an  agreement 
that  the  first  bank  shall  personally  or  by  its  servants  do  the  collect- 
ing in  the  distant  city,  or  whether,  considering  that  the  usage  of 
trade  is  universal  and  well  established  to  send  the  paper  to  some 
correspondent  bank  entirely  independent  of  the  first,  and  not  its 
servant  any  more  than  a  lawyer  is  the  servant  of  his  client,  and 
considering  that  no  compensation  is  taken  by  the  first  bank  at  all 
commensurate  with  such  a  risk  as  that  of  loss  by  negligence  of  the 
sub-agents,  it  is  not  fairer  to  construe  the  contract  intended  to  be 
simply  one  of  transmission ;  and  if  so,  then  the  question  arises. 
Is  there  good  reason  on  any  other  grounds  for  extending  the  liabil- 
ity of  the  first  bank  beyond  the  consequences  of  its  own  lack  of  due 
care  and  that  of  its  servants  ? 

The  court  does  not  give  any  reason  for  its  decision  that  will 
stand  analysis  for  a  moment ;  it  merely  says,  if  it  is  a  contract  to 
do  the  whole  business,  it  is  responsible  for  the  sub-agents  it  em- 
ploys to  do  part  of  what  it  has  contracted  to  do,  and  then  assumes 
that  it  is  such  a  contract,  whereas  all  the  sense  of  the  matter  is 
that  the  bank  does  not  employ  the  sub-agent  to  do  part  of  what  it 
contracted  to  do  itself,  but  that  in  the  light  of  usage  the  agree- 
ment was  only  to  employ  some  sub-agent  to  do  that  part  of  the 
business. 

(6)  How  very  tissuey  the  oj)inion  is  we  shall  see  still  more 
clearly  on  noticing  the  manner  in  which  it  treats  Bank  of  Washing- 
ton V.  Triplett,  saying  of  it,  "  The  question  under  consideration 
(here)  was  not  presented  in  1  Pet.  25  ;  for  although  the  defendant 
2  Story  on  Agency,  §§   201,  217  a. 

531 


§  280  THE    LIABILITY    OF    A    BANK 

bank  in  that  case  was  held  to  have  contracted  directly  with  the 
holder  of  the  bill  to  collect  it,  the  negligence  alleged  was  the  negli- 
gence of  its  own  officers  in  the  place  where  the  bank  was  situated." 
But  on  turning  to  the  Triplett  case  we  find  the  question  was  pre- 
sented, and  necessarily  presented,  and  was  decided  clearly  against 
the  decision  in  Exchange  Bank  v.  Third  National  Bank,  and  the 
court,  perhaps  in  order  to  avoid  appearing  to  overrule  so  clear  a 
decision  of  C.  J.  Marshall,  disposes  of  it  in  the  above  rather  mis- 
leading way. 

The  Bank  of  Washington,  the  defendant,  was  the  correspondent 
bank,  and  being  sued  by  Triplett,  the  owner  of  the  draft,  who  had 
given  it  to  the  Mechanics'  Bank  to  collect,  the  first  question  neces- 
sarily was  whether  the  Washington  Bank  was  the  agent  of  the 
Mechanics'  Bank  or  of  Triplett,  for  agents  are  not  liable  for  non- 
feasance or  omissions  except  to  their  own  principals ;  ^  the  matter 
was  one  of  contract,  and  privity  was  necessary  between  Triplett 
and  Bank  of  Washington  in  order  to  hold  the  latter. 

(c)  The  defendant  in  fact  insisted  that  there  was  no  privity 
between  the  holder  and  itself,  that  it  was  not  the  agent  of  Triplett 
but  of  the  IMechanics'  Bank,  and  the  court  said,  "  The  deposit  of  a 
bill  in  one  bank,  to  be  transmitted  for  collection  to  another,  is  a 
common  usage  of  great  public  convenience,  the  effect  of  which  is 
well  understood.  This  transaction  was  unquestionably  of  that 
character.  The  custom  to  indorse  a  bill  put  in  bank  for  collection 
is  universal,  and  the  Bank  of  Washington  had  no  more  reason  for 
supposing  that  Triplett  had  ceased  to  be  the  real  holder  from  such 
indorsement  (in  blank)  than  for  supposing  that  the  cashier  of  the 
Bank  of  Washington  had  become  the  real  holder  by  the  indorsement 
to  him  (by  the  Mechanics'  Bank).  It  is  the  customary  proceeding 
for  collection  in  such  cases.  .  .  .  The  court  is  decidedly  of  the 
opinion  that  the  Bank  of  Washington,  by  receiving  the  bill  for 
collection,  became  the  agent  of  Triplett." 

(d)  We  see  that  C.  J.  Marshall  uses  the  words  "  for  transmis- 
sion "  and  "  for  collection  "  interchangeably  in  regard  to  the  same 
transaction ;  and  indeed  the  facts  of  this  case  were  the  same  as  in 
all  the  other  cases,  and  the  use  of  the  word  "  transmission"  merely 
expresses  the  view  the  court  takes  of  the  facts,  and  we  see  that  the 
court  does  emphatically  declare  the  correspondent  bank  to  be  the 
agent  of  the  holder.  So  that  Exchange  Bank  v.  Third  National 
Bank  really  overrules  C.  J.  Marshall,  and  with  no  reason  expressed 

'  Story  on  Agency,  §  130. 
532 


PENNSYLVANIA  §  283 

that  will  bear  the  light,  though  it  is  prohahle  the  judges  had  some 
reason  which  did  not  shape  itself  into  words. 

The  cases  are  rather  unsatisfactory.  The  United  States  is 
based  on  New  York,  and  New  York  on  ^'an  Wart  v.  Woolley, 
plus  fallacy,  with  probably  a  feeling  of  public  convenience  and 
policy  which  did  not  find  expression. 

Cases  Denying  the  Liability  of  a  Bank  for  the  Negligence  of  its 

Correspondent 

§  281 .  United  States.  —  The  authority  of  Chief  Justice  IMarshall 
rests  upon  this  side  of  the  question ;  see  his  decision  in  Bank  of 
Washington  v.  Triplett,^  discussed  above,  §  280  c. 

§  282.  New  York.  —  Although  the  actual  decision  was,  by 
four  votes  out  of  twenty-four,  that  the  first  bank  shall  be  liable, 
yet  the  weighty  dissent  of  Chancellor  Walworth  is  entitled  to  notice 
on  this  side  of  the  question.     His  arguments  are,  — 

(1)  That  there  is  no  consideration  taken  by  the  principal  bank 
beyond  the  exchange  and  expenses  of  negotiation  ;  often  the  whole 
labor  and  expense,  except  the  mere  exchange,  is  borne  by  the  bank 
in  order  to  draw  business,  and  there  is  no  consideration  taken  to 
cover  the  risk  of  loss  of  the  whole  amount  of  the  paper  by  the 
negligence  of  a  correspondent,  as  it  is  certainly  reasonable  to  sup- 
pose there  would  be  if  any  such  risk  was  contemplated  by  the 
parties.  '■< 

(2)  The  loss  should  fall  on  the  owner,  who  has  impliedly  au- 
thorized the  employer  of  a  sub-agent,  by  entering  into  a  contract 
in  the  performance  of  which  such  employment  of  a  sub-agent  is  an 
established  usage,  and  not  providing  against  the  inference  of  law 
that  he  contracted  in  reference  to  such  usage  by  any  express  term 
in  his  contract. 

§  283.  Pennsylvania.  —  In  Pennsylvania  the  law  is  strongly 
stated  against  the  liability  of  a  bank  for  its  correspondent.^ 

"  A  bank  with  which  a  check  is  deposited  by  a  customer  for 
collection,  under  an  agreement  that  the  depositor's  responsibility 
as  indorser  is  to  continue  until  payment  is  ascertained  by  the  bank, 
is  bound  to  transmit  such  check  to  an  independent  agent  for  collec- 
tion, with  instructions  to  present  the  same  for   payment,  and  if 

1  §  281.     1  Pet.  25,  7  L.  ed.  37. 

1  §  283.  Merchants'  National  Bank  v.  Goodman,  109  Pa.  St.  422,"  2 
All.  687. 

533 


§  283  THE    LIABILITY    OF    A   BANK 

pa\Tnent  be  refused,  to  have  the  same  protested  and  returned  at 
once." 

The  agreement  to  transmit  for  collection  is  a  contract  between 
the  bank  and  its  customer ;  the  valuable  consideration  which  sup- 
ports the  agreement  as  a  contract  is  the  use  of  the  money  to 
be  collected  by  the  bank  as  long  as  it  shall  be  allowed  to  remain  in 
their  hands  after  it  is  collected.  This  binds  the  collecting  bank 
to  do  all  that  is  incumbent  on  them  to  do ;  and  that  entire  duty, 
as  we  have  said,  is  discharged  when  the  check  or  draft  is  trans- 
mitted to  a  responsible  sub-agent  to  collect  the  money.  The 
agent  to  whom  the  instrument  is  sent  to  make  demand  for  pay- 
ment then  becomes  the  agent  of  the  depositor  or  indorser,  and  is 
liable  to  such  depositor  for  loss  arising  from  failure  on  his  part  to 
perform  the  duty  which  is  incident  to  an  undertaking  to  collect 
the  money ;  and  such  duty  is  not  discharged  when  anything  but 
money  is  accepted  as  payment,  in  the  absence  of  special  authority 
to  the  contrary. 

The  law,  as  we  have  stated  it,  is  well  settled  on  the  authority 
of  decided  cases  in  this  country. 

"  Triplett,  having  deposited  a  bill  with  a  bank  in  Alexandria 
to  be  collected  in  Washington,  the  Alexandria  bank  forwarded  the 
bill  to  the  Bank  of  Washington,  which  by  negligence  failed  to 
collect  the  bill."  By  transmitting  the  bill,  as  directed,  the  bank 
with  whom  it  was  deposited  performed  its  duty,  and  the  whole 
responsibility  of  the  collection  devolved  on  the  bank  which  received 
the  bill  for  the  purpose.  To  the  same  effect  are  23  Pickering  330  ; 
1  Gushing  182  ;  12  Conn.  303  ;  25  111.  247 ;  1  Otto  308. 

In  Pennsylvania,  in  1834,  the  court  said :  The  undertaking  of 
the  first  bank  is  clearly  to  transmit  the  bills ;  that  this  was  the 
intention  of  both  parties  must  be  inferred  from  the  transaction. 
This  bank  is  used  simply  as  a  "  medium  of  communication."  If 
the  plaintiff  contended  that  it  undertook  "  to  collect  ",  that  was  a 
material  fact  which  should  have  been  passed  upon  by  the  jury. 
Hence  the  banks  do  not  stand  in  the  relation  of  principal  and  agent 
towards  each  other.  But  the  first  is  the  agent  for  transmission; 
the  second  is  the  agent  for  collection ;  ergo,  the  first  is  not  bound 
to  answer  for  the  doings  of  the  second.^  In  1848  the  same  view  was 
incidentally  adopted. ^     In  Bellemire  v.  United  States  Bank,^  the 

2  Mechanics'  Bank  v.  Earp,  4  Rawle  (Pa.)  384. 

3  wingate  v.  Mechanics'  Bank,  10  Barr  (Pa.)  104. 

4  1  Miles  (Pa.)  173;   4  Whart.  (Pa.)  105. 

534 


MISSISSIPPI  §  285 

same  ground  was  gone  over  in  both  the  lower  and  the  highest 
courts  of  the  State  with  the  same  result.  The  ruling  in  Mechanics' 
Bank  v.  Earp  was  deliberately  repeated  and  affirmed  as  being  the 
law  in  Pennsylvania.  It  was  urged  that  the  bank  had  undertaken 
"the  whole  business  of  collection  ",  and  in  proof  of  this  it  was  shown 
that  the  paper  had  been  indorsed  over  to  the  bank  by  an  unre- 
stricted indorsement.  But  the  court  considered  that,  though  the 
bank  was  holden  by  such  an  indorsement,  its  situation  was  ren- 
dered in  no  respect  peculiar  by  this  fact.  It  was  invested  with  the 
apparent  ownership  only  that  it  might  have  authority  to  present 
for  payment.  As  simple  agent  it  was  held  only  to  act  in  good  faith 
and  "  according  to  the  regular  and  accustomed  course  of  the  busi- 
ness ;  and  was  not  responsible  though  such  action  might  not 
prove  to  be  to  the  best  advantage."  The  bank,  from  its  nature,  is 
obliged  to  employ  agents,  in  this  case  a  notary,  who  is  not  alleged 
to  have  been  incompetent.  The  owner  of  the  paper,  in  omitting 
to  desire  a  special  agent  to  be  employed,  consented  to  let  the  matter 
take  the  ordinary  course,  and  the  bank  performed  its  duty  in 
committing  the  paper  to  the  hands  of  the  person  whom  it  employed 
in  its  own  like  concerns. 

§  284.  Iowa.  —  Where  the  holder  of  a  bill  of  exchange  payable 
at  a  distant  place  deposits  it  with  a  local  bank  for  collection,  he 
thereby  assents  to  the  course  of  business  of  banks  to  collect  through 
correspondents,  and  the  correspondent  of  the  local  bank  to  which 
the  bill  is  forwarded  becomes  his  agent,  and  is  responsible  to  him 
directly  for  negligence  in  failing  to  present  the  bill  for  payment  in 
the  proper  time.^ 

§  285.  Mississippi. — A  bank  receiving  a  draft  for  collection  at  an- 
other place,  and  transmitting  the  draft  to  its  agent  carefully  selected 
at  the  acceptor's  residence,  is  not  liable  for  the  agent's  neglect.^ 

In  this  case  the  court  followed  a  line  of  decisions  ^  in  the  same 
State,  and  referred  to  those  of  eight  States  ^  in  agreement  with  its 
conclusion.     The  chief  justice  dissented,  quoting  cases,*  which,  as 

1  §  284.  Gueliek  v.  National  State  Bank  of  Burlington,  56  Iowa  434, 
9N.  W.  328  (1881). 

1  §  285.  Third  National  Bank  of  Louisville  v.  Vicksburg  Bank,  61 
Miss.  112  (1883). 

2  Hoover  r.  Wise,  91  U.  S.  308,  23  L.  ed.  392  (1875) ;  Bradstreet  v. 
Everson,  72  Pa.  St.  124  (1872) ;   Morgan  ;•.  Tener,  S3  Pa.  St.  305. 

3  Massachusetts,  Maryland,  Connecticut,  Missouri,  Illinois,  Iowa,  Ten- 
nessee, and  Wisconsin. 

*  Tiernan  i'.  Commercial  Bank,  7  How.  (Miss.)  648  ;  Agricultural  Bank 

535 


§  285  THE    LIABILITY    OF   A    BANK 

we  have  seen,  have  no  bearing  on  the  question,  because  in  each  of 
them  the  sub-agent  was  the  servant  of  the  agent  in  chief,  or  in  his 
permanent  employ  and  under  his  control  and  direction,  really  one 
of  his  own  arms,  attached  to  the  main  body,  and  not  an  indepen- 
dent person,  and  in  most  of  them  the  express  terms  of  the  contract 
indicated  that  the  undertaking  was  to  do  the  collecting  in  the 
distant  place  through  its  oicn  branches  and  permanent  agencies, 
and  the  consideration  for  the  collection  also  was  not  of  the  meagre 
character  which  so  strongly  excludes  the  supposition  that  the 
agent  intended  to  take  the  risk  of  losing  the  principal. 

§  286.  Massachusetts.  —  In  Massachusetts  it  was  held,  in  1848, 
that  if  the  first  bank  selects  proper  sub-agents  for  accomplishing 
the  transmission  and  making  the  collection,  it  discharges  its  full 
duty,  and  is  not  liable  for  their  default.  If  the  note  has  been 
indorsed  over  to  it  generally,  it  may  indorse  over  to  sub-agents  in 
the  same  form,  and  need  not  make  a  restricted  indorsement.  In 
delivering  the  opinion,  Judge  Wilde  said  that  the  final  decision  in 
Allen  V.  Merchants'  Bank  (supra)  "  is  opposed  to  a  number  of 
decisions  of  great  authority,  and  is  not,  as  we  think,  well  founded  in 
principle."  ^ 

The  emplojTiient  of  a  sub-agent  is  justifiable,  because  this  man- 
ner of  conducting  business  is  the  usual  and  known  custom,  and 
"  in  a  business  which  requires  or  justifies  the  delegation  of  an 
agent's  authority  to  a  sub-agent,  who  is  not  his  own  servant,  the 
original  agent  is  not  liable  for  the  errors  or  misconduct  of  the  sub- 
agent  if  he  has  exercised  due  care  in  the  selection."  ^ 

§  287.  Other  States.  —  In  Connecticut  the  court  said,  in  the 
first  case  which  they  were  called  upon  to  consider,  that  of  Lawrence 
V.  Stonington  Bank,^  that  the  transmittee  bank  was  the  attorney, 
not  the  factor,  of  the  transmitting  bank,  and  had  for  its  principal 
not  the  transmitting  bank  itself,  but  the  original  holder  and  deposi- 
tor of  the  paper ;  whence  it  followed  that  the  defaults  of  each  bank 
in  the  order  of  succession  were  not  the  defaults  of  any  predecessor 
in  the  transmission,  but  of  the  original  customer  and  principal 
himself.  Later,  the  same  court  declared  that  a  person  who  deposits 
in  a  bank  a  note  which  is  payable  elsewhere  must  know  that  all  the 

V.  Commercial  Bank,  7  Sm.  &  M.  (Miss.)  592  ;  Bowling  v.  Arthur,  34  Miss. 
41.     These  were  notary  eases,  but  the  reasoning  was  general. 

1  §  286.  Dorchester  &  Milton  Bank  v.  New  England  Bank,  1  Cush. 
(Mass.)  177  ;   Fabens  v.  Mercantile  Bank,  23  Pick.  (Mass.)  330. 

2  Darling  v.  Stanwood,  14  Allen  504.  i  §  287.     6  Conn.  521. 

536 


OTHER   STATES  §  287 

bank  can  do  is  to  send  it  on  to  a  reputable  correspondent ;  and  if 
the  bank  does  this,  it  shoukl  be  thereby  fully  exonerated.  It  would 
be  an  unreasonable  hardship  to  hold  the  bank  for  the  defaults  of 
such  further  agents.^  In  Louisiana  it  has  been  held  that  the  bank 
does  enough  if  it  gives  the  note  to  its  regular  notary,  and  is  not 
liable  for  his  default.^  In  Illinois  it  was  said  that  a  bank  was  not 
liable  for  the  default  of  the  sub-agent,  if  it  had  exercised  due  dili- 
gence in  the  selection.''  The  same  doctrine  is  adopted  by  a  fair 
implication  in  the  ruling  in  the  Wisconsin  case,  cited  in  the  mar- 
gin,^ and  in  Kentucky.^"  In  Maryland  the  first  bank  is  not  regarded 
as  liable  for  defaults  of  sub-agents,  whether  banks  or  notaries ; 
but  it  is  fair  to  say  that  the  first  decision  was  based  on  proof  of 
usage  in  the  State,  or  at  least  in  the  city  of  Baltimore.^  The 
same  view  has  recently  been  directly  asserted  in  ]\Iissouri ;  '^  and 
the  tendency  of  the  court  might  pre\iously  have  been  inferred  to 
be  in  favor  of  it,  from  the  form  of  the  opinion  and  the  language 
used  therein,  delivered  in  the  case  of  Gerhardt  v.  Boatman's 
Savings  Institution.^ 

2  East  Haddam  Bank  v.  Scovil,  12  Conn.  303. 

3  Hyde  r.  Planters'  Bank,  17  La.  560 ;  Baldmn  v.  Bank  of  Louis\nlle, 
1  La.  Ann.  13. 

^  iEtna  Insurance  Co.  v.  Alton  City  Bank,  25  111.  243. 

5  Stacy  V.  Dane  County  Bank,  12  Wis.  629. 

^  Falls  City  Woolen  Mills  v.  Louisville  National  Bank,  145  Ky.  64, 
140  S.  W.  66  (1911) ;  Commercial  National  Bank  v.  First  National  Bank, 
158  Ky.  392,  165  S.  W.  398  (1914). 

*  Jackson  r.  Union  Bank,  6  Har.  &  J.  (Md.)  146;  Citizens'  Bank  v. 
Howell,  8  Md.  530. 

'  Daly  V.  Butchers  &  Drovers'  Bank  of  St.  Louis,  56  Mo.  94;  Landa  v. 
Traders'  Bank,  118  Mo.  App.  356,  94  S.  W.  770  (1904). 

8  38  Mo.  60. 


537 


CHAPTER   XVIII 

GENERAL   DEPOSIT 

§§  186,  565,  Title. 

A  deposit  of  loose  money  is  presumed  to  be  general. 
§  289.  The  relation  of  the  bank  to  the  depositor  of  good  money  is 

that  of  debtor  and  creditor.     Upon  crediting  the  deposit, 
the  bank  is  liable  to  the  depositor,   though  the  deposit 
should  be  lost  or  stolen  without  its  fault ;    the  deposit  be- 
§  289  b.  comes,  in  every  sense,  its  property  ;   if  it  makes  a  payment 

on  account  of  it,  it  is  its  own  money  that  is  paid ;   and  if 
the  bank  becomes 
§  289  c.         Insolvent,   the  depositor  cannot  claim  in  preference  to  the 
general  creditors,  unless  the  deposit  was  not  fidly  received, 
or  the  receiving  was  a  fraud  upon  the  depositor.      §  629. 
(d)  Forged  paper  or  counterfeit  coin  is  nothing,  and  cannot  form 
a  deposit ;   though,  if  a  bank  is  negligent  in  not  discovering 
a  forgery  of  its  own  bills,  it  will  have  to  bear  any  resulting 
loss,  in  the  absence  of  fraud  on  the  depositor's  part.      §  659. 
Bills  of  an  insolvent  bank  are,  according  to  the  best  opinion, 
received  at  the  risk  of  the  bank,  if  there  is  no  fraud  or 
concealment  on  the  part  of  the  depositor.      §  §  633,  662. 
Checks  on  the  depository  bank,  credited  as  cash,  create  the 
relation  of  debtor  and  creditor,  and  the  title   passes    to 
the  bank,  vinless  the  depositor  knew  the  check  was  not 
good  for  lack  of  funds.      §  565. 
Checks  on  other  banks,  notes,  bills,  etc.,  merely  credited  as 
cash,  ^vithout  further  agreement,  become  a  general  deposit 
as  against  the  depositor,  if  he  knows  they  are  so  credited ; 
but  as  against  the  bank  the  credit  is  conditional,  and  may 
be  cancelled  if  the  paper  is  not  paid  at  maturity  without 
default.       §  565. 
Paper,  credited  as  paper,  is  not  a  general  deposit. 
§  289  d.         Fraud  or  concealment  on  the  part  of  the  depositor  will  \'itiate 
the  contract  of  deposit,  and  make  it  voidable  at  the  option 
of  the  bank. 
§  289  e.  Suits  by  depositors. 

Writings  in  the  Course  op  Banking  Business. 

§  290.  Deposit  tickets,  pass-books,  books  of  the  bank,  and  their  effect. 

All  entries  and  written  statements  contained  in  the  above,  made 

§  291.  in  the  course  of  business,  are  merely  -prima  facie  evidence, 

(c)      and  are  subject  to  control  by  parol.     The  books  of  the  bank 

538 


GEXERAL    DEPOSIT 

§  295.  are  more  open  to  error  than  the  pass-books,  for  these  last 

usually  contain  orij^inal  entries  made  at  the  time  of  deposit, 
while  the  books  of  the  bank  are  written  up  afterward  by 
copying,  so  admitting  of  more  chanoe  of  error. 

§  295  /.  Parol  is  admissible  to   supplj'  the  place  of  a  record  in  the 

books  of  the  bank,  even  though  statute  law  requires  the 
bank  to  keep  a  record  of  transactions  of  the  nature  of  the 
one  to  be  proved,  and  this  has  not  been  done. 

§  295  e.         Entries  are  competent  evidence  of  the  nature  of  a  deposit, 
as  general,  special,  or  specific. 
Are  admissible   in   favor   of   bank.     §  295.     Or   against   it. 
§  171  i. 

§§  290,  291.  Mistakes  may  be  corrected  by  either  party,  subject  to  the 
rule  that  each  party  must  bear  any  loss  resulting  to  the 
other  by  reason  of  acting  on  the  faith  of  an  entry  made 
by  him,  or  his  negligent  acquiescence. 

§  291.  No  by-law  of  the  bank  can  destroy  this  right  of  correction 

in  the  depositor.  Nothing  short  of  express  agreement 
will  suffice. 

§  292.  Silence  may  estop  the  depositor  as  to  charges  actually  made 

in  account  stated  to  him,  but  cannot  give  authority  for 
future  similar  charges. 

§  295.  The  name  in  the  bank-book  is  not  conclusive  as  to  the  owner- 

ship of  the  deposit. 
Proof  of  entries  should  be  by  the  entering  clerk,  if  possible. 

§  294.  Right  of  depositor  to  inspect  books  is  confined  to  such  por- 

tions as  concern  his  own  transactions  with  the  bank. 

§  294  a.         Right  of  others  to  know  the  state  of  a  depositor's  account  is 

(1)  conceded  in  the  case  of  a  garnishee  creditor,  but  has  been 

(2)  denied  as  to  check-holders  and  as  to  third  persons  in  general. 
This,  so  far  as  concerns  a  cheek-holder  in  case  of  insuffi- 
cient funds,  is  questionable.  The  depositor  has  trans- 
ferred to  him  his  own  right  in  the  deposit,  right  of  in- 
quiry and  all ;  it  is  his  (the  check-holder's)  deposit  on 
presentation  of  the  check,  if  he  sees  fit  to  accept  it,  and 
he  may  not  be  able  to  decide  that  until  he  knows  the 
amount. 

§  296.     Certificate  of  Deposit.     (See  Analysis,  §  29G.) 

§  309.     Interest  Accounts. 

A  general  deposit  bears  no  interest  e.xcept  by 

(1)  {b)  Agreement. 

(2)  Usage  or  course  of  dealing. 

(3)  After  unjustifiable  delay  or  refusal  of  paj'ment. 

(b)  Usury  Laws  cannot  be  overcome  by  usage.  (So  it  is  said 
by  the  judges,  in  spite  of  the  fact  that  discounting  and 
"rests",  which  by  force  of  usage  have  claimed  and  secured 
recognition  by  the  law,  do  circumvent  the  usury  laws.) 

(d)  Death,  Insolvency,  or  Settlement  terminates  a  contract 
as  to  rate  of  interest  on  a  deposit  and  thereafter  interest  is 
calculated  at  the  ordinary  rate  for  simple  debt. 

§  327.     Appropri.\tion  of. 

539 


§  289  GENERAL   DEPOSIT 

§  289.  Relation  of  the  Customer  on  a  Simple  Deposit  Account.  — ■ 
The  ordinary  relation  existing  between  a  bank  and  its  customer," 
if  not  complicated  by  any  further  transaction  than  that  of  the 
depositing  and  withdrawing  of  moneys  by  the  customer  from  time 
to  time,  is  simply  that  of  debtor  and  creditor  at  common  law,^ 
whether  the  deposit  ^"  is  on  demand  or  on  time.^  The  original 
and  every  subsequent  deposit  by  the  customer  is  in  strict  legal 
effect  a  loan  ^"^  by  the  customer  to  the  bank,  and  e  converso  every 
payment  by  the  bank  to  or  on  account  of  the  customer  is  a  repay- 
ment of  the  loans  yro  tanto?^ 

All  sums  paid  into  the  bank  on  general  deposit  by  the  same  or 
different  depositors  form  one  blended  fund.^  So  soon  as  the  money 
has  been  handed  over  by  the  payer,  it  is  at  once  the  proper  money 
of  the  bank.''  It  enters  into  the  general  fund  and  capital,  and  is 
undistinguishable  therefrom.     Thereafter  the  depositor  has  only  a 

"  §  289.  The  deposit  of  money  in  the  name  of  G.  and  the  delivery  of 
the  pass  book  to  her  makes  her  a  customer  of  the  bank.  Second  National 
Bank  v.  Gibboney,  43  Ind.  App.  492,  87  N.  E.  1064  (1908). 

1  Bank  of  RepubHc  v.  Millard,  10  Wall.  152,  19  L.  ed.  897 ;  Neely 
V.  Rood,  54  Mich.  1.34,  19  N.  W.  920 ;  Perley  v.  Muskegon  County,  32  Mich. 
132  (1875) ;  Commercial  Bank  v.  Hughes,  17  Wend.  (N.  Y.)  100;  Foley 
V.  Hill,  2  H.  L.  Cas.  (Eng.)  278;  Engel  v.  O'MaUey,  219  U.  S.  128,  55  L. 
ed.  128,  31  Sup.  Ct.  190  (1910). 

1"  The  term  "deposit"  under  the  Vermont  Tax  Act  means  the  credit 
which  the  depositor  receives  for  the  money  deposited.  State  v.  Clement 
National  Bank,  84  Vt.  167,  78  Atl.  944,  1912D  Ann.  Cas.  22,  n. 

An  agreement  that  a  party  may  check  on  the  bank  for  a  car  load  of 
horses  is  equivalent  to  putting  the  amount  of  money  necessary  to  purchase 
the  horses  at  his  credit  for  that  purpose.  Falls  City  State  Bank  v.  Wehrli, 
68  Neb.  75,  93  N.  W.  994  (1903). 

2  Williams  v.  Rogers,  14  Bush  (Ky.)  776. 

2"  A  deposit  is  neither  a  loan  nor  a  bailment  in  the  strict  sense  but  is 
a  transaction  peculiar  to  banking.  Elliott  v.  Capital  City  State  Bank, 
128  Iowa  275,  103  N.  W.  777,  111  Am.  St.  Rep.  198,  1  L.  R.  A.  (n.  s.) 
1130,  n.  (1905).  See  also  Hunt  v.  Hopley,  120  Iowa  695,  95  N.  W.  205 
(1903) ;  State  v.  Corning  State  Sav.  Bank,  136  Iowa  79,  113  N.  W.  500 
(1907) ;  Officer  v.  Officer,  120  Iowa  389,  94  N.  W.  947,  98  Am.  St.  Rep. 
365,  n.  (1903) ;  Boyd  v.  Schneider,  131  Fed.  223  (1904)  ;  Warren  v.  Nix, 
97  Ark.  374,  135  S.  W.  896  (1911) ;  Pendleton  v.  Commonwealth,  110  Va. 
229,  65  S.  E.  536  (1909). 

In  the  popular  sense  a  deposit  is  a  receipt  of  money  for  safe  keeping. 
Engel  V.  O'MaUey,  219  U.  S.  128,  55  L.  ed.  128,  31  Sup.  Ct.  190  (1910). 

^^  Schinotti  v.  Whitney,  130  Fed.  780  (1904). 

^  Devaynes  v.  Noble,  1  Mer.  (Eng.)  541 ;  Bodenham  v.  Purchas,  2 
Barn.  &  Aid.  (Eng.)  39;  Henniker  v.  Wigg,  4  Q.  B.  (Ad.  &  El.)  (Eng.) 
792;   Commercial  Bank  of  Albany  v.  Hughes,  17  Wend.  (N.  Y.)  94. 

4  Seward  County  Commissioners  v.  Cattle,  14  Neb.  144,  15  N.  W.  337  ; 
Citizens'  State  Bank  v.  Worden,  95  Neb.  53,  144  N.  W.  1064  (1914)  % 
Davenport  v.  State  Banking  Co.,  126  Ga.  136,  54  S.  E.  977,  115  Am.  St. 

540 


REK.\TIOX    OF   THE    CUSTOMER    OX    A    SIMPLE    DEPOSIT    ACCOUNT      §  289 

debt  owing  him  from  the  bank ;  a  chose  in  action,  not  any  specific 
money,  or  a  right  to  any  specific  money.'' 

This  relation  of  debtor  and  creditor  is  not  changed  by  reason  of 
the  fact  that  the  depositor  "  purchases  "  from  the  bank  two  drafts 
on  another  bank,  and  pays  therefor  by  his  check  against  his  deposit, 
and  leaves  the  draft  at  the  bank.  Such  a  transaction  does  not 
constitute  the  bank  a  trustee  of  the  drafts,  entitling  the  depositor 
to  a  preference  over  general  creditors,  the  bank  having  become 
insolvent.^" 

(a)  A  bank  may  assume  the  functions  of  trustee,  quasi  trustee, 
factor,  or  agent,  as  we  have  seen ;  ^  but  as  to  a  simple  deposit  for 
general  credit  all  efforts  to  hold  the  bank  to  the  duties  of  these 
relations  have  failed  both  in  England  and  the  United  States,  the 
courts  uniformly  holding  the  relation  to  be  that  of  debtor  and 
creditor.*^ 

Rep.  68,  n.,  8  L.  R.  A.  (n.  s.)  944,  n.  (1906) ;  McGregor  v.  Battle,  128 
Ga.  577,  58  S.  E.  28,  13  L.  R.  A.  (n.  s.)  185,  n.  (1907). 

In  effect  the  money  is  kept  under  the  control  of  the  depositor.  Warren 
V.  Nix,  97  Ark.  374,  135  S.  W.  896  (1911). 

*  Marine  Bank  v.  Fulton  Bank,  2  Wall.  252,  17  L.  cd.  785 ;  Thompson 
V.  Riggs,  4  Wall.  663,  18  L.  ed.  704  ;  National  Bank  of  Republic  v.  Millard, 
10  Wall.  152,  19  L.  ed.  897 ;  .-Etna  National  Bank  v.  Fourth  National 
Bank,  46  N.  Y.  82 ;  Carr  v.  National  Security  Bank,  107  :Mass.  45 ;  First 
National  Bank  v.  Ocean  National  Bank,  60  N.  Y.  278 ;  Warren  v.  Nix, 
97  Ark.  374,  135  S.  W.  896  (1911) ;  Davenport  v.  State  Banking  Co.,  126 
Ga.  136,  54  S.  E.  977,  115  Am.  St.  Rep.  68,  n.,  8  L.  R.  A.  (x..  s.)  944,  n. 
(1906) ;  Citizens'  State  Bank  v.  Worden,  95  Neb.  53,  144  N.  W.  1064 
(1914) ;  Hoskins  v.  Velasco  National  Bank,  48  Tex.  Civ.  App.  246,  107 
S.  W.  598  (1908) ;  Templeman  v.  Hutchings,  24  Tex.  Civ.  App.  1,  57  S. 
W.  868  (1900) ;  New  York  County  National  Bank  v.  Massey,  192  U.  S. 
138,  48  L.  ed.  380,  24  Sup.  Ct.  199  (1904). 

6"  Jewett  I'.  Yardley,  81  Fed.  920  (1897). 

8  See  Grant  on  Bankers  and  Banking,  3d  ed.,  pp.  5,  11  ;  Crosskill  v. 
Bower,  32  Beav.  (Eng.)  86 ;  32  L.  J.  Ch.  (Eng.)  540 ;  Shiells  v.  Blaek- 
burne,  1  H.  Bl.  159  (per  Lord  Loughborough). 

'  EngUsh  cases:  Foley  v.  Hill,  2  H.  L.  Cas.  39;  Crosskill  v.  Bower, 
32  Beav.  86;  Carr  v.  Carr,  1  Mer.  541,  n. ;  Bishop  v.  Countess  of  Jersey, 
2  Drew.  143;  Devaynes  v.  Noble,  1  ISIer.  .541 ;  Bellamy  v.  Majoribanks, 
8  Eng.  L.  &  Eq.  517 ;  Sims  ;).  Bond,  5  Barn.  &  Ad.  .392 ;  2  Nev.  &  [Man. 
608;  Watts  v.  Christie,  11  Beav.  456;  Pott  v.  Clegg,  16  M.  &  W.  321; 
In  re  Agra  &  Masterman's  Bank,  Ex  parte  Waring,  36  L.  J.  Ch.  151 ; 
Grant  on  Bankers  and  Banking,  p.  4.  American  cases :  National  Bank 
V.  Eliot  Bank  (in  which,  however,  there  is  a  long  dissenting  opinion, 
delivered  by  Abbott,  J.),  20  Law  Rep.  (O.  S.)  138;  10  Monthly  L.  Rep. 
N.  s.  138;  Commercial  Bank  of  Albany  v.  Hughes,  17  Wend.  (N.  Y.) 
94;  Bullard  v.  Randall,  1  Grav  (Mass.)  605;  Chapman  v.  White,  2  Seld. 
(N.  Y.)  412;  Downes  c.  Phrenix  Bank,  6  Hill  (N.  Y.)  297;  Foster  v. 
Essex  Bank,  17  Mass.  479 ;  Bank  of  Northern  Liberties  i>.  Jones,  42  Pa. 
St.  536;    Marsh  v.  Oneida  Central  Bank,  34  Barb.  (N.  Y.)  298  (citing 

541 


§  289  GENERAL   DEPOSIT 

It  follows  that,  the  act  of  deposit  having  been  once  consum- 
mated, nothing  short  of  payment  on  the  part  of  the  bank,  or  some 

many  authorities) ;  Curtis  v.  Leavitt,  15  N.  Y.  9 ;  Bank  of  the  Repubhe 
V.  Millard,  10  Wall.  152,  19  L.  ed.  897 ;  Bank  v.  Brewing  Co.,  50  Ohio  St. 
151  (1893) ;  Clason  v.  City,  4G  La.  Ann.  1  (1894) ;  Eshleman  v.  Bolenius,  144 
Pa.  St.  269,  22  Atl.  758;  Law's  Estate,  id.,  499;  Hawes  v.  Blackwell,  107 
N.  C.  200,  12  S.  E.  245  (1890),  citing  Boyden  v.  Bank,  65  N.  C.  13;  Ship- 
man  et  al.  V.  Bank,  126  N.  Y.  318,  27  N.  E.  371 ;  O'Connor  v.  Mechanics' 
Bank,  124  N.  Y.  324,  26  N.  E.  816 ;  Alston  v.  State,  92  Ala.  124,  9  So.  732 
(1890) ;  Southern  Hardware  Co.  v.  Lester,  166  Ala.  86,  52  So.  328  (1910) ; 
Curtis  V.  Parker,  136  Ala.  217,  33  So.  935  (1903) ;  Steelman  v.  Atchley,  98 
Ark.  294,  135  S.  W.  902,  32  L.  R.  A.  (n.  s.)  1060  (1911) ;  Bank  of  Hartford 
V.  McDonald,  107  Ark.  232,  154  S.  W.  512  (1913) ;  Covey  v.  Cannon, 
104  Ark.  550,  149  S.  W.  514  (1912) ;  Smiths'  Cash  Store  v.  First  National 
Bank,  149  Cal.  32,  84  Pac.  663,  5  L.  R.  A.  (n.  s.)  870,  n.  (1906) ;  Manitou 
V.  First  National  Bank,  37  Colo.  344,  86  Pac.  75  (1906) ;  Patten  v.  Amer- 
ican National  Bank,  15  Colo.  App.  479,  63  Pac.  424  (1900) ;  National 
Dredging  Co.  v.  Farmers'  Bank,  6  Penn.  (Del.)  580,  69  Atl.  607,  130 
Am.  St.  Rep.  158,  16  L.  R.  A.  (n.  s.)  .593  (1908) ;  Camp  v.  First  National 
Bank,  44  Fla.  497,  33  So.  241,  103  Am.  St.  Rep.  173  (1902) ;  Lamar  v. 
Taylor,  141  Ga.  227,  80  S.  E.  1085  (1913) ;  Woodhouse  v.  Crandall,  197 
111.  104,  64  N.  E.  292,  58  L.  R.  A.  385  (1902) ;  Sacks  v.  Sacks,  181  111. 
App.  342  (1913) ;  Shopert  v.  Indiana  National  Bank,  41  Ind.  App.  474,  83 
N.  E.  515  (1907) ;  McBee  v.  Purcell  National  Bank,  1  Ind.  T.  288,  37 
S.  W.  55  (1896) ;  Kuhnes  v.  Cahill,  128  Iowa  594,  104  N.  W.  1025  (1905) ; 
Commercial  Banldng  etc.  Co.  v.  Citizens'  Trust  etc.  Co.,  153  Ky.  566, 
156  S.  W.  160,  1915C  Ann.  Cas.  166,  n.,  45  L.  R.  A.  (n.  s.)  950,  n. ; 
Robinson  v.  Bank  of  Pikeville,  146  Ky.  538,  142  S.  W.  1065,  37  L.  R.  A. 
(n.  s.)  151,  n.  (1912) ;  American  National  Bank  v.  Morey,  113  Ky.  857, 
66  S.  W.  759,  101  Am.  St.  Rep.  379,  58  L.  R.  A.  956  (1902) ;  Lonier  v. 
State  Savings  Bank,  149  Mich.  483,  112  N.  W.  1119  (1907) ;  Mitchell  v. 
Bank  of  Indianola,  98  Miss.  658,  54  So.  87  (1910) ;  Kenneth  Inv.  Co.  v. 
National  Bank,  96  Mo.  App.  125,  70  S.  W.  173  (1902) ;  Arnold  v.  Sedalia 
National  Bank,  100  Mo.  App.  473,  74  S.  W.  1038  (1903) ;  First  National 
Bank  v.  City  National  Bank,  102  Mo.  App.  357,  76  S.  W.  489  (1903) ; 
O'Grady  v.  Stotts  City  Bank,  106  Mo.  App.  366,  80  S.  W.  696  (1904) ; 
Butcher  v.  Butler,  134  Mo.  App.  61,  114  S.  W.  564  (1908);  Gupton  v. 
Carr,  147  Mo.  App.  105,  125  S.  W.  849  (1910) ;  Di.xon  v.  Jackson  Exch. 
Bank,  149  Mo.  App.  .585,  129  S.  W.  481  (1910);  Wilson  v.  Farmers' 
Bank,  176  Mo.  App.  73,  162  S.  W.  1047  (1914) ;  Missouri  Pacific  Ry.  Co. 
V.  Continental  National  Bank,  212  Mo.  505,  111  S.  W.  574,  17  L.  R.  A. 
(N.  s.)  999  (1908) ;  Vandagrift  v.  Masonic  Home,  242  Mo.  138,  145  S.  W. 
448  (1912) ;  Citizens'  State  Bank  v.  Worden,  95  Neb.  53,  144  N.  W. 
1064  (1914) ;  State  v.  People's  National  Bank,  75  N.  H.  27,  75  Atl.  542 
(1908),  even  though  the  bank  has  a  savings  department ;  Fricano  v.  Colum- 
bia National  Bank,  118  App.  Div.  567  (1907),  103  N.  Y.  S.  189;  Parks 
V.  Knickerbocker  Trust  Co.,  137  App.  Div.  719  (1910),  122  N.  Y.  S.  521 ; 
Baldwin's  Bank  v.  Smith,  215  N.  Y.  76,  109  N.  E.  138  (1915) ;  Hilsinger 
V.  Trickett,  86  Ohio  St.  286,  99  N.  E.  305,  1913D  Ann.  Cas.  421,  n. ; 
Nodine  v.  First  National  Bank,  41  Or.  386,  68  Pac.  1109  (1902) ;  Com- 
monwealth V.  Stone,  236  Pa.  St.  35,  84  Atl.  659  (1912) ;  hi  re  Pruden- 
tial Trust  Co.'s  Assignment,  223  Pa.  St.  409,  72  Atl.  798  (1909) ;  State 
V.  Grills,  35  R.  I.  70,  85  Atl.  281  (1912) ;   Wagner  v.  Citizens'  Bank  etc. 

542 


KEL.\TION    OF   THE    CUSTOMER   ON    A    SIMPLE    DEPOSIT   ACCOUNT     §  2S9 

act  of  the  depositor  himself,  will  suffice  to  exonerate  it  from  the 
indebtedness  it  has  assumed.'"  The  identical  bag  of  coin  or  roll 
of  bills  in  which  the  deposit  was  made  may  be  stolen,  before  it 
has  been  in  any  i)ractical  manner  commingled  with  the  funds  of  the 
bank;  it  may  be  embezzled  or  fraudulently  misap|)lied  by  an 
officer  of  the  bank ;  still  the  indebtedness  of  the  bank  subsists, 
entirely  unaltered  by  these  circumstances.  Neither  the  inten- 
tional nor  the  accidental  segregation  of  the  specific  moneys  (unless 
by  distinct  agreement  with  the  depositor  a  "  special  deposit  "  is 
effected  ^)  will  enable  the  bank  to  follow  them,  and  to  affect  its 
customer  with  their  fate.^ 

True  Owner  of  General  Deposit  cannot  Follow  it  against  Bona  Fide 

Holder 

(b)  It  also  results  that  the  true  owner  of  a  general  deposit  can- 
not follow  a  payment  made  out  of  it,  for  it  is  the  money  of  the 
bank  that  is  paid.     §§  565,  567,  621. 

D,  drew  on  his  debtor,  H.,  and  sent  the  draft  to  bank  B.  for 
collection.  H.  paid  a  part  properly,  and  directed  the  bank  where 
the  firm  of  H.  and  S.  had  their  deposit  to  pay  the  remainder  from 

Co.,  122  Tenn.  164,  122  S.  W.  245,  135  Am.  St.  Rep.  869,  28  L.  R.  A. 
(n.  s.)  484,  n.  (1909);  State  t'.  Clement  National  Bank,  84  Vt.  167, 
78  All.  785,  1912D  Ann.  Cas.  22,  n. ;  Wood  v.  American  National 
Bank,  100  Va.  306,  40  S.  E.  931  (1902) ;  Nolting  v.  National  Bank,  99 
Va.  54,  37  S.  E.  804  (1901)  ;  Brown  v.  Lynchburg  National  Bank,  109 
Va.  530,  64  S.  E.  950  (1909) ;  In  re  Salmon,  145  Fed.  649  (1906) ;  Levy 
V.  Larson,  167  Fed.  110  (1909)  ;  Havana  Central  R.  Co.  v.  Central  Trust 
Co.,  204  Fed.  546  (1913) ;  New  York  Countv  Bank  v.  Massey,  192  U.  S. 
138,  48  L.  ed.  380,  24  Sup.  Ct.  199  (1912) ;  Burton  v.  United  States,  196 
U.  S.  283,  49  L.  ed.  482,  25  Sup.  Ct.  243  (1904);  Kepitigalla  Rubber 
Estate  V.  National  Bank  (1909),  2  K.  B.  1010. 

'"  Robinson  v.  Bank  of  Pikeville,  146  Ky.  538,  142  S.  W.  1065,  37  L. 
R.  A.  (N.  s.)  151,  n.  (1912). 

The  bank  assumes  no  further  obligation  than  to  pay  the  amount  re- 
ceived when  it  sliall  hv  demanded  at  the  l)anking  house.  Elliott  r.  Cajntal 
City  State  Bank,  128  Iowa  275,  103  N.  W.  777,  111  Am.  St.  Rep.  198, 
1  L.  R.  A.  (N.  s.)  11.30  (1905).  • 

When  the  bank  of  C.  wired  the  L.  N.  Bank  that  the  A.  Co.  had  deposited 
with  it  for  credit  of  the  L.  N.  Bank  for  use  of  B.  SIOOO  whicli  telegram  was 
received  after  lianking  hours,  and  the  order  was  countermanded  by  wire 
the  following  morning  liofore  credit  had  been  given  thereof  and  liofore  the 
rights  or  liabilities  of  B.  or  other  parties  had  been  incurred  in  regard  thereto 
the  bank  of  C.  had  the  right  to  countermand  sucli  order  and  the  L.  N. 
Bank  was  not  liable  to  B.  for  such  dejiosit.  Brinton  c.  Lewiston  National 
Bank,  11  Idaho  92,  81  Pae.  112  (1905). 

8  Marine  Bank  v.  Fulton  Bank,  2  Wall.  252,  17  L.  ed.  785. 

543 


§  289  GENERAL  DEPOSIT 

this  deposit,  which  was  done.  Held,  that  neither  the  firm  nor  S. 
could  recover  from  D.  D.  did  not  receive  any  money  of  the  firm, 
for  the  money  on  deposit  in  the  bank  was  not  the  firm's  money, 
but  the  bank's.^" 

Insolvency.     Deposit  after  Banking  Hours  Kept  Separate,  etc. 

(c)  The  relation  of  the  depositor  to  the  bank  being  that  of  a 
simple  creditor,  if  the  bank  goes  into  insolvency  the  depositor  has 
no  right  to  any  preference  ;  but  shall  come  in  like  any  other  ordi- 
nary creditor.^^  But  if  a  deposit  is  never  really  received  by  the 
bank,  it  may  be  recovered  by  the  crown  as  against  the  creditors  of 
the  bank  upon  its  failure ;  as  where  the  deposit  was  kept  separate 
and  not  credited,  it  being  paid  in  after  banking  hours  on  the  day 
before  failure  ^^  (the  bank  did  not  again  open  after  receiving  the 
deposit).  But  where  it  has  been  customary  to  make  deposits 
after  banking  hours  and  treat  them  as  proper  deposits,  and  a  de- 
posit is  received  as  usual,  subsequent  insolvency  cannot  affect 
the  case.^^  And  even  insolvency  (actual  but  not  yet  avowed)  at 
the  time  of  receiving  a  deposit,  whether  known  or  not  to  the  officers 
of  the  bank,  will  not  prevent  the  property  from  passing  to  the 
bank,  unless  the  reception  of  it  amounts  to  a  fraud  on  the  depositor. 
(§629.) 

Deposit  in  Forged  Paper  or  Base  Coin 

(d)  If  the  deposit  be  made  in  forged  paper  or  in  base  coin, 
although  the  nominal  amount  be  duly  passed  to  the  depositor's 
credit,  yet  no  indebtedness  shall  accrue ;  for  a  deposit  made  in  such 
material  is  not  a  payment,  and  can  in  no  wise  affect  the  relationship 
previously  existing  between  the  parties.  It  goes  absolutely  for 
nothing  ;  and  as  it  is  a  familiar  rule  that  the  transfer  of  such  worth- 
less stuff  could  not  discharge  a  debt,  so,  on  the  other  hand,  it  is 
equally  clear  that  it  cannot  create  one.^^ 

9  Concord  v.  Concord  Bank,  16  N.  H.  26 ;  Commercial  Bank  of  Al- 
bany V.  Hughes,  17  Wend.  (N.  Y.)  94. 

10  Davis  V.  Smith,  29  Minn.  201,  12  N.  531  (1882). 

u  In  re  Franklin  Bank,  1  Paige  (N.  Y.)  249.     See  §§  565,  621. 

12  Threlfal  v.  Giles,  cited  2  M.  &  Rob.  492 ;  Sadler  v.  Belcher,  id.,  489. 

13  Ex  parte  Clutton,  1  Fonb.  167. 

1^  Bank  of  United  States  v.  Bank  of  Georgia,  10  Wheat.  333,  6  L.  ed. 
334 ;  Corbit  v.  Bank  of  Smyrna,  2  Harr.  (Del.)  235 ;  Gloucester  Bank  v. 
Salem  Bank,  17  Mass.  33 ;  Jones  v.  Ryde,  5  Taunt.  488 ;  1  Com.  Law 
166  ;  Markle  v.  Hatfield,  2  .Johns.  (N.  Y.)  455  ;  Young  v.  Adams,  6  Mass. 
182;  Wilson  v.  Foree,  6  Johns.  (N.  Y.)  110. 

544 


RELATION    OF    THE    CUSTOMER    OX    A    SIMPLE    DEPOSIT    ACCOUNT      §  289 

Forged  Bills  of  the  Depositor 

If  a  bank  receives  its  own  pretended  bills,  it  cannot  object  after 
it  has  allowed  several  days  to  go  by,  for  it  should  know  its  own 
bills.^'^  This,  however,  is  not  in  accord  with  the  best  views  on  this 
subject,  unless  it  be  added  that  its  failure  to  discover  the  forgery  is 
through  negligence,  and  that  correction  of  the  error  would  leave 
the  depositor  in  a  worse  position  than  if  the  bills  had  been  refused. 
A  forged  promise  is  no  promise,  it  lacks  the  consent  necessary  to  a 
contract ;  receiving  it  without  knowing  the  facts  cannot  be  a 
ratification,  and  the  only  other  ground  of  holding  the  bank  is 
neglect  and  damage. 

Bills  of  Insolvent  Bank.     Fraud  of  Depositor 

If  bills  of  another  bank  are  received  on  deposit,  and  it  turns  out 
that  that  bank  is  insolvent,  the  best  view  is  that  the  loss  must 
fall  on  the  bank,  \\hether  the  insolvency  be  before  or  after  de- 
positing the  bills.^'^" 

Any  fraud  or  concealment  on  the  part  of  the  depositor  will 
throw  the  loss  on  him  in  any  of  these  cases. 

(e)  Suits  by  Depositor.  —  Though  the  items  on  general  deposit 
constitute  a  running  account,  yet  it  is  not  of  such  a  nature  that  a 
bill  in  equity  for  an  accounting  will  lie.  At  any  time  the  simple 
striking  of  a  balance  between  the  two  columns  of  debits  and  credits 
will  show  a  sum  which  is  a  simple  debt ;  so  that  there  is  in  fact  no 
ground  on  which  an  accounting  can  be  demanded  in  equity.  An 
ordinary  action  of  debt  will  lie  on  behalf  of  the  depositor,  and  if  the 
bank  answer  payment  or  discharge,  it  is  matter  of  common  law, 
where  the  remedy  for  either  party  is  perfect.  Neither,  as  has  been 
stated,  is  there  a  fiduciary  relation  of  any  nature  whatsoever 
between  the  parties  which  could  justify  recourse  to  equity.  Suit 
will  lie  on  the  common  money  counts.  This  has  been  coiiclusi\ely 
settled  by  the  sound  decision  given  by  the  House  of  Lords  in  the 
case  of  Foley  v.  Hill.^" 

It  has  been  said  that  the  bank  is  debtor  to  the  depositor  for  the 
balance  of  his  deposit  account.  But  though  the  relationship  be- 
tween the  bank  and  the  depositor  is  in  nearly  all  respects  that  of 

IS  Bank  of  the  United  States  v.  Bank  of  Georgia,  10  Wheat.  33S,  0  L. 
ed.  334.     See  §§  633,  G59. 
i5«  See  §§  633,  662. 

VOL.  I  —  35  545 


§  289  GENERAL  DEPOSIT 

simple  debtor  and  creditor,  yet  the  usages  of  the  banking  business 
have  introduced  certain  special  rules.  For  example,  the  usage  of 
banks  to  make  payments  only  in  response  to  checks,  drafts,  or 
notes  made  payable  at  the  bank  of  the  promisor,  has  given  rise 
to  the  rule  that  ordinarily  an  action  cannot  be  maintained  by  a 
depositor  against  a  bank  to  recover  the  amount  of  his  deposit 
until  a  formal  demand  has  been  made.  The  bringing  an  action 
does  not  amount  to  a  demand  in  such  cases.^''     (§  322.) 

But  if  it  appears  that  demand  would  have  been  useless,  as  where 
the  bank  denies  that  there  ever  was  a  deposit,  suit  may  be  brought 
without  prior  demand.^* 

§  290.  Deposit  Tickets,  Pass-Books,  Bank-Books,  and  their 
Effect.  —  Summary  :  IVIistakes  in  bank  accounts  are  common,  by 
charging  unreal  payments,  or  excessive  payments,  or  omitting 
proper  credits,  or  incorrect  figuring,  and  the  writing  up  of  a  bank- 
book or  return  of  vouchers  does  not  preclude  inquiry  into  the 
correctness  of  the  account  rendered.^ 

A  bank-book  is  prima  facie  evidence,  but  no  more,^  and  is  open 
to  explanation  by  parol  evidence,  or  it  is  not  a  contract.^  As 
between  the  bank  and  its  depositor,  the  entry  of  debits  in  the  pass- 
book and  striking  a  balance  are  a  statement  of  account,  and  the 
delivery  of  the  book  to  the  depositor  and  its  retention  by  him 
without  objection  make  it  a  stated  account,^"  and  a  retention  for 
many  months  and  drawing  out  the  exact  balance  shown  on  the 
book  afford  clear  evidence  of  a  settled  as  well  as  a  stated  account, 
and  prima  facie  establishes  the  accuracy  of  the  items.^ 

If  the  depositor  acts  on  faith  of  the  account  in  a  manner  he 
would  not  have  done  but  for  faith  in  its  correctness,  the  bank  is 
bound, ^  or  if  the  depositor  neglects  to  make  such  examination  as  a 
prudent  man  would  make  of  his  accounts,  and  the  bank,  acting  in 

i«  2  H.  L.  Cas.  28. 

"  Chemical  National  Bank  v.  Bailey,  12  BlatcM .  480 ;  Payne  v.  Gard- 
ner, 29  N.  Y.  146. 

But  in  McKnigM  v.  Bank  of  Acadia,  114  La.  289,  38  So.  172  (1905),  it 
is  said  that  a  suit  is  a  judicial  demand  for  the  money  due  plaintiff  on 
deposit  account. 

18  Miller  v.  Bank,  172  Pa.  197,  33  Atl.  684. 

1  §  290.  First  National  Bank  v.  Whitman,  94  U.  S.  346,  24  L.  ed.  229 ; 
Mechanics'  Bank  v.  Earp,  4  Rawle  (Pa.)  384  ;  Bucklin  v.  Chapin,  1  Lans. 
(N.  Y.)  443  ;  FoUansbee  v.  Parker,  70  111.  11 ;  Bullock  v.  Boyd,  2  Edw.  Ch. 
(N.  Y.)  293;  Bruen  v.  Hone,  2  Barb.  (N.  Y.)  .586;  Schneider  v.  Irving 
Bank,  1  Daly  (N.  Y.)  500 ;  French  v.  Eastern  Trust  and  Banking  Co.,  91 
Me.  485,  40  Atl.  327  (1898) ;  Lieber  v.  Fourth  National  Bank,  137  Mo. 
App.  158,  117  S.  W.  672  (1909). 

546 


DEPOSIT  TICKETS,  PASS-BOOKS,  BANK-BOOKS,  AXD  THEIR  EFFECT     §  290 

good  faith  or  omitting  to  act  by  reason  of  his  silence,  puts  itself 
in  such  position  that  correction  would  injure  it,  the  depositor  is 
bound.  ^ 

Pass-Book  not  Negotiable 

A  pass-book  or  other  book  of  account  is  not  negotiable,  and  can- 
not be  rendered  so  by  any  agreement  of  the  parties  that  the  balance 
shall  be  payable  "  to  order."  ^ 

An  assignment  of  a  deposit  slip  is  not  an  assignment  of  the  debt 
acknowledged  thereby.^" 

A  deposit  ticket  may  be  controlled  by  parol.    It  is  not  a  contract, 

2  Featherston  v.  Norris,  7  S.  C.  472 ;  s.  c.  14  S.  C.  624 ;  State  ex 
rel.  Van  Wyck  v.  Norris,  15  S.  C.  241 ;  Union  Bank  v.  Knapp,  3  Pick. 
(Mass.)  96;  Davis  t'.  Lenawee  Countj'  Savings  Bank,  53  Mich.  103, 
18  N.  W.  629  ;  Taleott  v.  National  Bank,  53  Kan.  480,  30  Pac.  1066  (1894) ; 
Marine  Bank  v.  Stirling,  115  Md.  90,  80  Atl.  736  (1911) ;  First  National 
Bank  v.  Peck,  180  Ind.  649,  103  N.  E.  643  (1913) ;  Boyd's  Ex's  v.  First 
National  Bank,  128  Ky.  468,  108  S.  W.  360  (1908) ;  Corbin  Banking  Co. 
V.  Bryant,  151  Ky.  194,  151  S.  W.  393  (1912)  ;  Quattroehi  Bros.  v.  Farmers' 
etc.  Bank,  89  ]SIo.  App.  500  (1901) ;  Lucks  v.  Northwestern  Sav.  Bank, 
148  Mo.  App.  376,  128  S.  W.  19  (1910). 

^  Nodine  v.  First  National  Bank,  41  Or.  386,  68  Pac.  1109  (1902) ; 
Pospisil  V.  Hajicek,  190  111.  App.  638  (1914). 

The  rule  that  when  an  account  is  rendered  its  retention  for  a  long 
time  without  objection  becomes  an  account  stated  docs  not,  as  a  general 
proposition,  apply  between  banker  and  customer.  As  between  them  some 
superior  equity  would  have  to  intervene  to  preclude  the  customer  from 
objecting  to  illegal  items  charged  against  him.  IMcGraw  v.  Traders'  Na- 
tional Bank,  64  W.  Va.  509,  03  S.  E.  398  (1908). 

3  Clark  V.  National  Bank  of  City  of  New  York,  11  Daly  (N.  Y.)  239; 
Shipman  cl  al.  v.  Bank,  126  N.  Y.  318,  27  N.  E.  371 ;  Corbin  Banking  Co. 
V.  Bryant,  151  Ky.  194,  151  S.  W.  393  (1912) ;  Pospisil  v.  Hajicek,  190  111. 
App.  638  (1914) ;  Kenneth  Inv.  Co.  v.  National  Bank,  96  ISIo.  App.  125, 
70  S.  W.  173  (1902). 

*  SkjTing  V.  Greenwood,  4  Barn.  &  Cr.  281 ;  Heane  v.  Rogers,  9  Barn. 
&  Cr.  577  ;   Hume  v.  Bolland,  1  C.  &  M.  130. 

5  Dana  v.  National  Bank,  132  Mass.  150 ;  Leather  ISIanufacturers' 
Bankv.  Morgan,  117  U.  S.  96,  29  L.  ed.  811,  6  Sup.  Ct.  657;  Scanlon- 
Gipson  Lumber  Co.  v.  Germania  Bank,  90  Minn.  478,  97  N.  W.  380  (1903)  ; 
Brown  r.  Lynchville  National  Bank,  109  Va.  530,  04  S.  E.  950  (1909) ; 
National  Dredging  Co.  v.  Farmers'  etc.  Bank,  6  Penn.  (Del.)  580,  69  Atl. 
607,  130  Am.  St.  Rep.  158,  16  L.  R.  A.  (n.  s.)  593  (1908);  New  York 
Produce  Exch.  Bank  v.  Houston,  1()9  Fed.  785  (1909)  ;  National  Bank 
of  Commerce  v.  Tacoma  Mills,  182  Fed.  1  (1910).  See  Jordan  ISIarsh 
Co.  V.  National  Shawmut  Bank,  201  Mass.  397,  87  N.  E.  740,  22  L.  R.  A. 
(n.  s.)  250  (1909) ;    Stallo  v.  Wagner,  220  Fed.  360  (1914). 

6  Witte  V.  Vincenot,  43  Cal.  325 ;  Stewart  v.  State,  42  Tex.  242  ;  Bayer 
V.  Commonwealth  Trust  Co.,  144  Mo.  App.  676  (1910). 

<^  First  National  Bank  v.  Clark,  134  N.  Y.  368,  32  N.  E.  38. 

547 


§  290  GENERAL  DEPOSIT 

but  a  memorandum  or  "  note  to  help  the  memory."  ^  It  is  prima 
facie  evidence  of  the  bank's  Habihty  though  the  deposit  is  not 
credited  on  its  books. ^ 

When  a  depositor  by  mistake  makes  out  the  deposit  sHp  in  the 
name  of  another  the  bank  is  justified  in  giving  credit  to  the  cus- 
tomer whose  name  is  on  the  shp  and  the  depositor  cannot  recover 
the  amount  from  the  bank  even  though  it  was  entered  in  his  pass- 
book.^ 

§291.  Bank-Books,  or  Pass-Books.  —  Expanded  statement: 
The  custom  is  probably  universal  in  this  country  for  every  depositor 
with  a  bank  to  have  his  bank-book,  so  called.  In  England  the 
same  thing  is  called  a  "  passage-book  "  or  "  pass-book."  It  is 
hardly  necessary  to  describe  anything  so  familiarly  known.  In- 
stead of  this  book,  private  bankers  sometimes  give  simple  receipts ; 
or,  more  frequently,  only  render  to  their  customers,  from  time  to 
time,  balanced  accounts. 

Balance  and   Voucher  —  Account  Stated 

(a)  Ordinarily,  whenever  a  deposit  is  made,  the  bank-book  is 
presented  at  the  bank  counter  for  the  purpose  of  having  the  amount 
and  date  of  the  deposit  contemporaneously  entered  therein  by  the 
bank  clerk  or  teller.  At  intervals,  also,  it  is  sent  into  the  bank  to  be 
balanced  by  the  proper  officer;  after  which  it  is  returned  to  the 
depositor,  customarily  accompanied  by  all  his  checks  which  have 
been  paid  by  the  bank  since  the  date  of  the  next  preceding  balanc- 
ing. It  will  be  seen  that  the  chief  value  of  the  book  is  that  the 
depositor  may  have  a  species  of  check  upon  the  bank,  and  may  use 
it  as  evidence  upon  the  occurrence  of  any  dispute  and  lawsuit. 
The  entries  in  the  bank-book,  made  by  the  proper  officer,  bind  the 
bank  as  admissions. °  Especially  the  balancing  of  the  book  is 
conclusive  upon  the  bank,  in  the  same  manner  as  an  account 
stated."*^ 

^Weisinger  v.  Bank,  10  Lea  (Tenn.),  330;  First  National  Bank  v. 
City  National  Bank,  102  Mo.  App.  357,  76  S.  W.  489  (1903). 

A  deposit  slip  is  a  mere  acknowledgment  by  the  bank  that  the  amount 
named  has  been  received,  and  does  not  purport  to  embody  the  contract 
between  the  parties  and  cannot  affect  the  rights  of  parties  under  an 
agreement.  Fort  v.  First  National  Bank,  82  S.  C.  427,  64  S.  E.  405 
(1908). 

8  American  National  Bank  v.  Presnall,  58  Kan.  69,  48  Pae.  556  (1897). 

9  Schwartz  v.  State  Bank,  135  App.  Div.  42  (1909),  119  N.  Y.  S.  763. 

548 


BANK-BOOKS,    OR    PASS-BOOKS  §  291 

Entries  are  only  Receipts  —  Prima  Facie  Evidence  against   Bank 

(6)  But  the  entry  of  credit  for  a  deposit  is  held  to  be  an  original 
entry  only  on  the  supposition  that,  as  in  the  ordinary  course  of 
business  above  described,  the  book  accompanied  the  deposit,  and 
the  entry  was  made  by  the  teller  simultaneously  with  the  receipt 
of  the  money,  and  as  part  of  the  same  transaction.  For  if  the 
book  was  sent  to  be  written  up  afterwards  from  the  books  or 
memoranda  in  possession  of  the  bank,  the  entries  are  not  original, 
and  may  be  examined  into.^  But  the  entry  of  the  credit  is,  after 
all,  only  a  receipt.  It  is  yriina  facie  evidence  against  the  bank, 
and  binds  it  like  any  other  form  of  acknowledgment  or  receipt.^ 
But  apparently  it  binds  no  more ;  and  as  a  receipt  it  is  open  to 
explanation  by  evidence  aliunde.  So  that,  if  the  bank  succeeds  in 
showing  clearly  that  the  entry  is  a  mistake,  it  will  no  longer  be 
binding.^  If  the  correctness  or  incorrectness  of  the  entry  be 
disputed  between  the  customer  and  the  bank,  a  question  of  fact 
is  thereby  made  for  the  jury."* 

A  deposit  is  deemed  to  be  made  at  the  time  it  is  credited  in 
the  pass-book  by  the  cashier,  although  not  entered  on  the  books 
of  the  corporation  until  some  da^'s  later.^" 

Also  as  against  Depositor,  and  can  be  Controlled  by  Parol 

(c)  But  the  most  difficult  questions  arise  in  considering  to  what 
extent  the  bank-book  can  be  regarded  as  binding  upon  the  deposi- 
tor. In  the  simple  case  of  an  erroneous  entry  by  the  receiving 
teller,  of  course  the  customer  may  insist  upon  correction.  Even 
where,  when  making  his  deposit,  he  also  hands  in  with  it  the  ordi- 
nary memorandum  stating  what  sums  he  is  depositing,  and  the 
receiving  teller's  entry  corresponds  with  this  memorandum,  he 
may  afterward  be  allowed  to  show  that  both  his  memorandum  and 

"§291.  Wasson  v.  Lamb,  120  Ind.  515,  22  N.  E.  729;  Arnold  v. 
Hart,  176  111.  442,  52  N.  E.  936  (1898) ;  Second  National  Bank  v.  Gibboney, 
43  Ind.  App.  492,  87  N.  E.  1064  (1908). 

But  the  entry  cannot  he  regarded  as  an  admission  when  the  bank 
cancels  the  entry  on  first  detecting  it,  claiming  it  to  be  erroneous.  Lucks 
V.  Northwestern  Sav.  Bank,  148  Mo.  App.  376,  128  S.  W.  19  (1910). 

The  entry  is  in  the  nature  of  a  receipt.  Quattrochi  Bros.  v.  Farmers' 
etc.  Bank,  89  Mo.  App.  500  (1901). 

""  A  balance  struck  in  a  pass-book  is  in  effect  an  account  stated  which 
may  be  impeached  for  fraud  or  error.  Greenhalge  Co.  v.  Farmers'  Na- 
tional Bank,  226  Pa.  St.  184,  75  Atl.  260  (1910). 

1  Manhattan  Co.  v.  Lydig,  4  Johns.  (N.  Y.)  377. 

549 


8  291  GENERAL  DEPOSIT 

the  entry  were  wrong,  and  gave  him  credit  for  too  small  a  sum. 
For  the  bank  is  in  fact  liable  for  precisely  the  amount  of  money  it 
receives.  It  is  the  act  of  receiving  which  by  itself  creates  and 
perfects  the  debt,  and  which  alone  need  be  shown.  The  receipt 
therefore  is  open  to  correction  in  favor  of  the  depositor,  if  it  be 
erroneous.  The  actual  fact  of  the  real  deposit  is  alone  absolutely 
conclusive.'*'' 

No  By-Law  can  Subtract  from  this  Right 

{(1)  This  rule  of  law  is  rigid,  and  can  only  be  dispensed  with 
by  the  express  agreement  of  the  parties.  It  cannot  be  infringed 
or  modified  by  reason  of  any  orders  or  by-laws  of  the  bank.^  When, 
however,  the  book  has  been  balanced  by  the  bank  officer,  has  been 
returned  to  the  depositor  together  with  his  checks,  and  has  been 
retained  by  him  for  any  length  of  time  without  objection,  the  mat- 
ter becomes  less  clear  upon  principle,  and  the  decisions  are,  perhaps, 
not  wholly  harmonious.  The  object  which  the  bank  declares 
itself  to  have  in  view  is  to  put  the  depositor  in  the  way  promptly 
to  discover  and  demand  correction  of  any  mistake  existing  in  its 
account  with  him. 

Acquiescence  in  Account  Stated 

(e)  Accordingly,  it  has  been  held  in  England  that  the  silence  of 
the  customer  for  a  reasonable  time  after  receiving  back  his  books 
and  checks  would  be  deemed  an  admission  on  his  part  of  the  cor- 
rectness of  the  balance.^  It  is  not  that  his  right  to  have  the  book 
amended  to  agree  with  the  fact  has  been  modified ;  but  that  he 
has  lost  that  right  altogether  by  reason  of  his  own  laches  in  failing 
to  demand  the  amendment  earlier.^" 

2  Union  Bank  v.  Knapp,  3  Pick.  (Mass.)  96 ;  Commercial  Bank  of 
Scotland  v.  Rhind,  1  Macq.  H.  L.  Cas.  643 ;  Shaw  v.  Dartnell,  6  Barn.  & 
C.  57 ;  Quattrochi  Bros.  v.  Farmers'  etc.  Bank,  89  Mo.  App.  500  (1901) ; 
Landa  v.  Traders'  Bank,  118  Mo.  App.  356,  94  S.  W.  770  (1906). 

3  Shaw  V.  Picton,  4  Barn.  &  C.  715  ;  French  v.  Eastern  Trust  and  Bank- 
ing Co.,  91  Me.  485  (1898). 

^  Snead  v.  WiUiams,  9  L.  T.  n.  s.  Exch.  115;  Bank  of  Lawrenceville 
V.  Rockmore,  129  Ga.  582,  59  S.  B.  291  (1907). 

*«  Wasson  v.  Lamb,  120  Ind.  514,  22  N.  E.  729. 

^^  The  depositor  is  not  bound  to  examine  his  pass-book  to  discover 
whether  the  cashier  has  blundered  in  counting  the  money  deposited, 
since  in  such  case  the  loss  to  the  bank  is  the  direct  result  of  its  own  gross 
neglect  wliich  can  in  no  case  act  as  an  estoppel  on  the  depositor.  Kemble 
t'.  National  Bank,  94  App.  Div.  544  (1904),  88  N.  Y.  S.  246,  affirmed  in 
Kemble  v.  Rondout  National  Bank,  183  N.  Y.  545,  76  N.  E.  1098  (1905). 

550 


BANK-BOOKS,    OR    PASS-BOOKS  §  291 

And  where  a  depositor  receives  an  account  stated  from  a  bank 
and  acquiesces  in  its  correctness  for  six  years,  he  loses  his  right 
to  object  that  a  check  charged  to  him  was  charged  by  mistake.^" 

Balance  Cunduauc  after  Six   Years.     Silence  of  Depositor  Casts 
the   Burden  of  Proof  upon    Hint 

In  Union  Bank  v.  Knapp,  supra,  the  bank-book  was  said  to  be  a 

transcript  of  tlie  books  of  the  bank,  and  so,  if  not  objected  to,  to 

operate  as  a  mutual  acknowledgment  of  the  parties  as  to  their 

money  dealings.     But  the  construction  which  this  remark  ought 

to  receive  from  the  circumstances  of  the  case,  and  the  course  of 

reasoning  adopted  by  the  court,  both  go  to  show  that  the  judges 

did  not  mean  to  adopt  the  English  rule.     The  case  really  arose 

and  was  decided  under  the  Statute  of  Limitations.     They  say 

that  the  balance  struck  goes  into  the  new  account  as  a  single  item, 

and  as  such  is  taken  out  of  the  statute ;  but  that  it  is  taken  out  as  a 

solid  amount ;   that  the  several  items  going  to  make  it  up  are  not 

taken  out  of  the  statute  and  cannot  be  inquired  into.     Since  the 

court  thus  takes  the  pains  to  say  that  the  items  shall  not  be  looked 

into  after  six  years  from  the  date  of  the  balancing,  which  must 

then  be  regarded  as  conclusive,  it  must  be  inferred  that  they  do  not 

mean  to  regard  the  book  or  the  balancing  as  a  conclusive  "  mutual 

acknowledgment  "  of  the  items  at  times  prior  to  the  lapse  of  that 

period.     In  Watson  v.  Phoenix  Bank,"  the  depositor's  bank-book 

was  said  to  be  no  better  evidence  than  the  books  of  the  bank. 

That  is  to  say,  it  is  a  mere  account  drawn  up  by  bank  officers  and 

not  reinforced  by  a  presumption  of  correctness  growing  out  of  its 

possession  by  the  depositor.     The  best  rule,  as  it  is  the  most  just, 

seems  to  be  the  one  laid  down  in  the  New  York  cases.     In  Weisser 

V.  Denison,^  the  ruling  was  substantially,  that,  if  the  depositor  ^^ 

had  not  examined  and  objected  to  the  account  stated  in  his  book 

witliin  a  reasonable  time  after  it  had  been  balanced  and  returned 

to  him  with  the  checks,  his  silence  could  at  most  only  be  prima 

facie  evidence  against  him,  and  would  throw  the  burden  of  i)roof 

6  Mechanics  &  Farmers'  Bank  v.  Smith,  19  Johns.  (N.  Y.)  115. 

6  Devaynes  ;>.  Noble,  1  Mer.  541.  But  see  KepitiKalla  Rubber  Estate 
V.  National  Bank  (1909)  2  K.  B.  1010.  What  t'onstitutos  a  reasonabU>  tune 
is  a  question  of  law  for  the  court.  Nodine  v.  First  National  Bank,  41 
Or.  .3S(i.  GS  Pac.  1109  (1902). 

s"  National  Bank  of  Commerce  v.  Takoma  Mills,  182  Fed.  1  (1910). 

60  Penn  Bank's  Estate,  152  Pa.  St.  65,  25  Atl.  310. 

551 


§  291  GENERAL   DEPOSIT 

upon  him,  instead  of  leaving  it,  where  it  would  otherwise  rest, 
with  the  bank,  to  prove  its  payments. 

In  Case  of  Forgery,  the  Depositor  is  now  Held  to  Ordinary  Care  and 
Diligence  in  Making  Examination.     §§  461,  Ji70-Jf73 

(/)  So  the  depositor  was  allowed  to  show  that  certain  checks 
charged  against  him  in  the  account  were  forgeries,  though  a  con- 
siderable time  had  elapsed  since  he  received  back  his  book.  John- 
son, J.  said,  that,  in  contemplation  of  law  the  book  was  balanced 
and  the  checks  returned  to  him  for  his  protection,  not  for  that  of 
the  bank.  This  law  certainly  bears  hardly  upon  the  bank,  which, 
in  performing  the  task  of  writing  up  the  book  and  in  returning  the 
checks,  which  are  its  own  sole  vouchers  for  the  payments  made  by 
it  on  the  depositor's  account,  has  its  own  protection  from  precisely 
these  tardy  disputes  partially  in  view,  as  it  may  reasonably  expect 
that  any  ordinarily  careful  man  will  not  long  delay  to  see  that  the 
balance  is  correct,  and  that  the  checks  returned  and  purporting 
to  be  his  are  in  fact  genuine.  The  language  used  by  one  of  the 
judges  intimates  that  if  in  the  interval  the  bank  had  suffered  any 
injury,  which  it  might  have  escaped  or  avoided  had  it  received 
correction  in  due  season  from  its  depositor,  then  the  rights  of 
the  parties  might  be  affected  by  this  fact  also.  This  last-named 
case  has  been  cited  with  approval,  and  followed,  in  Illinois.  A 
depositor's  clerk  drew  checks,  wrongfully  signing  the  depositor's 
name,  which  were  all  duly  honored  by  the  bank.  The  process 
was  continued  several  months,  during  which  time  the  bank-book 
was  several  times  written  up,  returned  to  the  depositor,  and  by 
him  sent  back  to  the  bank  to  be  again  written  up,  as  in  the  ordinary 
course  of  business.  He  meantime  did  not  detect  the  fraud  for 
about  six  months,  apparently  because  he  intrusted  the  comparing 
of  the  bank-book  to  this  same  clerk.     The  court  said  that  these 

7  8  Met.  (Mass.)  217. 

8  10  N.  Y.  68.  See  also  Shipman  et  al.  v.  Bank,  126  N.  Y.  318,  27  N.  E. 
371 ;  First  National  Bank  v.  Peck,  180  Ind.  649,  103  N.  E.  643  (1913) ; 
Merchants'  National  Bank  v.  Nichols,  223  111.  41,  79  N.  E.  38,  7  L.  R.  A. 
(n.  s.)  752  (1906) ;  Rettig  v.  Southern  111.  National  Bank,  147  111.  App. 
193  (1909) ;  Kenneth  Inv.  Co.  v.  National  Bank,  96  Mo.  App.  125,  70 
S.  W.  173  (1902) ;  Lieber  v.  Fourth  National  Bank,  137  111.  App.  158 
(1909). 

^"^  The  examination  may  be  entrusted  to  one's  agent  or  clerk.  Mer- 
chants National  Bank  v.  Nichols,  223  111.  41,  79  N.  E.  38,  7  L.  R.  A.  (n.  s.) 
752,  (1906). 

552 


SILENCE   MAY    ESTOP    DEPOSITOR    AS    TO    CHARGES  §  292 

facts  did  not  conclude  him  as  against  the  bank ;  that  the  writing 
up  the  pass-book  and  returning  the  checks  were  for  the  protection 
of  the  depositor,  not  of  the  bank ;  and  the  depositor's  faihire  to 
examine  them  was  not  such  negUgence  as  to  exonerate  the  bank 
from  habiUty  to  make  good  to  him  the  amount  of  checks  impn  ])- 
erly  paid  and  charged  to  him.^ 

In  Manhattan  Co.  v.  Lydig/°  it  was  said  that,  though  the  de- 
positor shoukl  not  be  allowed  to  open  the  whole  account,  yet  after 
the  lapse  of  only  a  moderate  time  without  objection  by  him  he 
might  still  be  allowed  to  falsify  certain  particular  items.  Whether 
this  right  ought  to  be  allowed  to  exist  for  so  long  a  time  as  the  six 
years  of  the  Statute  of  Limitations  may  well  be  questioned.  Prob- 
ably such  time  as  the  courts  should  consider  reasonable,  upon 
consideration  of  the  nature,  course,  and  amount  of  the  dealings 
between  the  parties,  would  be  held  conclusive  against  the  depositor. 
For  after  he  has  passed  many  successive  balancings,  for  many 
months  or  years,  having  meantime  had  multitudinous  transactions 
wdth  the  bank,  it  might  fairly  be  deemed  an  unreasonable  hardship 
if  he  coukl  still  be  allowed  to  go  back  and  litigate  to  correct  an 
error  which  he  has  so  long  had  the  means  of  correcting,  and  which 
the  bank  might  justly  presume  that  any  ordinarily  careful  person 
could  not  fail  to  have  corrected  long  since. 

The  weight  of  reason  and  authority  is  now  strongly  in  favor  of  the 
rule  that  the  depositor  must  answer  to  the  bank,  under  the  general 
principles  of  estoppel  and  responsibility  for  loss  caused  by  negli- 
gence, for  any  damage  resulting  to  the  bank  by  reason  of  its  having 
acted  or  omitted  to  act  upon  faith  of  the  depositor's  silence,  when 
he  might  have  discovered  the  fraud,  forgery,  or  mistake  by  reason- 
able care  in  examining  his  accounts  with  the  bank.     (§§  470-473.) 

§  292.  Silence  may  estop  the  Depositor  as  to  Charges  and 
Comniissions  of  the  Bank.  —  A  dilVercnt  description  of  case  is 
wdiere  there  is  no  claim  to  correct  a  mistake  in  the  bank-book,  but 
use  is  sought  to  be  made  of  it  in  order  to  conclude  the  depositor  as 
to  a  course  of  dealing,  or  an  implied  agreement  between  himself 
and  the  bank.     The  extent  to  which  the  book  may  be  used  for  this 

9  Manufacturers'  National  Bank  v.  Barnes,  65  111.  69;  Merchants' 
National  Bank  v.  Nichols,  223  111.  41,  79  N.  E.  38,  7  L.  R.  A.  (n.  s.)  752 
(1906),  affirming  123  111.  App.  430  (1905). 

When  the  forgery  is  discovered  it  is  the  duty  of  the  depositor  to  promptly 
notify  the  bank  thereof.  McNeely  v.  Bank  of  North  America,  221  Pa. 
St.  58S,  70  Atl.  891,  20  L.  R.  A.  (n.  s.)  79,  n.  (1908). 

104  Johns.  (N.  Y.)  377. 

553 


§  292  GENERAL   DEPOSIT 

purpose  is  illustrated  by  the  following  case.  A  depositor  had 
largely  overdrawn  his  account,  and  the  banker  in  writing  up  the 
bank-book  at  the  end  of  a  period  of  six  months  had  made  certain 
charges  in  the  way  of  interest  and  commissions  for  his  advances, 
and  had  explained  the  same  to  the  agent  of  the  depositor  (the 
depositor  himself  being  too  ill  to  attend  to  his  affairs).  It  was 
held  that  the  lapse  of  several  months,  without  complaint  made  on 
behalf  of  the  depositor,  was  conclusive  evidence  of  his  acquiescence 
in  the  charges  made.  But  it  was  also  held  that  it  was  no  evidence 
of  his  acquiescence,  or  agreement  to  acquiesce,  in  similar  charges 
continued  thereafterward  during  an  ensuing  period  of  six  months. ^ 

§  293.  Bank-book  not  conclusive  as  to  Title  to  the  Deposit. 
—  It  has  been  held  in  England,  that  the  name  in  the  bank-book 
is  not  conclusive  as  to  the  person  with  whom  the  bank  contracted. 
If  money  be  deposited  by  A.  in  his  own  name,  B.  may  recover 
from  the  bank  by  showing  that  the  deposit  was  in  fact  made  upon 
his  account,  —  that  he  was  the  principal  and  the  real  lender, 
creditor,  or  depositor.  But  the  evidence  to  this  effect  must  be 
very  clear  and  explicit.^     See  §  565. 

§  294.  Right  to  inspect  Books  and  inquire  into  Account.  — 
It  has  been  said  that  "  on  all  proper  occasiojis  "  a  depositor  has  a 
right  to  inspect  the  books  of  the  bank,"  and  that  for  this  purpose 
the  officers  having  charge  of  the  books  ^  are  agents  of  both  parties. 
What  would  be  regarded  as  "  proper  occasions  "  was  not  intimated  ; 
and  certainly  such  a  request,  made  without  notice  by  the  depositor 
or  invitation  by  the  bank,  would  not  improperly  be  regarded  by 
the  bank  officers  as  an  unwarrantable  intermeddling.  The  de- 
positor not  being  in  any  respect  responsible  for  the  conduct  of  the 
affairs  of  the  bank,  not  being  a  stockholder  therein,  or  not  applying 
to  examine  in  that  character,  might  reasonably  be  refused  an 
inspection  of  all  its  private  affairs.  It  must  be  supposed  that  the 
right  to  examine,  if  fully  considered  and  passed  upon,  would  be 

1  §  292.  Williamson  v.  Williamson,  L.  R.  7  Eq.  542 ;  and  see  Mosse 
V.  Salt,  32  Beav.  269. 

1  §  293.     Sims  v.  Bond,  5  Barn.  &  Ad.  389. 

"  §  294.  When  a  banker  makes  an  assignment  for  the  benefit  of  creditors 
the  bank  books  should  not  be  sold  since  they  are  the  evidence  of  the  assets 
of  the  trust  estate  which  belong  alike  to  all  the  creditors  and  which 
should  be  preserved  for  their  inspection  upon  proper  application  and  at 
a  proper  time.  Andrew  v.  Wilson's  Assignee,  114  Ky.  671,  71  S.  W.  890 
(1903). 

1  Union  Bank  v.  Knapp,  3  Pick.  (Mass.)  96 ;  Watson  v.  Phoenix  Bank, 
8  Met.  (Mass.)  217. 

554 


RIGHT   TO    INSPECT    BOOKS    AND    INQUIKK    INTO    ACCOUNT       §  294 

confined  to  such  portions  of  the  books  as  relate-  to  the  accounts 
and  dealings  of  the  bank  with  the  individual  applicant ;  also  that 
the  "  proper  occasions  "  wcnild  be  very  narrowly  defined.  If  the 
depositor  has  reason  to  think  that  there  is  an  error  in  his  account, 
as  shown  on  the  bank-book,  he  niay  reasonably  demand  an  inspec- 
tion at  the  first  convenient  hour ;  but  the  reas(jn  of  the  pri\-ilege, 
and  doubtless  the  privilege  accordingly,  should  be  confined  to 
such  an  examination  only  as  would  suflBce  to  prove  or  refute  the 
suspicion  of  error,  and  could  not  extend  to  the  accounts  of  other 
customers  or  to  the  general  business  of  the  institution.  It  might 
be  highly  injurious  to  the  welfare  of  the  corporation  and  to  the 
interests  of  all  concerned  to  have  its  condition  and  affairs  subject 
to  inspection,  and  therefore  to  publication  and  gossip.  Indeed, 
the  bank  might  be  committing  a  positive  wrong,  for  which  it 
might  be  held  to  answer  in  damages,  if  it  should  allow  one  person 
to  examine  the  accounts  of  others. 

(o)  When  Bank  may  reveal  the  State  of  a  Customer's  Account 
to  Another.  —  It  has  been  laid  down  that  a  ])anker  has  no  right 
to  reveal  the  state  of  his  account  with  his  customers.^  Though 
in  the  case  cited  it  has  also  been  doubted  whether  an  action  for 
damages  can  be  maintained  by  the  customer  against  the  banker 
unless  specific  injury  can  be  shown.  But  this  case  is  a  very  un- 
satisfactory precedent,  since  in  it  the  question  whether  or  not 
the  relation  between  banker  and  customer  created  this  duty  of 
secrecy  on  the  part  of  the  former  concerning  the  balance  of  the 
latter  appears,  for  some  unaccountable  cause,  to  have  been  left 
to  the  decision  of  the  jury.  They  found  that  the  relationship 
did  create  such  a  duty,  and  the  court  allowed  their  finding  to 
remain  undisturbed.  In  another  English  case  it  has  been  held 
that,  where  a  check  is  presented,  and  the  banker  has  funds  of  the 
drawer,  but  not  sufficient  to  meet  this  check,  the  banker  has  no 
right  to  disclose  to  the  holder  of  the  check  the  amount  of  such 
deficiency,  and  so  to  enable  the  holder  to  pay  in  the  balance  to 
the  drawer's  credit  and  then  procure  the  check  to  be  paid.^ 

It  may  be  very  proper  to  deny  the  general  right  of  a  banker 
to  disclose  the  state  of  an  account  to  satisfy  an  inquiry,  to  the 
possible  great  disadvantage  of  his  customer  (as,  if  the  latter  were 
thought  to  be  embarrassed  and  his  account  overdrawn,  his  credit 
might  be  damaged  by  the  appearance  of  his  account,  though  a 

2  Hardy  /•.  Veasev,  3  L.  R.  Ex.  107. 

3  Foster  v.  Bank  of  Loudon,  3  F.  &  F.  214. 

555 


§  294  GENERAL  DEPOSIT 

fuller  statement  of  his  arrangements  with  the  bank  would  wear 
a  different  aspect). 

It  is  no  part  of  the  business  of  a  bank  to  constitute  itself  a 
bureau  of  information,  or  headquarters  for  reporters  and  gossips. 
But  the  case  of  a  check-holder  when  the  funds  are  insufficient 
seems  very  different ;  he  has  a  right  to  w^hatever  unincumbered 
funds  of  the  drawer  are  in  the  hands  of  the  bank,  a  right  superior 
to  any  right  of  the  depositor,  and  if  the  disclosure  in  such  case  be 
a  harm  to  the  depositor  it  is  his  own  fault  alone,  for  he  drew  the 
check  and  authorized  the  inquiry.  One  to  whom  the  depositor 
has  passed  his  interest  in  the  deposit  should  have  the  same  right 
to  know  its  conditions  as  the  depositor  possessed.  As  to  the 
depositor,  there  can  be  no  doubt  that  the  bank  should  state  the 
amount  on  hand,  and  give  the  holder  an  opportunity  to  decide 
what  course  he  will  pursue ;  and  though  the  strict  contract  of  the 
bank  with  the  depositor  may  perhaps  be  only  to  pay  if  it  has 
sufficient  funds,  it  is  a  public  institution,  receiving  valuable 
franchises  from  the  State,  and  owes  in  return  a  duty  to  the  public 
to  conduct  its  business  in  such  a  manner  as  not  to  cause  damage 
to  those  who  have  dealings  with  it,  by  refusal  to  do  so  simple  and 
costless  an  act  as  to  state  the  true  condition  of  the  deposit  against 
which  a  check  is  drawn.  Indeed,  it  seems  clear  to  us  that  the 
duty  of  the  bank  can  be  placed  on  firmer  ground.  It  would  have 
no  right  to  say  to  a  depositor  inquiring  as  to  his  account,  with  a 
check  in  his  hand,  "  We  agreed  to  pay  your  checks,  if  the  funds 
were  sufficient ;  but  your  check  is  too  large,  and  we  will  have 
nothing  to  do  with  it,  nor  inform  you  of  the  true  amount."  Well, 
then  when  the  depositor  gives  H.  the  check  for  value,  he  (sub- 
stantially and  according  to  the  best  opinion  legally)  transfers 
the  whole  deposit  (if  less  than  the  check)  to  the  holder  (subject 
to  his  acceptance),  and  therefore  the  holder  has  the  same 
right  of  inquiry  of  the  bank  and  as  against  the  bank  as  the 
depositor. 

It  is  unquestionable  that  a  banker  summoned  as  a  witness  — 
a  fortiori  summoned  as  garnishee  —  must  declare  the  balance  of 
his  customer  at  any  given  date.  The  fact  or  knowledge  cannot 
be  regarded  as  a  "  confidential  communication."  * 

And  if  a  general  creditor  has  a  right  to  know  the  state  of  the 

account  in  this  way,  when  he  inquires  in  the  manner  provided  by 

law  for  making  his  demand  upon  the  deposit,  why  has  not  such  a 

special  creditor  as  a  check-holder  an  equal  right,  when  he  makes 

556 


NOTE    UPON   THE    USE    OF    BANK-BOOKS    AS    EVIDENCE        §  295 

his  demand  in  the  way  provided  by  law  for  his  kind  of  demand 
on  the  deposit,  namely,  presentment  of  his  check? 

A  partner  has  a  right  to  inspect  the  books  of  the  partnership 
and  where  his  co-partner  is  the  president  of  a  national  hank  and 
nearly  its  sole  owner  and  the  only  account  of  the  partnership 
transaction  was  kept  on  the  books  of  the  bank  under  the  direction 
of  its  president  the  partner  has  a  right  to  inspect  so  much  oi  the 
books  of  the  bank  as  relates  to  the  partnership  transaction,  for 
the  purpose  of  preparing  his  defence  to  a  note.^ 

A  stockholder  has  a  right  to  inspect  the  books  of  the  bank  at  a 
proper  time  and  for  proper  purposes,  but  he  has  no  right  to  examine 
them  for  speculative  purposes,  or  to  gratify  idle  curiosity  or  to 
aid  a  blackmailer.^ 

Note  upon  the  Use  of  Bank-Books  as  Evidence 

§  295.  The  books  of  the  bank  are  admissible  in  evidence  on  its  behalf  .* 
The  reason,  as  laid  down  in  a  well-known  Massachusetts  case,  is  that 
depositors  have  a  right  "on  all  proper  occasions"  to  inspect  the  books  of 
the  bank,  and  therefore  the  officers  having  charge  of  these  books  are  the 
agents  of  both  parties  in  this  portion  of  their  employment.  Also,  because 
the  depositor's  own  bank-book  is  a  transcript  of  the  books  of  the  bank, 
and  in  effect  operates  as  a  mutual  acknowledgment  between  the  parties 
as  to  their  money  dealings.'  This  line  of  reasoning  will  hardlj-  commend 
itself  as  perfectly  satisfactory.  Practically  speaking,  the  right  of  the  de- 
positor to  examine  the  books  of  the  bank  must  be  exceedingly  limited, 
and  the  "proper  occasions"  could  hardly  be  supposed  to  occur  often 
enough  to  make  the  book-keepers  reallj',  and  in  any  reasonable  sense  of 
the  phrase,  the  agents  of  the  depositor.  They  are  in  no  manner  under  his 
supervision,  nor  would  it  be  possible  for  him  daily  to  examine  their  entries, 

*  Lovd  V.  Freshfield,  2  Car.  &  P.  325;  and  see  Forbes's  Case,  41  L.  J. 
Ch.  4G7. 

A  cashier  may  be  committed  for  contempt  if  he  refuses  to  testify  as  to 
the  amount  a  customer  has  on  deposit.  In  re  Sanford,  23G  AIo.  6(35,  139 
S.  W.  376  (1911). 

A  magistrate  before  whom  criminal  proceedings  are  being  taken  has 
power  under  the  Bankers  Books  Evidence  Act  to  make  an  order  for  the 
prosecutor  to  inspect  the  books  of  a  bank  and  take  copies  of  entries  of 
defendant's  account  therein.      Rex  v.  Kingborn  (1908)  2  K.  B.  949. 

6  Rush  ('.  Browning,  103  Tex.  649,  132  S.  W.  763. 

«  Guthrie  i-.  Ilarkness,  199  U.  S.  148,  50  L.  ed.  130,  26  Sup.  Ct.  4 
(1905) ;  Ilarkness  v.  Guthrie,  27  Utah  248,  75  Pac.  624,  107  Am.  St.  Rep. 
576,  n.  (1904) ;  Tuttle  v.  Iron  National  Bank,  170  N.  Y.  9,  62  N.  E.  761 
(1902). 

1  §  295.  Bagley  v.  Roberson,  57  Ga.  145;  Union  Bank  v.  Knapp, 
3  Pick.  (Mass.)  96;  Watson  v.  Phcenix  Bank,  8  Met.  (Mass.)  217  (follow- 
ing and  reiving  upon  the  preceding) ;  Leonora  National  Bank  v.  Ragland's 
Adm'r,  12S  Kv.  548,  108  S.  W.  854  (1908) ;  Blinn  Lumber  Co.  v.  McArthur, 
150  Cal.  610,  89  Pac.  436,  10  L.  R.  A.  (n.  s.)  876  (1907). 

557 


§  295  GENERAL  DEPOSIT 

even  if  the  courts  should  hereafter  feel  able  to  assert  the  occasional  right 
of  examination  above  declared  to  exist,  when  that  question  shall  be  directly 
raised.  Other  authorities,  though  content  to  admit  the  books  in  evidence, 
yet  lay  down  a  doctrine  contrary  to  that  advanced  in  the  Massachusetts 
opinion,  and  say  that  the  depositor  is  not  bound  by  the  books  of  the  bank, 
since  the  persons  who  keep  those  books  are  in  no  sense  his  agents,  but  are 
the  employees  of  the  bank  only.  It  is  true  that  the  Massachusetts  judges 
did  not  declare,  and  did  not  intend  to  declare,  that  the  depositor  would  be 
absolutely  concluded  by  the  books  of  the  bank ;  yet  their  reasoning  was 
only  a  proper  basis  for  this  conclusion.  The  discussion  of  the  comparative 
merits  of  the  different  courses  is,  however,  rendered  rather  unprofitable 
by  the  fact  that  they  lead  to  the  same  ultimate  conclusion,  and  that  this 
is  too  unquestionably  sound  to  suffer  from  any  criticism  of  the  reasoning 
which  has  led  up  to  it.  Either  directly  or  by  implication,  too  many 
authorities  combine  to  assert  the  admissibility  of  the  books  of  the  bank 
to  leave  the  rule  in  any  doubt.^ 

The  entries  in  the  books,  when  produced,  must  be  verified  and  sworn 
to  by  the  clerk  who  made  them  if  possible.^"  But  if  he  is  inaccessible, 
proof  that  the  entries  are  in  his  handwriting  will  suffice.' 

(a)  Proof  of  Entries.  So,  too,  the  cashier  of  the  bank  is  competent  to 
prove  the  amount  of  a  deposit  in  favor  of  the  bank ;  certainly,  if  the  bank 
releases  him  from  any  possible  liability  he  may  be  under  to  it  for  any 
mistake  or  misconduct  of  his  own  in  the  matter ;  and  perhaps  so,  even  if 
the  bank  does  not  thus  release  him.* 

But  if  the  entry  was  actually  made  by  a  clerk,  it  is  said  that  the  clerk 
should  be  summoned  in  person  ;  for  though  it  is  true  that  the  cashier  has, 
as  a  part  of  his  official  function,  the  charge  of  the  books  and  the  superin- 
tendence of  the  book-keeping,  yet  this  does  not  necessarily  imply  that 
personal  knowledge  of  particular  entries  which  is  necessary  in  order  that 
they  should  be  duly  proved. ^     It  is  the  actual  maker  of  the  daily  entries 

2  Johnson  v.  Farmers'  Bank,  1  Harr.  (Del.)  117;  Meighen  v.  Bank,  25 
Pa.  St.  288  (by  implication  ;  the  books  were  introduced  and  the  theory  on 
which  they  were  kept  was  allowed  to  be  explained  in  that  case) ;  Town  of 
Concord  v.  Concord  Bank,  IG  N.  H.  26. 

2«  Pass-books  of  banks  may  be  admitted  in  evidence  without  identi- 
fication when  they  are  admitted  in  an  action  of  conversion  merely  to  show 
the  defendant's  possession.  Manning  v.  Maytubby,  42  Okla.  414,  141  Pac. 
781  (1914). 

When  the  books  of  a  bank  are  introduced  to  show  the  state  of  the  ac- 
count between  the  bank  and  a  customer,  which  was  collateral  to  the  main 
issue  of  whether  the  bank  made  fraudulent  representations  in  respect  to 
the  solvency  of  the  customer,  they  may  be  admitted  upon  proof  of  their 
identity  by  the  cashier  without  calling  the  book-keeper  who  made  the 
entries.  Continental  National  Bank  v.  First  National  Bank,  108  Tenn. 
374.  68  S.  W.  497  (1902). 

3  Union  Bank  v.  Knapp,  3  Pick.  (Mass.)  96 ;  Watson  v.  Phoenix  Bank, 
8  Met.  (Mass.)  217;  Johnson  v.  Farmers'  Bank,  1  Harr.  (Del.)  117; 
Leonora  National  Bank  v.  Ragland's  Adm'r,  128  Ky.  548,  108  S.  W.  854 
(1908). 

*  Johnson  v.  Farmers'  Bank,  1  Harr.  (Del.)  117. 

5  Williams  v.  Kelsey,  6  Ga.  365.  But  see  Continental  National  Bank  r. 
First  National  Bank,  108  Tenn.  374,  68  S.  W.  497  (1902) ;  Schmidt  v. 
Scanlon,  32  S.  D.  608,  144  N.  W.  128  (1913). 

558 


NOTE   UPON    THE    USE    OF   BANK-BOOKS   AS    EVIDENCE         §  295 

who  is  needed.  An  examined  copy  of  tlie  books  is,  by  itself,  inadmissible. 
But  it  has  been  said  that  perhaps,  if  supplemented  by  proof  that  the  orig- 
inal entries  were  made  by  an  officer  of  the  bank,  the  officer  himself  swear- 
ing to  this  fact ;  or  if  this  be  impossible,  his  handwriting  being  proved,  the 
copy  might  in  a  case  of  sufficient  necessity  be  admitted." 

(6)  Depositor's  Book.  The  case  of  Watson  v.  Phrenix  Bank,  adopting 
the  views  above  criticised,  which  were  laid  down  in  the  preceding  case  of 
Union  Bank  v.  Knapp,  says  that  the  depositor's  bank-book  is  no  better 
evidence  than  the  books  of  the  bank.*'"  Certainly,  if  the  doctrine  of  the 
last-named  case  is  correct,  this  is  an  unavoidable  corollary.  It  has  been 
stated  that  the  depositor  is  under  no  such  positive  obligation  to  examine 
his  bank-book,  when  returned  to  him  after  its  posting  by  the  bank,  and  to 
correct  errors,  that  his  failure  promptly  to  demand  a  correction  can  V)e  sub- 
sequently construed  as  an  admission  of  correctness.  Nevertheless,  the  fact 
that  he  has  the  opportunity  offered  him  to  do  this,  and  that  any  man  of 
ordinary  prudence  in  the  conduct  of  his  affairs  would  do  it,  must  raise  a 
certain  presumption  of  the  accuracy  of  the  entries  in  the  bank-book 
stronger  than  any  presumption  which  can  reasonably  arise  in  favor  of  the 
entries  in  the  books  of  the  bank ;  for  these,  whatever  may  be  the  legal 
right  of  the  depositor  to  examine  them,  he  in  point  of  fact  never  does  see. 

(c)  More  Probability  of  Mistake  in  the  Bank's  Books  than  iyi  the  Pass-Book. 
Neither  is  it  correct  to  say  that  the  value  of  these  two  descriptions  of 
entries  is  equal,  on  the  theory  advanced  by  the  judge  in  Union  Bank  v. 
Knapp,  that  the  bank-book  is  a  "transcript"  of  the  books  of  the  bank; 
for  tliis  is  not  the  truth.  The  noting  of  the  checks  drawn  —  that  is,  the  de- 
positor's debit  account  —  is  probably  made,  w^hen  the  bank-book  is  posted, 
from  the  books  of  the  bank ;  but  the  entries  of  deposits,  which  form  the 
at  least  equally  important  credit  side  of  his  account,  are  made  in  most 
cases  by  the  recei\'ing  teller  when  the  bank-book  and  the  deposit  are 
offered  to  him  together,  and  the  book  is  at  once  returned.  No  contem- 
poraneous entry  is  made  on  the  books  of  the  bank,  and  the  credit  does  not 
appear  upon  them  until  at  a  later  hour  of  the  day  it  is  copied  on  to  them 
from  the  depositor's  memorandum  of  his  deposit,  w'hich  he  hands  to  the 
receiving  teller,  and  which  is  checked  as  correct  by  that  officer,  and  retained 
by  him  for  the  very  purpose  of  subsequently  making  up  or  enabling  the 
book-keeper  to  make  up  the  entries  in  the  books  of  the  bank.  There  are, 
therefore,  obviously  much  greater  means  for  a  mistake  to  creep  into  the 
books  of  the  bank  without  observation,  than  for  the  same  mistake  to 
appear  in  the  bank-book  of  the  depositor  without  his  obserAing  it.  Hence 
it  follows  that,  if  the  bank-book  of  tlie  depositor  does  operate  as  an 
acknowledgment  between  the  parties  (Union  Bank  v.  Knapp),  it  is  cer- 
tainly entitled  to  greater  consideration  than  the  liooks  of  the  bank,  wliich 
could  have  the  same  operation  only  by  virtue  of  a  very  questionable  legal 
fiction. 

(d)  New  York  has  Held  Pass-Book  Conclusive  on  Bank.  I'suallij  onl;/ 
Prima  Facie.  In  New  York  it  has  been  held  that  if  the  bank-book  accom- 
panies the  deposit,  and  the  credit  is  given  in  the  book  at  the  very  time 
when  the  deposit  is  made,  it  then  becomes  an  original  entry,  and  is  con- 

«  Philadclplaia  Bank  v.  Executors  of  Thos.  Officer,  12  Serg.  &  R.  (Pa.) 
49 ;    Ridgway  r.  Farmers'  Bank,  id.,  2.56. 

""  The  original  pass-book  of  a  bank  customer  containing  the  original 
entries  of  deposit  is  competent  evidence  of  the  facts  disclosed  by  it. 
Security  State  Bank  v.  Fussell,  30  Okla.  527,  129  Pac.  740  (1913). 

559 


§  295  GENERAL  DEPOSIT 

elusive  upon  the  bank ;  though  if  the  book  were  sent  to  be  written  up 
afterwards  this  would  not  be  the  case.'  In  Maine,  it  has  been  declared 
generally,  that  any  credit  in  a  bank-book  may  at  any  time  be  corrected 
■  by  parol  e\ddence,  like  any  other  receipt. ^  Clearly  the  credit  entries  in 
the  bank-book  are  simply  receipts,  neither  more  nor  less.  There  seems 
to  be  no  reason  why  they  should  not  be  open  to  correction,  equally  with 
much  more  formal  species  of  receipts,  even  though  the  deposit  and  the 
entry  be  contemporaneous. 

The  sound  rule  would  seem  to  be  that  the  depositor's  bank-book,  if  it 
has  been  returned  to  him,  and  he  has  not  within  a  reasonable  time  ob- 
jected to  it,  should  be  regarded  as  prima  facie  evidence  of  the  way  the 
account  stood  between  him  and  the  bank  at  the  date  of  the  last  balancing. 
It  settles  the  presumption  in  the  case,  and  leaves  the  onus  on  the  party 
disputing  it.  If  it  agrees  with  the  books  of  the  bank,  well  and  good; 
then  there  can  be  no  use  of  discussing  which  of  them  is  the  better  evi- 
dence, since  both  support  the  same  state  of  facts.  But  if  it  is  at  variance 
with  the  books  (unless  an  error  in  eop^-ing  into  it  the  entries  of  drafts 
drawn  can  be  shown),  the  probabilities  are  that  it  is  the  more  correct, 
especially  if  the  credits  have  always  been  made  at  the  time  the  deposits 
were  paid  in.  These  were  contemporaneous  entries,  whereas  the  entries 
in  the  books  were  copies.  The  entries  of  debits  or  of  cheeks  drawn  are 
copies  from  the  books,  and  a  mere  error  in  eopjang  ought  to  be  easily 
shown  and  explained.  Further,  both  parties  have  had  access  to  the  bank- 
book. The  bank  itself  has  made  it  up,  and  the  depositor,  unless  he  is  an 
exceptionally  careless  man,  has  examined  it,  at  least  with  sufficient  care 
to  see  that  the  balance  is  correct.  Every  presumption  arising  from  the 
actual  course  of  deahng  of  the  parties  favors  the  correctness  of  the  bank- 
book to  the  extent  above  asserted,  that  is,  in  respect  to  the  last  balanc- 
ing, when  the  depositor  has  since  that  time  had  it  in  his  hands  long  enough 
to  make  it  natural  to  suppose  that  he  has  examined  it.  No  equally 
strong  presumptions  arise  in  favor  of  the  books  of  the  bank.  This  is, 
however,  strictly  a  mere  presumption  that  is  claimed  in  favor  of  the  bank- 
book, which  may  of  course  be  at  any  time  refuted.  The  bank  may  show 
an  error  in  the  credits,  which  are  its  receipts,  or  an  error  or  omission  in 
the  debits,  which  only  purport  to  be  a  copy  from  its  books,  and  are  not  an 
original  instrument.  The  depositor  is  under  no  positive  legal  obUgation 
to  examine  the  book  or  to  object  to  its  accuracy  within  any  specific  tinie. 
Therefore,  it  is  always  open  to  him  after  any  lapse  of  time  to  object  to  it, 
precisely  as  it  is  open  to  any  person  to  object  to  the  accuracy  of  an  account 
rendered  to  him  by  one  with  whom  he  has  financial  deaUngs. 

(e)  Entries  Competent  Evidence  of  the  Nature  of  a  Deposit.  An  entry  in 
a  bank-book  was  as  follows  :  "  1861,  Dec.  30th,  cash  (coin)  $3000."  The 
bank  had  at  the  time  ceased  to  pay  in  specie,  and  when  the  depositor 
subsequently  drew  checks  for  this  amount,  payable  in  gold  coin,  the  bank 
refused  to  pay  in  coin,  and  offered  the  "legal  tender  notes"  of  the  United 
States  government.  The  court  held  that  tliis  single  entry  was  competent 
evidence  for  the  plaintiff  (in  a  suit  to  recover  the  gold  coin  or  its  equivalent 
in  "legal  tender  notes")  for  the  purpose  of  verifjdng  the  testimony  of  a 
witness  concerning  the  circumstances  of  the  deposit,  and  of  showing  the 
nature  of  the  particular  entry  made  by  the  bank  officer  at  the  time  as 
indicative  of  the  character  of  the  deposit  in  question;  also,  that  plaintiffs 
were  not  bound  to  put  in  evidence  all  the  other  entries  in  the  book,  but 

7  Manhattan  Co.  v.  Lydig,  4  Johns.  (N.  Y.)  377. 

8  Lewis  V.  Eastern  Bank,  32  Me.  9. 

560 


NOTE    UPON   THE    USE    OF    BANK-BOOKS    AS    EVIDENCE         §  295 

that  it  was  sufficient  if  the  book  was  placed  in  the  power  of  the  defendant 
to  be  used  as  e\ndeneo  for  any  legitimate  purpose ;  also  that  plaintiff 
might  explain  any  ambiguity  in  the  entrj'  itself  by  evidence  that  by  general 
and  well  known  usage  of  the  banks  of  that  city  an  entry  of  this  knnd  im- 
ported an  agreement  to  return  the  deposit  in  kind,  but  that  such  usage 
could  not  be  proved  by  showing  a  few  particular  instances.^ 

Parol  evidence  is  admissible  to  explain  an  abbreviated  or  short  entry 
in  a  bank-book,  as  being  in  the  nature  of  a  cipher  or  technical  term.'" 

(/)  Absence  of  Record  does  not  Conclude.  Parol  may  be  Used,  even  though 
Statute  Requires  a  Record.  That  a  matter  is  of  such  a  nature  that  it  ought 
to  appear,  or  might  naturally  be  expected  to  appear,  upon  the  records  or 
the  books  of  the  bank,  is  no  objection  to  a  substantiation  of  it  by  parol 
testimony.  This  rule  is  not  affected  by  the  fact  that  the  bank  offers  its 
books  and  i-ecords,  in  which  no  such  matter  appears.  For  there  is  no 
necessary  legal  obligation  upon  a  bank,  unless  by  virtue  of  express 
imperative  legislation,  to  keep  any  record,  or  a  thorough  record,  even  of 
the  formal  votes  of  the  board  of  directors.  And  though  express  legislation 
should  in  any  case  require  such  a  record  to  be  kept,  yet  the  requisition 
would  probably  be  only  directory  in  its  nature,  and  if  neglected  the  vote 
would  still  remain  equally  vaHd,  though  unrecorded.  So  also  authority, 
sanction,  and  ratification,  though  properly  the  subject  of  recorded  cor- 
porate action,  may  all  be  based  upon  conclusive  presumptions  of  law 
growing  out  of  acts  and  deahngs  and  other  matters  wholly  independent 
of  any  proceedings  appearing  of  record  or  capable  of  so  appearing.  If 
the  party  to  the  suit  seeks  to  show  facts  and  circumstances  which  either 
prove  a  vote  or  other  corporate  action  to  hav.e  been  had,  or  which  by  legal 
ImpUcation  raise  in  his  favor  a  presumption  of  such  vote  or  action,  the 
effect  of  which  presumption  the  law  will  not  allow  the  corporation  to  evade 
by  sho-wing  that  no  such  vote  or  action  was  taken,  he  may  do  so  by  any 
means  in  his  power.  He  cannot  be  shut  off  from  his  rights  because  the 
means  of  proving  them  are  not  furnished,  as  they  ought  to  be,  by  the'cor- 
porate  records.  Hence  it  is  a  sound  rule  that  the  absence  from  corporate 
records  of  notice  of  a  fact,  which  if  it  existed  ought  to  be  stated  there,  is 
not  conclusive  of  the  non-existence  of  that  fact,  and  does  not  preclude 
positive  parol  testimony  offered  to  establish  it.'' 

Where  one  is  charged  with  having  obtained  goods  by  false  pretences 
one  may  show  the  entries  in  his  bank-book  showing  payments  made  by 
him  for  goods  suppHed  to  him,  in  order  to  prove  that  he  was  carrjing  on  a 
bona  fide  business. '^ 

Entries  in  a  savings  bank-book  whose  authenticity  is  not  challenged 
are  competent  evidence  that  moneys  were  deposited  as  credited  tlierein.^' 

A  depositor  is  not  entitled  to  an  instruction  that  entries  on  the  stub  of 
his  check  book  make  a  prima  facie  case  of  deposit,  especially  when  such 
an  instruction  is  not  specifically  requested." 

9  Chesapeake  Bank  v.  Swain,  29  Md.  483. 
»» Wingate  r.  INIechanics'  Bank,  10  Barr  (Pa.)  104. 
"Concord  v.  Concord  Bank,  16  N.  H.  26;    Edgerley  v.  Emerson,  3 
Fost.  (N.  11.)  555. 

12  Rex  V.  Segar,  (1914)  3  K.  B.  1112. 

"  Miller  v.  Pierpont,  87  Conn.  406,  87  Atl.  785  (1913). 

"  Pate  V.  Snow  Hill  Banking  Co.,  162  N.  C.  508,  77  S.  E.  230  (1913). 


VOL.  1  —  36  561 


CHAPTER   XIX 
CERTIFICATES   OF   DEPOSIT 

§  297.     Form.     §  51. 

May  vary  from  a  simple  receipt  to  a  full  express  promise  to  pay, 

with  words  of  negotiability. 
§  299.     Signature.     §  744. 

Of  the  cashier  is  sufficient,  though  a  statute  requires  the  bank's 
§  297.  contracts  to  be  otherwise  signed. 

Nature  and  Effect. 

A  certificate  of  deposit  bears  a  close  resemblance  to  a  promis- 
sory note  on  demand,  and  is  by  some  courts  held  identical 
with  such  a  note,  so  that  suit  may  be  brought  upon  it  with- 
§  298.  out  demand,  and  the  Statute  of  Limitations  runs  from  date 

or  delivery,  whichever  is  latest.  But  the  weight  of  reason 
and  authority  is  to  the  effect  that  it  is  intended  as  a  con- 
tinuing security,  and  that  the  bank  is  not  in  default  until 
demand  is  made,  so  that  demand  is  necessary  before  a  right 
of  action  can  arise  to  set  the  statute  running. 
§  298.  If  there  are  no  words  of  promise  in  the  instrument,  th^y  are  im- 

pUed,  though  a  New  York  case  holds  that  such  a  certificate 
is  a  simple  receipt  and  not  even  a  contract,  but  subject  to 
control  by  evidence  parol. 
Negotiability.     §  9,  n.  9,  §  374. 
§  299.  A  certificate  is  negotiable  if  it  contains  negotiable  words,  and  is 

payable  in  money. 
"Currency"   and  "current  funds"   are  considered  to  mean 
money,  though  there  are  cases  to  the  contrary. 
§  300.     Transfer  of  Certificate. 
By  indorsement. 
Without  indorsement. 
Statute  of  Limitations.     §  321. 
§  301.  Analysis. 

§  302.     Staleness. 

Thirty-one  days  does  not  make  a  certificate  stale. 
Six  years  has  been  held  to  do  so. 
§  303.  Seven  years  has  been  held  not  to  do  so. 

Payment  by  (§§  490,  637). 
§  304.  A  certificate  of  deposit  is,  like  a  check,  presumed  to  be  only 

conditional  payment. 
§  305.  But  a  collecting  bank  may  take  its  own  certificates  in  payment 

to  the  absolute  discharge  of  the  debtor,  though  the  bank  be- 
comes insolvent  before  remitting  to  the  creditor ;   the  trans- 

562 


FORM  §  297 

action  is  equivalent  to  payment  of  the  certificate  and  repay- 
ment of  the  money  to  the  bank.  But  if  the  taking  is  a 
fraud,  by  reason  of  the  condition  of  the  bank  at  the  time  of 
recei\'ing  the  certificate  as  payment,  tlie  depositor  will  be 

§  305.  preferred  to  the  general  creditors  of  the  bank,  he  having 

ordered  the  bank  to  collect  and  remit. 

§  306.     Lost  Ceiitificate.     §§  395  A,  049. 

§  307.     Interest  on  Certificate.     §  309. 

§  308.     Alternate  Certificate. 

Where  the  deposit  is  payable  to  the  order  of  S.  or  of  E.,  his 
wife,  if  S.  dies,  E.'s  power  is  revoked.  This  interpretation 
has  been  questioned. 

§  297.  Form.  —  A  certificate  of  deposit,"  or  the  written  ac- 
knowledgment of  the  bank  that  it  has  received  from  a  certain 
person  a  certain  sum  °"  on  deposit,  is  an  instrument  occasionally 
issued."*  Chiefly  it  is  given  to  persons  not  regular  customers  of 
the  bank  and  not  designing  to  become  such,  but  who  have  for  some 
reason,  and  on  some  isolated  occasion,  desired  to  leave  a  sum  of 
money  in  the  custody  of  the  bank."''  Sometimes,  though  more 
rarely,  a  regular  customer,  having  some  special  object  to  subserve, 
may  desire  such  a  certificate.  In  form  they  are  substantially 
simple  receipts  of  the  bank,  in  negotiable  form,  for  so  many  dollars, 
and  so  are  only  evidence  of  an  indebtedness,  like  the  bank-book. 

An  instrument  saying,  "  Due  A.  A.,  trustee,  S4,000,  returnable 
on  demand.  It  is  understood  that  this  sum  is  specially  deposited 
with  us  and  is  distinct  from  the  other  transactions  with  said  A. 
A.",  —  was  held  a  certificate  of  deposit.^ 

So,  "  Received  from  L.  Sl,600  on  deposit,  in  national  currency", 
was  held  a  certificate  of  deposit,^ 

"  §  297.  A  deposit  slip  is  used  for  the  same  purpose  as  a  certificate  of 
deposit,  but  it  is  more  informal.  It,  however,  is  an  evidence  of  debt  and 
is  the  subject  of  forgerv.  State  v.  Jackson,  221  Mo.  478,  120  S.  \V.  06, 
133  Am.  St.  Rep.  477  (1909). 

'X'  A  receiver  of  a  savings  bank,  in  an  action  upon  a  certificate  of  deposit 
issued  by  the  bank,  cannot  affirm  that  the  Viank  never  received  the  money. 
State  V.  Corning  State  Sav.  Bank,  136  Iowa  79,  113  N.  W.  500  (1907). 

*  Commercial  banks  have  full  power  to  issue  certificates  of  deposit  in 
the  absence  of  statutory  prohibition.  Nor  are  their  powers  curtailed  by 
a  statutorv  provision  expressly  vesting  similar  powers  in  savings  banks. 
Abbott  y.\jack,  136  Cal.  510,  69  Pac.  257  (1902).  See  Kavanaugh  v. 
American  Bank,  239  111.  404,  88  N.  E.  171  (1909). 

<"^  The  purpose  and  use  of  certificates  of  deposit  is  to  transmit  funds, 
and  in  this  respect  they  are  like  certified  checks.  Pierce  v.  State  Normal 
Bank,  215  Mass.  18,  101  N.  E.  1060,  46  L.  R.  A.  (n.  s.)  093  (1913). 

1  Smiley  v.  Fry,  100  N.  Y.  262,  3  N.  E.  186. 

2  Long  V.  Straus,  107  hid.  94,  0  N.  E.  123.  7  N.  E.  763. 

563 


§  297  CERTIFICATES   OF   DEPOSIT 

The  words  "to  be  left  six  months  "  renders  the  instrument  a 
"  time",  and  not  a  "  demand  "  certificate,  maturing  at  the  ex- 
piration of  six  months. 2" 

A  certificate  of  deposit  as  follows:  "  This  certifies  that  A.  B. 
has  deposited  in  this  bank  $3,000  payable  to  the  order  of  self 
in  current  funds  on  return  of  this  certificate  properly  indorsed ; 
this  deposit  not  subject  to  check;  with  interest  at  six  per  cent 
if  left  six  months ;  no  interest  after  six  months",  is  overdue  so  as 
to  charge  purchasers  with  notice  of  equities  after  the  expiration 
of  six  months,  and  not  until  then.^'' 

A  certificate  payable  twelve  months  from  date,  but  "  payable 
in  six  months  if  desired",  is  due  in  twelve  months.  The  priv- 
ilege of  payment  at  the  end  of  six  months  is  to  be  availed  of,  only 
at  the  election  of  the  payee  or  his  indorsee.^'' 

Signature 

Ordinarily,  the  signature  of  the  cashier  to  the  certificate  is  suffi- 
cient. Though  it  is  a  contract  in  strict  law,  and  though  statutes 
often  designate  the  manner  in  which  "  contracts  "  shall  be  signed, 
yet  the  phrase  thus  used  in  the  statutes  has,  by  sheer  force  of  neces- 
sity and  common  sense,  been  construed  by  the  courts  not  to  apply 
to  those  instruments  which  by  the  daily  course  of  business  in  all 
banking  institutions  the  cashier  alone  is  wont  to  execute,  and 
among  which  the  simple  receipt  and  promise  to  repay,  which  con- 
stitute a  certificate  of  deposit,  are  to  be  included.^ 

§  298.  Nature  and  EfEect.  —  The  practical  ease  with  which 
the  holder  of  such  a  receipt  can  transfer  it  for  value  received,  or 
pledge  it  as  security,  has  led  to  considerable  litigation  upon  such 
instruments.  They  have  been  held  to  be  in  fact  equivalent  to 
promissory  notes. ^    They  create  no  trust  relation  between  deposi- 

^  Towle  V.  Starr,  67  Minn.  370,  69  N.  W.  1098  (1897). 

^f-  Kirkwood  v.  First  National  Bank,  40  Neb.  485,  58  N.  W.  1016  (1894). 

'-'  Citizens'  Bank  v.  Jones,  121  Cal.  30,  53  Pac.  354  (1898). 

3  See  the  following  cases :  Curtis  v.  Leavitt,  15  N.  Y.  19 ;  Barnes  v. 
Ontario  Bank,  19  N.  Y.  1,52;  State  Bank  v.  Kain,  1  Breese  (111.)  45; 
State  Bank  v.  Lock,  4  Dev.  (N.  C.)  533. 

1  §  298.  Cate  v.  Patterson,  25  Mich.  191 ;  Mills  v.  Barney,  22  Cal. 
240 ;  Curran  v.  Witter,  68  Wis.  16,  31  N.  W.  705 ;  Taylor  v.  Hutchinson, 
145  Ala.  202, 40  So.  108  (1905) ;  Lamar  etc.  Drug  Co.  v.  First  National  Bank, 
127  Ga.  448,  56  S.  E.  486  (1907) ;  First  National  Bankw.  Stopf,  165  Ind.  162, 
74  N.  E.  987,  112  Am.  St.  Rep.  214  (1905) ;  Krebs  v.  Blatz,  134  Ky.  505, 
121  S.  W.  4.36  (1909) ;  Jensen  v.  Wilslef,  36  Nev.  37,  132  Pac.  16  (1913) ; 
Rinard  v.  Lasley,  143  111.  App.  450  (1908)  ;  Bertolet  v.  Stoner,  164  111.  App. 

564 


NATURE   AXD    EFFECT  §  298 

tor  and  the  bank,  but  merely  that  of  debtor  and  creditor.^"  Usually 
they  embody  an  express  promise,  in  terms,  to  pay ;  but  even  if 
they  do  not,  they  are  yet  the  bank's  acknowledgment  of  its  in- 
debtedness, and  so  are  of  nearly  the  same  effect  as  if  they  expressly 
promised  payment.  Substantially,  therefore,  they  resemble  prom- 
issory notes,!*"  and  the  courts  have  always  inclined  to  regard 
them  as  such,  especially  when  they  are  made  payable  otherwise 
than  immediately  and  upon  demand.  But  this  is  not  a  necessary 
feature.2  If  they  are  payable  at  a  future  day  certain,  they  are 
simply  promissory  notes,  neither  more  nor  less.  If  a  bank  cannot 
issue  its  negotiable  promissory  note,  neither  can  it  issue  a  negotiable 
certificate  of  deposit  of  this  description.  If  the  note  would  be 
void,  so  likewise  is  the  certificate. 

If  a  bank  cannot  lawfully  issue  promissory  notes,  it  cannot 

605  (1911) ;  In  re  Baldwin,  170  N.  Y.  156,  63  N.  E.  62,  58  L.  R.  A.  122 
(1902) ;  Hanna  v.  Manufacturers'  Trust  Co.,  104  App.  Div.  90  (1905)  93 
N.  Y.  S.  304 ;  Dickey  v.  Adler,  143  Mo.  App.  326,  127  S.  W.  593  (1910) ; 
Kushner  v.  Abbott,  156  Iowa  598,  137  N.  W.  913  (1912) ;  Kavanaugh  v. 
American  Bank,  239  111.  404,  88  N.  E.  171  (1909) ;  Forrest  v.  Safety 
Banking  etc.  Co.,  174  Fed.  345  (1909). 

But  they  represent  transactions  entirely  different  from  those  repre- 
sented by  promissory  notes.  Elliott  v.  Capital  City  State  Bank,  128  Iowa 
275,  103  N.  W.  777,  111  Am.  St.  Rep.  198,  1  L.  R.  A.  (x.  s.)  1130,  n. 

1"  Leaphart  v.  Bank,  45  S.  C.  563,  23  S.  E.  939  (1895),  citing  Forgarties 
and  Stillman  v.  State  Bank,  12  Rich.  (S.  C.)  518;  Buckley  v.  Bank,  39 
S.  C.  291 ;  Simmon  v.  Bank,  41  S.  C.  188,  19  S.  E.  502 ;  Thomasson  v. 
Bank,  45  S.  C.  570,  23  S.  E.  942  (1895),  citing  Leaphart  v.  Bank,  supra; 
State  V.  Shove,  96  Wis.  1,  70  N.  W.  312  (1897) ;  Lamar  v.  Taylor,  141  Ga. 
227,  80  S.  E.  1085  (1913) ;  State  v.  Corning  State  Sav.  Bank,  136  Iowa  79, 
113  N.  W.  500  (1907). 

Holders  of  such  certiiicates  are  "depositors"  within  the  meaning  of 
the  constitution  of  South  Carolina  maldng  stockholders  in  banks 
liable  to  depositors.  Wilkes  v.  Arthur,  91  S.  C.  163,  74  S.  E.  361 
(1911).  But  in  Alabama  a  holder  of  a  certificate  of  deposit  is  not  a 
"depositor"  within  the  meaning  of  the  constitutional  provisions  relating 
to  preferred  creditors.  Taylor  v.  Hutchinson,  145  Ala.  202,  40  So.  108 
(1905). 

i*"  For  many  purposes  certificates  of  deposit  are  treated  as  promissory 
notes.  State  v.  Corning  State  Sav.  Bank,  136  Iowa  79,  113  X.  W.  500 
(1914). 

Where  the  certificate  recites  that  the  money  is  deposited  to  the  credit  of 
a  third  person,  and  no  control  over  it  is  reserved  to  the  depositor,  it  is 
equivalent  to  a  promise  by  the  bank  to  pay  such  tliird  person  upon  the 
presentation  of  the  certificate ;  and  he  may  maintain  an  action  against 
the  bank  for  an  unwarranted  refusal  to  pay  the  money  deposited  to  his 
credit.  Lamar  etc.  Drug  Co.  v.  First  National  Bank,  127  Ga.  448,  56 
S.  E.  486  (1906). 

^Poorman  v.  MiUs,  35  Cal.  118;  Beardsley  i-.  Webber,  104  Mich.  88, 
62  N.  W.  173. 

505 


§  298  CERTIFICATES   OF   DEPOSIT 

issue  certificates  of  deposit  payable  at  a  future  day  with  interest, 
and  their  illegahty  affects  all  parties,  however  innocent.^ 

If,  however,  the  bank  is  empowered  to  issue  promissory  notes 
subject  only  to  the  restriction  that  it  shall  issue  none  which  are 
designed  to  pass  into  circulation  as  currency,  but  only  such  as 
become  necessary  in  the  ordinary  course  and  conduct  of  its  affairs, 
and  are  strictly  business  paper,  then  it  may  issue  certificates  of 
deposit,  whether  payable  on  demand  or  otherwise,  subject  only 
to  the  same  restriction.  By  reason  of  the  ease  with  which  such 
instruments  may  be  used  for  circulation,  the  courts  have  often 
been  rigid  in  scrutinizing  them,  and  applying  the  strict  letter  of 
the  law  to  them ;  but  they  have  never,  that  we  have  found,  sub- 
stantially modified  or  departed  from  the  general  principles  above 
laid  down.*  If  the  certificate  be  in  law  a  promissory  note,  the  same 
rules  as  to  indorsements  in  blank,  the  right  of  the  holder  to  sue, 
grace,  presentment,*"  consideration,**  etc.,  which  govern  promis- 
sory notes,  will  also  govern  the  certificate.^ 

3  Bank  of  Peru  v.  Farnsworth,  18  111.  563 ;  Bank  of  Orleans  v.  Merrill, 
2  Hill  (N.  Y.)  295;  Ontario  Bank  v.  Sehermerhorn,  10  Paige  (N.  Y.) 
109 ;   Bank  of  ChiUicothe  v.  Dodge,  8  Barb.  (N.  Y.)  233. 

4  Curtis  V.  Leavitt,  15  N.  Y.  19;  Leavitt  v.  Palmer,  3  Comst.  (N.  Y.) 
19 ;  Barnes  v.  Ontario  Bank,  19  N.  Y.  152 ;  Bank  of  Orleans  v.  Merrill, 
2  Hill  (X.  Y.)  295;  Southern  Loan  Co.  v.  Morris,  2  Barr  (Pa.)  175; 
Craig  V.  State  of  Missouri,  4  Pet.  433,  7  L.  ed.  911 ;  Miller  v.  Austen,  13 
How.  218,  14  L.  ed.  119;  Kilgore  v.  Bulkley,  14  Conn.  362;  Laughlin  v. 
Marshall,  19  111.  390 ;  Bank  of  Peru  v.  Farnsworth,  18  id.,  563 ;  Lindsey  v. 
McClelland,  18  Wis.  481 ;  White  v.  Franklin  Bank,  22  Pick.  (Mass.)  181 ; 
Bank  of  ChiUicothe  v.  Dodge,  8  Barb.  (N.  Y.)  233 ;  Bank  Commissioners 
V.  St.  La^Tence  Bank,  3  Seld.  (N.  Y.)  513;  Cate  v.  Patterson,  25  Mich. 
191;  Pardee  v.  Fish,  60  N.  Y.  265;  Poorman  v.  Mills,  35  Cal.  118,  and 
other  Cahfornian  cases  therein  cited  ;  Forrest  v.  Safety  Banking  etc.  Co., 
174  Fed.  345  (1909). 

^  Towle  V.  Starr,  67  Minn.  370,  69  N.  W.  1098  (1897). 

*''  If  a  bank  issues  to  its  stockholders  certificates  of  deposit  for  the 
amount  of  reduction  of  capital  stock  when  its  assets  are  less  than  its  Uabih- 
ties  they  are  without  consideration  as  against  a  receiver  and  creditors 
of  the  bank,  and  if  any  money  has  been  paid  thereon  it  may  be  recovered 
by  the  receiver  unless  barred  by  the  statute  of  limitations.  State  v.  Bank 
of  Ogalalla,  65  Neb.  20,  90  X.  W.  961  (1902). 

When  certificates  of  deposit  are  issued  as  a  loan  to  C,  and  not  for 
bonds  deposited  by  him  as  security  for  the  loan  for  which  certificates  C. 
gives  the  bank  his  cheek,  which  is  duly  paid,  they  are  valid  in  his  hands, 
even  though  the  bonds  are  worthless.  Kavanaugh  v.  American  Bank,  239 
111.  404,  88  N.  E.  171  (1909) ;  Pryor  v.  Bank  of  America,  240  111.  100,  88 
N.  E.  288  (1909). 

For  a  case  of  no  consideration  see  Wood  v.  Green,  131  Tenn.  583,  175 
S.  W.  1139  (1915). 

5  Poorman  v.  MiUs,  35  Cal.  118 ;   Pardee  v.  Fish,  60  N.  Y.  265 ;   Miller 

566 


NATURE    AXD    EFFECT  §  298 

Certificate  of  Deposit  not  a  Promissory   Note  Merely 

Massachusetts  distinguishes  a  certificate  of  deposit  from  a 
promissory  note  payable  on  demand,  because  the  certificate 
states  the  deposit  of  a  sum  of  money  by  the  person  to  wliom  it 
is  issued,  and  more  especially  because  it  is  not  payable  until  de- 
mand is  made^"  and  the  certificate  is  either  returned  or  tendered.^" 
It  says  also  that  they  are  designed  to  circulate  as  money,  like  bills  of 
the  bank,  and  to  be  used  for  convenience  and  safety.  Such  a  cer- 
tificate is  therefore  said  not  to  come  within  the  language  of  the 
Massachusetts  Revised  Laws,  c.  73,  §  70,  making  a  promissory 
note  on  demand  in  the  hands  of  a  third  party  subject  to  all  the 
equities  between  the  original  parties.*^ 

If  there  are  no  words  of  promise,  the  instrument  is  a  simple 
receipt ; ''  and  in  this  case  it  was  held  that  it  was  not  a  written 
contract  within  the  rule  excluding  parol  evidence  to  contradict 
or  vary  it 7" 

But  in  Indiana  this  case  has  been  severely  criticised,  as  based 
on  no  authority,  and  as  inconsistent  with  the  holdings  of  many 
courts  to  the  effect  that  a  written  order  for  property  is  a  contract 
containing  a  promise  to  pay.^  The  law  imports  into  the  order 
a  promise  to  pay,  and  no  parol  evidence  of  a  previous  or  concur- 
rent agreement  can  be  admitted  to  vary  it.  It  seems  clear,  how- 
ever, that,  unless  there  is  in  the  instrument  an  undertaking  to  pay, 
it  is  not  a  promissory  note.^ 

V.  Austen,  13  How.  218,  14  L.  ed.  119 ;  Forrest  v.  Safety  Banking  etc.  Co., 
174  Fed.  345  (1909) ;  Hanna  v.  Manufacturers'  Trust  Co.,  104  App.  Div. 
90  (1905),  93  N.  Y.  S.  304. 

^  The  time  uithin  which  demand  must  be  made  is  the  time  limited  for 
bringing  an  action ;  and  a  demand  thirty-six  years  after  the  date  of  cer- 
tificate is  too  late.  Pierce  v.  State  National  Bank,  215  Mass.  18,  101  X.  E. 
1060  (1913). 

« Shute  V.  Pacific  National  Bank,  136  Mass.  487 ;  citing  Bellows  Falls 
Bank  v.  Rutland  County  Bank,  40  Vt.  377 ;  Munger  v.  Albany  County 
Bank,  85  N.  Y.  580;  Merchants'  Bank  v.  State  Bank,  10  Wall.  G04,  19 
L.  ed.  1008. 

^  Hotchkiss  V.  Mosher,  48  N.  Y.  482.  But  see  State  v.  Corning  State 
Sav.  Bank,  136  Iowa  79,  113  N.  W.  500  (1907). 

'^  State  V.  Corning  State  Sav.  Bank,  136  Iowa  79,  113  N.  W.  500  (1907). 

8  Long  V.  Straus,  107  Ind.  94,  6  N.  E.  123,  7  N.  E.  763;  Garraire  r. 
State,  104  Ind.  444,  4  N.  E.  54 ;  Anderson  v.  State,  65  Ala.  553 ;  State  v. 
Keeler,  SO  N.  C.  472 ;  Commonwealth  v.  Fisher,  17  Mass.  46 ;  United 
States  V.  Book,  2  Cranch  (C.  C.)  294 ;  People  v.  Shaw,  5  Johns.  (N.  Y.) 
236 ;  State  v.  Morgan,  35  La.  Ann.  293 ;  Burke  v.  State,  66  Ga.  157. 

9  1  Amer.  L.  Cas.  307. 

567 


I  298  CERTIFICATES    OF   DEPOSIT 

A  certificate  of  deposit  is  a  subsisting  chose  in  action  and  rep- 
resents the  fund  it  describes.^" 

§  299.  Negotiability  of  Certificates  of  Deposit.  —  A  certificate  of 
deposit  may  or  may  not  be  made  negotiable.  It  may  be  made  pay- 
able to  A.  B.,  when  it  is  not  negotiable. °  It  may  be  made  payable 
to  A.  B.  or  order,  when  it  is  negotiable  by  indorsement.  It  may  be 
made  payable  to  A.  B.  or  bearer,  when  it  is  negotiable  by  simple 
delivery. 

Best  View  Holds  it  Negotiable 

The  best  view  is  that  a  certificate  of  deposit  is  negotiable  if  it 
contains  words  of  negotiability,  as  to  A.  B.  or  order,  or  to  bearer,^ 
though  Pennsylvania  does  not  agree  to  this,  and  a  certificate 
bearing  interest,  and  payable  only  to  the  order  of  the  depositor 
on  return  of  the  certificate,  was  held  to  be  only  a  special  agreement 
to  pay  to  any  one  presenting  the  certificate  and  depositor's  order, 
and  not  a  negotiable  note ;  ^  and  a  holder  taking  by  indorsement 
after  attachment  of  the  fund  by  a  creditor  of  the  depositor  takes 
subject  to  the  attachment.'' 

loPhilpot  V.  Temple  Banyng  Co.,  3  Ga.  App.  742,  60  S.  E.  480 
(1907). 

0  §  299.  A  certificate  of  deposit  indorsed  on  its  face  "Deposit  receipt, 
not  transferable"  is  not  negotiable.  Bank  of  Montreal  v.  Clark,  lOS  111. 
App.  163  (1903).  ^    ^ 

1  Miller  v.  Austen,  13  How.  218,  14  L.  ed.  119;  0,'Neill  v.  Bradford,  1 
Finn.  (Wis.)  390  ;  1  Parsons  on  Bills,  26  ;  Frank  v.  Wessels,  64  N.  Y.  155  ; 
Pardee  v.  Fish,  60  N.  Y.  268 ;  Bellows  Falls  Bank  v.  Rutland,  40  Vt.  377 ; 
Laughlin  v.  Marshall,  19  111.  390 ;  Fultz  v.  Walters,  2  Mont.  165  ;  Drake  v. 
Markle,  21  Ind.  433 ;  Tripp  ;;.  Curtenius,  36  Mich.  494  (1877) ;  Bank  of 
Peru  V.  Farnsworth,  18  111.  563 ;  Lynch  v.  Goldsmith,  64  Ga.  42  ;  Gregg  v. 
Union  Co.  National  Bank,  87  Ind.  238 ;  National  State  Bank  r.  Ringel, 
51  Ind.  393 ;  Blood  v.  Northrup,  1  Kan.  28 ;  Finer  v.  Clary,  17  B.  Mon. 
(Ky.)  645 ;  Talladega  Ins.  Co.  v.  Woodward,  44  Ala.  287 ;  Fells  Point 
Savings  Institution  v.  Weedon,  18  Md.  528  ;  Poorman  v.  Mills,  35  Cal.  1 18  ; 
Brummagim  v.  Tallant,  29  Cal.  503;  Welton  v.  Adams  &  Co.,  4  Cal.  37; 
Mills  V.  Barney,  22  Cal.  240;  Howe  v.  Hartness,  11  Ohio  St.  449;  Bean 
V.  Briggs,  1  Iowa  488 ;  Forrest  v.  Safety  Banking  etc.  Co.,  174  Fed.  345 
(1909) ;  City  Bank  v.  Brvan,  72  W.  Va.  29,  78  S.  E.  400  (1913) ;  Kushner 
V.  Abbott,  156  Iowa  598,  137  N.  W.  913  (1912) ;  Kavanaugh  v.  Bank  of 
America,  239  111.  404,  88  N.  E.  171  (1909)  ;  Hanna  v.  Manufacturers' 
Trust  Co.,  104  App.  Div.  90  (1905),  93  N.  Y.  S.  304.  See  First  National 
Bank  v.  Stopf,  165  Ind.  162,  74  N.  E.  987,  112  Am.  St.  Rep.  214 
(1905). 

2  Patterson  v.  Poindexter,  6  Watts  &  S.  (Fa.)  227 ;   Charnley  v.  Dallas, 
8  Watts  &  S.  (Pa.)  353 ;   Gillespie  v.  Mather,  10  Fa.  St.  28. 

3  Lebanon  Bank  v.  Morgan,  28  Pa.  St.  452. 

568 


NEGOTIABILITY    OF   CERTIFICATES   OF   DEPOSIT  §  299 

"In  Current  Funds  "  or  "  Currency  "    Held  not   Negotiable 

(a)  It  has  been  held  that  if  it  l)e  expressed  as  payable  "  in 
currency  ",  or  "in  current  funds  ",  or  the  like  phraseology,  it  is 
not  negotiable,  because  it  is  not  made  payable  in  money,  but  in 
that  which  at  the  time  of  payment  may  or  may  not  be  money. 
A  tender  in  any  of  the  circulating  notes  of  the  banks  of  the  State 
would  seem  sufficient  to  satisfy  the  requirements  of  an  instrument 
so  worded  ;  and  courts  will  not  consider  current  funds  to  be 
necessarily  either  money  or  equivalent  to  money.* 

In  Indiana,^  Pennsylvania,^  and  North  Carolina,'^  a  certificate 
of  deposit  payable  "  in  current  funds  "  is  not  regarded  as  payable 
in  "  money  ",  and  is  therefore  not  negotiable.  But  the  better 
opinion  is  that  "  currency  "  or  "  current  funds  "  means  money 
and  does  not  interfere  with  the  negotiability  of  the  certificate. 


"  Currency  "   Held  to  Mean  Money 

(b)  "  Currency  "  in  a  certificate  of  deposit  means  money, 
including  bank  notes,  which,  though  not  an  absolute  legal  tender, 
are  issued  by  authority  of  law,  and  are  in  actual  and  general 
circulation  at  par  with  coin.     Such  certificates  are  negotiable.^ 

"  In  Current  Funds."     Grace 

(c)  A  certificate  of  deposit  payable  in  current  funds  is  nego- 
tiable.^ 

In  an  Iowa  case  a  bank  having  for  collection  a  certificate  payable 
"  in  current  funds  "  protested  it  without  allowing  grace,  thereby 
discharging  the  indorser.  There  were  in  evidence  two  customs : 
(1)  to  regard  current  funds  as  meaning  legal  tenders  and  national 
bank  notes,  thereby  making  the  certificate  negotiable,  and  as  it 

*  Ford  V.  Mitchell,  15  Wis.  304,  and  eases  cited ;  Piatt  v.  Sauk  County 
Bank,  17  id.,  222;   Lindsey  ik  :McClelland,  18  id.,  4S1. 

5  National  State  Bank  of  Lafayette  v.  Ringel,  51  Ind.  393  (1875). 

«]McC()rmick  r.  Trotter,  10  Serg.  &  Rawle  (Pa.)  94;  Wharton  v. 
Morris,  1  Dall.  125,  1  L.  ed.  65. 

'  Johnson  v.  Henderson,  76  N.  C.  227. 

8  Klauber  v.  Biggerstaff,  47  Wis.  551,  3  N.  W.  357;  Drake  v.  Markle, 
21  Ind.  433. 

3  Citizens'  National  Bank  v.  Brown,  45  Ohio  St.  39,  11  N.  E.  799  (1887) ; 
Whiteman  v.  Childress,  6  Humph.  (Tenn.)  303;  Kirkpatrick  v.  McCul- 
lough,  3  Humph.  (Tenn.)  171;  Simpson  u.  Mouldon,  3  Cold.  (Tenn.)  429. 

509 


§  299  CERTIFICATES   OF   DEPOSIT 

was  payable  one  year  after  date,  it  was  entitled  to  grace ;  (2)  a 
local  usage  of  the  banks  *to  regard  such  certificates  as  payable 
without  grace.  It  was  held  that  the  bank  was  bound  to  know 
the  law,  but  was  not  held  to  knowledge  of  the  first  usage,  and 
that  the  second  usage  protected  it  from  the  charge  of  negligence 
brought  by  the  holder. ^° 

When  in  making  out  a  certificate  for  a  special  deposit  the  teller 
by  mistake  makes  it  payable  "  in  current  funds  "  instead  of  "  in 
certain  notes  ",  the  bank  is  only  liable  to  retire  the  notes  consti- 
tuting the  special  deposit.^^ 

§  300.  Transfer  of  Certificates.  —  A  certificate  of  deposit 
prima  facie  represents  an  undertaking  on  the  part  of  the  bank 
to  pay  the  depositor  on  demand,  and  a  transfer  of  the  certificate 
will  transfer  all  the  rights  possessed  by  the  depositor  against  the 
bank  in  respect  to  the  deposit.^  It  is  an  agreement  to  pay  the 
holder  of  the  certificate  properly  indorsed,^"  and  the  bank  is  liable 
to  a  bona  fide  holder  though  it  has  already  paid  the  deposit  to  the 
depositor.^ 

S.,  who  owed  P.  $388,  made  a  deposit  of  S388  intended  for  P. ; 
by  P.'s  consent  the  deposit  became  his,  with  complete  title  by 
indorsement  to  him  of  the  certificate  of  deposit.^ 

10  Haddock  v.  Citizens'  National  Bank,  53  Iowa  542,  5  N.  W.  766  (1880). 
See  Mechanics'  Bank  v.  Merchants'  Bank,  6  Met.  (Mass.)  13,  where  a 
usage  of  Boston  banks  to  protest  post  notes  without  grace  was  admitted 
to  protect  a  bank. 

11  Niblaek  v.  Cosier,  80  Fed.  596  (1897). 

1  §  300.  MiUer  v.  Austen,  13  How.  228,  14  L.  ed.  124 ;  Kavanaugh  v. 
Bank  of  America,  239  111.  404,  88  N.  E.  171  (1909) ;  Philpot  v.  Temple 
Banking  Co.,  3  Ga.  App.  742,  60  S.  E.  480  (1907). 

But  if  the  indorsement  is  void  because  in  furtherance  of  a  gambling 
transaction  it  is  the  duty  of  the  bank  which  has  been  notified  of  such 
defence  to  interpose  it  when  sued  upon  the  certificate.  Thomas  v.  First 
National  Bank,  213  lU.  261,  72  N.  E.  801  (1904),  affirming  116  lU.  App.  20 
(1904). 

Certificates  may  also  be  assigned.  Forrest  v.  Safety  Banking  etc.  Co., 
174  Fed.  345  (1909) ;  Dollar  v.  International  Banking  Corp.,  13  Cal.  App. 
331,  109  Pac.  499  (1910). 

i»  Hanna  v.  Manufacturers'  Trust  Co.,  104  App.  Div.  90  (1905),  93 
N.  Y.  S.  304. 

If  the  certificate  is  not  indorsed  the  payee  thereof  is  prima  facie  en- 
titled to  its  proceeds.  Sommers  v.  Germania  National  Bank,  152  Wis.  210, 
138  N.  W.  713  (1912) ;  EUiott  v.  Capital  City  State  Bank,  149  Iowa  309, 
128  N.  W.  369  (1910). 

2  National  Bank  v.  Washington  County  National  Bank,  5  Hun  (N.  Y.) 
605. 

3  Phillips  V.  Franciseus,  52  Mo.  370  (1873). 

570 


CERTIFICATES   OF    DEPOSIT   AND    THE    STATUTE    OF    UMITATIONS     §  302 

Ownership   may   Exist    without     Indorsement,  though  the    Certifi- 
cate is  to  Order 

A  third  person  may  become  the  owner  of,  and  have  a  right  to 
demand  payment  upon,  a  certificate  of  deposit  without  indorse- 
ment, even  though  it  be  payable  to  order.  As  where  H.  deposited 
money  of  W.,  his  wife,  and  took  a  certificate  of  deposit  payable 
to  H,  or  order,  which  he  gave  to  W.  without  indorsing.  W.  de- 
manded payment  from  the  bank,  notifying  it  of  her  right  to  the 
fund,  and  H.  also  claimed  the  money.  It  was  held  that  the  bank 
must  pay  W.^ 

§301.  Statute  of  Limitations.  (See  §321.)  —  Runs  on  a 
certificate  of  deposit,  — 

(1)  From  demand,  according  to  the  better  opinion,  it  being 
intended  to  circulate  as  money,  so  far  as  to  make  it  a  continuing 
security,  and  the  very  nature  and  terms  of  the  contract  making 
the  deposit  payable  only  on  demand,  thus  reversing  the  rule  that 
applies  to  notes  ordinarily,  requiring  the  maker  to  seek  out  the 
creditor  and  pay  him ;  and  it  may  be  added  that,  since  the  best 
authorities  hold  that  a  depositor  cannot  sue  the  bank  for  his 
deposit  before  demand  (except  in  special  cases),  and  that  the 
statute  only  runs  against  the  deposit  from  such  demand,  and  since 
the  certificate  of  deposit  is  only  evidence  of  the  contract  which 
exists  in  every  case  of  deposit,  implied  if  not  expressed,  therefore 
it  should  be  subject  to  the  same  rules.  INIerely  writing  down 
a  contract  does  not  change  its  nature.  The  bank  is  in  no  default 
until  demand  is  made. 

(2)  To  the  contrary,  there  are  some  cases  holding  that  the 
certificate  is  a  promissory  note,  and  subject,  along  with  such  notes, 
to  the  rule  that  no  demand  is  necessary  before  suit,  and  that  the 
statute  runs  from  the  date,  or  from  the  delivery  (whichever  is 
latest),  of  the  instrument. 

§  302.  Certificates  of  Deposit  and  the  Statute  of  Limitations. 
By  First  View  Statute  Runs  from  Date.  —  A  certificate  of  de- 
posit is  in  legal  effect  a  promissory  note,"  is  due  immediately, 
and  no  demand  is  necessary  to  set  the  Statute  of  Limitations 
running.^ 

*  Cassidy  v.  First  National  Bank,  .30  IMinn.  86,  14  N.  W.  363. 

»  §  302.     Tavlor  v.  Hutchinson,  145  Ala.  202,  40  So.  lOS  (1905). 

1  MitehoU  r.  Villvins,  37  Minn.  335,  33  N.  W.  910,  followinp:  Cassidy 
V.  Bank,  30  Minn.  87,  14  X.  W.  363  ;  Brummaffim  r.  Tallant.  29  Cal.  503  ; 
Curran  r.  Witter,  08  Wis.  10,  31  N.  W.  705  (1887);    Meador   r.    Dollar 

571 


§302 


CERTIFICATES    OF   DEPOSIT 


Second  View  Favored 


(a)  In  the  case  cited  from  Michigan,  the  court  thought  that, 
as  a  certificate  of  deposit  is  a  promissory  note  payable  on  demand, 
the  principles  governing  such  notes  should  be  applied.  It  did 
not  then  perceive  the  effect  of  the  facts  that  a  certificate  of  de- 
posit is  meant  to  circulate  as  money,  and  is  evidently  intended 
to  be  a  continuing  security,  etc. ;  but  in  a  later  case  the  INIichigan 
court  said  that,  if  the  question  were  open,  it  should  decide  with 
New  York  that  a  certificate  of  deposit  did  not  become  due  till 
demand.^ 

The   Two  Views 

(b)  Where  the  certificate,  as  is  not  unfrequently  the  case, 
states  that  the  amount  is  payable  "  on  the  return  of  this  certifi- 
cate", or  on  its  presentment,  or  other  such  phrase,  this  language 
does  not  alter  the  legal  effect  of  the  instrument .^^  As  a  promis- 
sory note,  naming  no  place  of  payment,  —  for  a  heading  with  the 
name  of  the  bank  is  not  such  a  naming,  —  its  maker,  the  bank, 
is  bound  to  find  it  out  and  offer  to  pay  it ;  and  not  till  then  can  a 
return  of  it  be  claimed.  Neither  is  the  holder  generally  deemed 
to  be  under  any  obligation  to  present  it  for  payment  before  suit 
upon  it.^  Though  where  a  certificate  w^as  given  to  A.,  "  payable 
to  order  of  himself  on  presentation  of  this  certificate  properly 
indorsed",  the  court  regarded  this  as  so  far  like  an  ordinary  deposit 
that  A.  could  not  sue  the  bank  upon  it  v/ithout  a  previous  demand.* 

Savings  Bank,  56  Ga.  605 ;  Tripp  v.  Curtenius,  36  Mich.  494 ;  Curran  v. 
Witter,  68  Wis.  16,  31  N.  W.  705 ;  Mitchell  v.  Easton,  37  Minn.  335,  33 
N.  W.  910;  Lusk  v.  Stoughton  State  Bank,  135  Wis.  311,  115  N.  W.  813 
(1908) ;  Koelzer  v.  First  National  Bank,  125  Wis.  595,  104  N.  W.  838, 
110  Am.  St.  Rep.  870,  2  L.  R.  A.  (n.  s.)  885,  n.  (1905). 

2  Birch  V.  Fisher,  51  Mich.  39,  16  N.  W.  220. 

2«  In  Tobin  v.  McKinney,  15  S.  D.  257,  88  N.  W.  572,  91  Am.  St.  Rep. 
694  (1901),  the  court  holds  that  the  date  of  maturity  of  such  certificate  is 
dependent  upon  its  return  to  the  bank,  and  the  statute  does  not  begin  to 
run  until  payment  is  demanded.  See  also  Tobin  v  McKinney,  14  S.  D. 
52,  84  N.  W.'  228,  91  Am.  St.  Rep.  688  (1900). 

But  a  demand  must  be  made  within  a  reasonable  time  and  notice  of 
non-payment  given,  in  order  to  hold  indorsers.  Anderson  v.  First  National 
Bank,  144  Iowa  251,  122  N.  W.  918,  138  Am.  St.  Rep.  288  (1909). 

Commencement  of  an  attachment  suit  and  service  upon  the  bank  is 
equivalent  to  notice  and  demand  for  payment.  Bank  of  Montreal  v. 
Clark,  108  111.  App.  163  (1903). 

3  Hunt  V.  Divine,  37  111.  137 ;  SmiUe  v.  Stevens,  39  Vt.  315,  affirmed  in 
Bellows  Falls  Bank  v.  Rutland  County  Bank,  40  id.,  377. 

4  BeUows  Falls  Bank  v.  Rutland  County  Bank,  40  id.,  377 ;  Elliott  v. 

572 


CERTIFICATES    OF    DEPOSIT    AND    THE    STATUTE    OF    LIMITATIONS     §  302 

Second  \'iew,  Statute  liun.s  from  Demand 

(c)  In  Massachusetts  it  is  said  that  a  certificate  of  deposit 
is  not  like  a  promissory  note  on  demand  so  far  as  concerns  the 
Statute  of  Limitations,  for  upon  sucli  notes  the  statute  runs 
from  their  datc,^  wliile  a  certificate  is  not  due  until  demand,  being 
intended  to  circulate  as  money .^ 

And  in  Pennsylvania  the  statute  does  not  run  until  demand^ 
So  it  is  in  New  York,  Indiana,  and  Iowa.  The  very  nature  of  the 
instrument  shows  that  it  represents  money  actually  left  with  the 
bank  to  be  retained  until  demanded.^ 

(d)  It  seems  clearly  reasonable  that  the  Statute  of  Limitations 
should  not  be  deemed  to  begin  running  until  demand.  The 
contract  of  the  parties  is  to  pay  "on  presentation  of  the  certifi- 
cate", and  tliis  changes  by  express  agreement  the  ordinary  rule 
that  the  debtor  must  seek  the  creditor  and  pay  his  debt,  on  which 
rests  the  rule  that  a  debt  can  be  sued  for  without  demand.     In 

Capital  City  State  Bank,  128  Iowa  275,  103  N.  W.J77,  111  Am.  St.  Rep. 
198,  1  L.  R.  A.  (n.  s.)   142,  n.  (1905). 

^  F'ield  V.  Nickerson,  13  Mass.  131. 

e  Shute  V.  Pacific  National  Bank,  136  Mass.  487. 

In  Iowa  the  same  rule  holds  in  regard  to  a  demand  certificate.  But 
when  payable  at  a  fixed  time  they  do  not  circulate  and  are  like  promissory 
notes  so  far  as  concerns  the  Statute  of  Limitations  which  begins  to  run  at 
the  time  specified  for  the  payment  of  the  certificate.  Thompson  v. 
Farmers'  State  Bank,  159  Iowa  662,  140  N.  W.  877,  44  L.  R.  A.  (x.  s.) 
550  (1913). 

But  when  a  demand  is  not  made  until  thirty-six  years  after  the  date  of 
the  certificate  it  is  too  late.  Pierce  v.  State  National  Bank,  215  Mass.  18, 
101  N.  E.  1060,  46  L.  R.  A.  (x.  s.)  693  (1913). 

'  McGough  V.  Jamison,  107  Pa.  St.  336  (1884).  See  Elhott  v.  Capital 
City  State  Bank,  149  Iowa  309,  128  N.  W.  369  (1910). 

If  the  hank  which  issues  the  certificate  is  a  partnership  and  one  of  the 
partners  dies  after  the  certificate  has  matured  demand  upon  his  estate 
must  be  made  within  six  years  from  the  date  of  the  death  of  the  partner 
or  the  claim  -will  bo  barred.  In  re  Gardner's  Estate,  228  Pa.  St.  282, 
77  Atl.  509,  29  L.  U.  A.  (n.  s.)  685,  n.  (1910). 

8  National  Bank  v.  Washington  County  National  Bank,  5  Hun  (N.  Y.) 
607 ;  Munger  v.  All)anv  City  National  Bank,  85  N.  Y.  587  ;  Boughton  v. 
Flint,  74  N.  Y.  476;  Howell  v.  Adams,  68  N.  Y.  314;  Brown  v.  IMcElroy, 
52  Ind.  404;  Smiley  v.  Fry,  100  N.  Y.  262,  3  N.  E.  186;  Elliott  v.  Capital 
City  State  Bank,  128  Iowa  275,  103  N.  W.  777,  HI  Am.  St.  Rep.  198.  1 
L.  R.  A.  (n.  s.)  142,  n.  (1905) ;  In  re  Cook,  86  App.  Div.  586  (1903),  83 
N.  Y.  S.  1009. 

Since  the  depositor  has  the  right  to  demand  the  amount  due  him  at  the 
time  and  the  bank  has  the  right  to  pay  at  any  time,  there  can  bo  no  exten- 
sion of  the  Statute  of  Limitation  by  either  party,  nor  any  laches  on  the 
part  of  either.     ElUott  v.  Capital  City  State  Bank,  supra. 

573 


§  302  CERTIFICATES    OF   DEPOSIT 

case  of  a  certificate  of  deposit,  or  in  any  case  where  there  is  an  agree- 
ment express  or  implied  that  the  creditor  shall  seek  the  debtor, 
neither  party  is  in  fault  until  demand  is  made,  and  the  statute 
should  not  run  until  then,  although  of  course  the  creditor  may 
pay  at  any  time? 

§  303.  When  a  Certificate  of  Deposit  is  Stale.  —  A  lapse  of 
thirty-one  days  does  not  raise  the  presumption  that  it  is  dishonored 
paper,  even  in  States  which  hold  that  a  certificate  of  deposit  is 
due  at  its  date.^ 

Where  the  owner  has  indorsed  the  certificate,  and  carelessly  al- 
lowed it  to  pass  beyond  his  control,  one  who  buys  it  in  good 
faith,  for  value  and  within  a  reasonable  time,  is  entitled  to 
protection.^ 

But  (as  is  held  by  some  courts  as  in  regard  to  checks)  a  certifi- 
cate of  deposit  is  stale  after  six  years,  and  is  taken  as  dishonored 
paper,  and  the  holder  cannot  enforce  its  second  payment  by  the 
bank.2  But  in  New  York  a  transfer  of  a  certificate  (that  bore 
interest)  seven  years  after  date  does  not  subject  the  holder  to  prior 
equities.^ 

§  304.  Payment  by  Certificates  of  Deposit.  —  In  general  only 
Conditional  Payment.  —  A  certificate  of  deposit  is  presumed 
to  be  taken,  not  as  cash,  but  as  a  convenient  means  of  obtaining 
cash,  and  where  a  certificate  was  given  as  a  loan,"  and  the  bank 
failed  before  maturity,  the  lender  was  held  to  bear  the  loss.^ 

Where  a  State  treasurer,  upon  beginning  his  duties,  instead  of 
demanding  the  funds  due  from  his  predecessor  in  cash,  accepts 
in  payment  thereof  certificates  of  deposit  issued  by  a  bank  in 
which  such  funds  have  been  deposited  for  safe-keeping,  he  is  charge- 
able, upon  the  subsequent  failure  of  said  bank,  for  the  amount 
of  such  funds.2 

9  Munger  v.  Albany  City  National  Bank,  85  N.  Y.  587  ;  Pardee  v.  Fish, 
60  N.  Y.  265 ;  Bellows  Falls  Bank  v.  Rutland  County  Bank,  40  Vt.  377 ; 
Fells  Point  Savings  Institution  v.  Weedon,  28  Md.  320. 

1  §  303.     Birch  v.  Fisher,  51  Mich.  36,  16  N.  W.  220  (1883). 

2  Gregg  V.  Union  County  National  Bank,  87  Ind.  238.  See  also  Tripp 
V.  Curtenius,  36  Mich.  497  (1877). 

'  National  Bank  v.  Washington  County  National  Bank,  5  Hun  (N.  Y.) 
605  (1875). 

°  §  304.  See  State  v.  Corning  State  Savings  Bank,  136  Iowa  79, 1 13  N.  W. 
500  (1907) ;  Brown  v.  Sheldon  State  Bank,  1.39  Iowa  83,  117  N.  W.  289 
(1908) ;  State  v.  Corning  State  Savings  Bank,  139  Iowa  338,  115  N.  W. 
937  (1908). 

1  Burrows  v.  Bangs,  34  Mich.  304  (1876). 

2  State  V.  Hill,  47  Neb.  459,  66  N.  W.  541  (1896). 

574 


LOST   CERTIFICATE  §  306 

§  305.  Collecting  Bank  taking  its  own  Certificates  in  Payment. 
—  By  custom  l);uiks  receive  their  own  certificates  of  deposit  as 
payment,  and  such  custom  will  be  judicially  noticed  by  the  courts, 
and  will  justify  a  collecting  bank  in  receiving  its  own  certificate 
of  deposit  in  payment  of  paper  it  holds  for  collection ;  and  the 
debtor  is  discharged,  even  though  the  bank  fails  before  remitting. 
And  especially  will  this  be  so  where  the  owner  of  the  paper  directed 
the  bank  to  remit  by  draft,  for  he  is  presumed  to  have  intended 
a  draft  of  the  collecting  bank.^ 

From  the  language  of  the  court  in  this  case  it  would  seem  that, 
custom  or  not,  the  payment  ought  to  be  good.  "  The  plaintiff 
in  effect  claimed  that  the  debtor  should  have  presented  his  certifi- 
icates  of  deposit  at  the  bank  counter,  and  had  the  money  counted 
out  to  him,  and  then  counted  it  back  to  the  cashier.  The  law  does 
not  require  any  such  vain  and  unnecessary  formality." 

This  is  sound,  of  course,  if  the  certificate  would  really  have  been 
paid  by  the  bank,  and  the  fact  that  the  bank  received  it  as  payment 
is  proof  that  it  would  have  paid  cash  if  demanded.  In  respect 
to  the  transaction  as  a  question  of  custom,  the  court  said  that 
the  ignorance  of  the  plaintiff  as  to  the  existence  of  such  usage  was 
of  no  moment ;  every  business  man  must  be  held  to  know  the 
method  by  which  nearly  all  banks  in  the  country  transact  1nisi- 
ness  by  checks,  drafts,  and  certificates  of  deposit. 

Taking  Own  Certificate  Held  to  he  a  Fraud,  and  the  Depositor  Pre- 
ferred 

A.  sold  land  to  B.,  and  forwarded  the  deed  to  the  C.  bank,  to  be 
delivered  to  B.  on  payment  to  the  C.  bank  of  §2000,  which  was 
to  be  remitted  to  A.  at  once.  The  bank  took  its  own  certificates 
of  deposit  from  B.,  and  failed  the  same  night  before  remitting  to 
A.  Held,  it  was  a  fraud  on  A.  to  take  the  certificates  instead  of 
cash,  and  that  the  funds  in  the  hands  of  the  assignee  were  impressed 
with  a  trust  in  favor  of  A.  to  the  extent  of  S2000,  which  should 
be  paid  in  preference  to  other  claims.^ 

§  306.  Lost  Certificate.  —  A  negotiable  certificate  of  deposit 
lost  before  indorsement  cannot  give  the  finder  any  title,  and  al- 
though it  says  "  payable  on  return  of  this  certificate",  the  bank 

1  §  305.  British  &  American  Mortgage  Co.  v.  Tibbals,  6.3  Iowa  408, 
19  N.  319. 

2  Francis  v.  Evans,  69  Wis.  115,  33  N.  W.  93.  But  see  Sehafer  v.  Olson, 
24  N.  D.  542,  139  N.  W.  983,  43  L.  R.  A.  (n.  s.)  762  (1913). 


§  306  CERTIFICATES    OF   DEPOSIT 

has  no  right  to  require  a  bond  of  indemnity  from  the  depositor 
before  paying  him  the  money. ^ 

No  one  can  be  a  bona  fide  taker  of  a  certificate  of  deposit,  unless 
he  takes  within  a  reasonably  short  time ;  otherwise  banks  could  issue 
certificates  with  the  same  effect  as  bank  bills.  If  a  certificate 
is  due  at  the  time  of  its  loss,  the  subsequent  holder  is  subject  to 
the  equities,  and  a  payment  by  the  bank  to  the  loser  would  bar 
an  action  by  such  holder,  wherefore  no  bond  of  indemnity  is  re- 
quired.^ 

Although  ordinarily  one  who  demands  payment  of  a  certificate 
of  deposit  must  surrender  the  certificate,^  the  bank  is  not  entitled 
to  retain  the  money  if  the  certificate  is  not  forthcoming.  The 
depositor  is  entitled  on  proof  of  loss,  and  indemnity,  if  required, 
to  relief  in  equity.^ 

§  307.  Interest  on  Certificate  of  Deposit.  —  A  rate  of  interest 
specified,  as  six  per  cent  from  date,  continues  after  maturity, 
and  until  the  certificate  is  paid.^ 

§  308.  Certificate  to  Order  of  Husband  or  Wife.  —  S.  depos- 
ited money  and  received  a  certificate  payable  "to  the  order  of 
S.,  or  of  E.,  his  wife."  It  was  held  that  the  death  of  S.  revoked 
the  power  of  E.  to  draw  the  money ;  during  the  life  of  S.  her  power 
was  that  of  an  agent,  and  S.  could  have  revoked  it  at  any  time, 
and  the  death  of  the  principal  revoked  the  agent's  authority.^ 

It  would  seem  much  more  probable  that  the  intent  of  such 
an  arrangement  was  to  give  the  wife  a  power  over  the  deposit 
concurrent  with  that  of  S.,  or  at  least  only  second  to  it,  and  that 
the  death  of  S.,  instead  of  diminishing  the  power  of  E.,  only 

1  §  306.  Citizens'  National  Bank  v.  Brown,  45  Ohio  St.  39,  11  N.  E. 
799  (1887).  See  Divine  v.  Unaka  National  Bank,  125  Tenn.  98,  140  S.  W. 
747,  39  L.  R.  A.  (n.  s.)  586,  n.  (1911),  which  says  that  a  bank  is  entitled  to 
have  certificates  of  deposit  surrendered  when  it  makes  payment,  or  in 
case  they  cannot  be  surrendered  because  of  loss  or  other  impossibility  of 
production,  then  to  have  a  bond  of  indemnity  given  to  protect  it.  See 
also.  In  re  Cook,  86  App.  Div.  586  (1903),  83  N.  Y.  S.  1009.  But  see 
Zander  v.  New  York  Security  etc.  Co.,  178  N.  Y.  208,  70  N.  E.  449  (1904). 

2  Brown  v.  Citizens'  National  Bank,  38  Bank.  Mag.  (Am.)  135;  18 
Bank.  Mag.  (3d  series.  Am.)  135. 

3  Read  ;'.  Marine  Bank,  59  Hun  (N.  Y.)  578. 

'  Bank  v.  Little,  17  Gr.  Chy.  R.  (Canada)  685. 

1  §  307.  Cordell  v.  First  National  Bank  of  Kansas  City,  64  Mo.  600 
(1877) ;   Payne  v.  Clark,  23  Mo.  259  (1886). 

1  §  308.  Baltimore  v.  Wrightson,  63  Md.  81  (1884) ;  citing  Murray  v. 
Cannon,  41  Md.  476.  See  Smith  v.  Haire,  133  Tenn.  343,  181  S.  W.  161 
(1915),  holding  that  the  word  "or"  is  equivalent  to  "and." 

576 


INTEREST   ACCOUNTS  §  309 

eliminated  the  power  of  S.  and  left  that  of  E.  to  reign  alone.  If 
a  thing  may  be  done  by  S.  or  by  E.,  the  vanishing  of  the  term 
S.  leaves  E.  the  only  one  able  to  do  that  thing,  —  in  this  case 
drawing  the  money.  The  other  construction  makes  the  whole 
sentence  equal  only  to  the  first  clause. 

§  309.  Interest  Accounts.  —  Ordinarily,  as  to  deposits  in  an 
incorporated  bank  the  rule  is  that  a  general  deposit  draws  no 
interest^  unless  by  agreement  ^"  until  upon  demand^''  for  payment 
it  is  refused  ^<=  or  unreasonably  delayed,^  or  by  virtue  of  statute,  or 

1  §  309.  First  National  Bank  v.  Coleman,  11  Brad.  (Til.)  511 ;  Hilburn 
V.  Mercantile  National  Bank,  39  Colo.  189, 89  Pac.  45  (1907)  ;  Clark's  Adm'r 
V.  Farmers'  National  Bank,  124  Ky.  563,  99  S.  W.  674  (1907) ;  Bank  of 
Commerce  v.  Harrison,  11  N.  M.  50,  66  Pac.  460  (1901). 

The  payment  of  interest  on  deposit  is  a  modern  custom  resulting  from 
competition  and,  in  the  absence  of  statutory  authority,  would  be  unlawful. 
Commercial  Banking  etc.  Co.  v.  Citizens'  Trust  etc.  Co.,  153  Ky.  566,  156 
S.  W.  160,  1915C  Ann.  Cas.  166,  n.,  45  L.  R.  A.  (n.  s.)  950,  n. 

^^  A  printed  paragraph  on  the  back  of  a  demand  certificate  of  deposit 
which  purports  to  be  an  interest  agreement  signed  by  the  printed  signa- 
tm-es  of  the  depositing  bank  and  other  banks,  to  the  effect  that  an  allow- 
ance of  three  per  cent  interest  would  be  made  on  deposits  left  undrawn  for 
six  months  is  not,  as  a  matter  of  law,  a  part  of  the  contract.  Anderson  v. 
First  National  Bank,  144  Iowa  251,  122  N.  W.  918,  138  Am.  St.  Rep.  288 
(1909). 

When  a  deposit  is  received  from  the  judge  of  probate,  under  Mass.  Rev. 
Laws  c.  150,  §  23,  the  contract  is  ^vith  him  ;  and  if  the  agreement  is  that 
interest  will  be  paid,  with  a  reservation  that  such  may  be  discontinued 
upon  ten  days'  notice,  a  notice,  to  be  effectual,  must  be  given  to  him  ;  and 
if  it  is  given  only  to  the  beneficiary  or  to  the  register  of  probate  it  is  not 
sufficient  to  stop  the  accumulation  of  interest.  Cole  v.  New  England 
Trust  Co.,  200  Mass.  594,  86  N.  E.  902  (1908). 

i*"  The  presentation  of  a  claim  to  the  receiver  of  an  insolvent  bank  and 
its  allowance  by  the  court  are  equivalent  to  a  demand.  Baker  v.  WiUiams 
Banking  Co.,  42  Or.  213,  70  Pac.  711  (1902). 

The  appointment  of  a  temporary  receiver  and  his  assumption  of  posses- 
sion of  the  assets  excuses  demand,  People  v.  Merchant's  Trust  Co.,  116 
App.  Div.  41  (1906),  101  N.  Y.  S.  255.  But  see  Patten  v.  American 
National  Bank,  15  Colo.  App.  479,  63  Pac.  424  (1900). 

1"=  When  a  bank  closes  its  doors  —  suspends  payment  —  it  expresses  its 
refusal  to  pay  and  the  depositor  is  entitled  to  interest  from  that  time. 
Ex  parte  Stockman,  70  S.  C.  31,  48  S.  E.  736,  106  Am.  St.  Rep.  741  (1904). 

But  the  depositor  is  not  entitled  to  interest  merely  from  the  fact  that 
the  bank  has  temporarily  suspended  and  its  assets  are  temporarily  in  the 
hands  of  a  receiver.  Patten  v.  American  National  Bank,  15  Colo.  App. 
479,  63  Pac.  424  (1900). 

2  Parkersburg  National  Bank  v.  Als,  5  W.  Va.  50 ;  Jassoy  v.  Horn.  64 
lU.  379  ;  Stearns  v.  Brown,  1  Pick.  (Mass.)  531 ;  Dodge  v.  Perkins,  9  Pick. 
(Mass.)  368;  Pierce  v.  Rowe,  1  N.  H.  182;  Griswold  v.  Chandler,  5  N.  H. 
497;  Wendell  v.  French,  19  N.  H.  213;  Stark  v.  Gamble,  43  N.  H.  46S ; 
Parsons  v.  Treadwell,  50  N.  H.  356 ;   First  National  Bank  v.  State  Bank, 

VOL.  I  —  37  '^'  ' 


§  309  CERTIFICATES   OF   DEPOSIT 

on  account  of  the  default  of  the  party  hable  to  pay,^"  and  defending 
a  suit  in  good  faith  is  not  unreasonable  or  vexatious  delay .^ 

Interest  on  a  deposit  runs  from  demand,  and  a  counter-claim 
asking  to  have  the  deposit  set  off  against  a  claim  on  the  depositor 
is  sufficient  demand.'" 

Agreement 

Private  bankers  usually  pay  interest  on  customers'  balances, 
and,  e  converso,  charge  interest  on  their  overdrafts.  With  us, 
however,  it  is  a  proper  subject  of  a  special  agreement  or  under- 
standing between  the  parties.  In  England  it  might  be  judicially 
noticed  and  assumed  by  the  courts  as  the  regular  course  of  business. 
But  probably  it  would  not  be  so  with  us,  where  private  banking 
is  carried  on  much  less  extensively.  Such  agreements  may  be 
entered  into  also  with  an  incorporated  bank,  though  certainly 
they  would  never  be  assumed  in  dealings  with  a  corporation  or 
association,  however  it  might  be  with  a  firm  or  an  individual  in 
the  business.  It  naturally  happens  that  nearly  all  the  cases  which 
we  find  on  this  subject  are  English.^  They  chiefly  concern  dis- 
putes which  arise  as  to  when  rests  may  be  taken,  and  as  to  what 
rate  of  interest  shall  be  allowed  in  cases  not  specifically  provided 
for  by  distinct  agreement. 

Usage  and  Mode  of  Dealing 

(a)  Usage,  if  it  contravenes  no  law,  will  govern  in  such  con- 
troversies. So  when  a  banker  and  his  customer  are  shown  to  have 
conducted  their  banking  account  for  a  series  of  years  upon  a  cer- 
tain specified  system,  which  is  not  in  itself  intrinsically  illegal, 
it  will  be  assumed  that  that  system  had  been  originally  agreed  upon 

15  N.  D.  594, 109  N.  W.  61  (1906) ;  Bowman  Bank  etc.  Co.  v.  First  National 
Bank,  18  N.  M.  589,  139  Pac.  148  (1914). 

2«  Forschirm  v.  Mechanic's  etc.  Bank,  137  App.  Div.  149  (1910),  122 
N.  Y.  S.  168. 

When  a  solvent  bank,  able  to  pay  its  depositors  in  full,  is  compelled  to 
suspend  payment  by  the  superintendent  of  banks  who  caused  the  attorney 
general  to  institute  suit  for  the  dissolution  of  the  bank,  in  which  a  volun- 
tary receiver  was  appointed  but  which  suit  was  later  dismissed  and  the 
receiver  discharged,  the  bank  is  not  Uable  for  interest  on  a  deposit  due 
only  upon  demand,  in  the  absence  of  demand  or  some  act  of  its  own  ex- 
cusing demand.     Forschirm  v.  Mechanics'  etc.  Bank,  supra. 

3  Aldrieh  v.  Dunham,  16  111.  403. 

^  Sickles  V.  Harold,  149  N.  Y.  332,  43  N.  E.  852. 

4  Gwyn  V.  Godby,  4  Taunt.  346 ;  Ikin  v.  Bradley,  5  Price  536 ;  Cross- 
kill  V.  Bower,  32  Beav.  86. 

578 


INTEREST    ACCOUNTS  §  309 

between  them,' and  the  principles  involved  in  it  will  be  held  bind- 
ing for  the  solution  of  any  subsequent  disagreement.^  But  ac- 
quiescence in  the  general  system  does  not  go  further  than  to  fix  the 
principle  upon  which  the  accounts  shall  be  computed ;  it  does 
not  admit  the  accuracy  of  particular  items,  any  of  which  may  be 
disputed.^ 

Cannot  Control  the    Usury  Laws 

(6)  It  is  necessary,  however,  that  the  principle  which  it  is 
sought  thus  to  establish  should  be  one  which  is  in  itself  strictly 
legal.  Thus,  it  cannot  be  questioned  that  a  bank,  or  banker, 
equally  with  any  other  individual,  is  subject  to  the  operation  of 
the  usury  laws,  and  cannot  exact  more  than  the  legal  rate  of  in- 
terest, either  directly  or  indirectly.  The  custom  pursued  in  dis- 
counting, of  deducting  the  interest  at  the  beginning  of  the  term 
of  the  loan,  thereby  in  fact  gaining  a  very  little  more  than  the 
strict  legal  rate,  is  allowed,  and  has  been  sanctioned  by  the  courts. 
This  matter  is  treated  under  the  topic  "  Discount."  ^ 

"  Rests^\  or  Frequent  Compounding  of  Interest 

(c)  One  of  the  most  common  methods  of  circumventing  the 
usury  laws  is  by  taking  "  rests  "  at  very  short  intervals,  and  so 
compounding  the  interest  many  times,  perhaps,  in  the  course  of 
a  single  year.  That  "  rests  "  may  be  taken  at  intervals  of  proper 
length  is  undoubted  ;  the  only  question  is,  what  interval  is  proper  ? 
In  Clancarty  v.  Latouche,  supra,  a  compounding  at  tri-monthly 
rests  was  declared  to  be  usurious  and  intolerable.  In  Rufford  v. 
Bishop,^  it  was  said  that  the  decision  in  Clancarty  v.  Latouche 
seemed  to  throw  some  doubts  on  rests  at  a  less  interval  than  one 
year,  but  that  it  must  be  admitted  that  shorter  rests  were  legal. 
No  definite  rule  of  law  therefore  exists  on  the  i)oint.  In  the  I'nited 
States,  accountings  in  every  })ran(h  of  business  are  customarily 
had  more  promptly  and  frequently  than  is  usual  in  England,  and 
it  is  quite  probable  that  tri-monthly  rests  might  be  sanctioned, 
if  agreed  to  by  both  parties. 

The  nature  of  the  customer's  indebtedness  to  his  banker  for  ad- 
vances is  not  affected  by  the  fact  that  the  final  footing  is  cast  so 
as  to  include  interest,  which,  by  rests  at  proper  intervals,  has 

6  Mosse  V.  Salt,  32  Beav.  269. 

« Ibid. ;  Clancarty  v.  Latouche,  1  Ball  &  B.  420. 

7  Maine  Bank  v.  Butts,  9  Mass.  49.  »  5  Russ.  34G.     . 

579 


§309 


CERTIFICATES   OF   DEPOSIT 


been  from  time  to  time  converted  into  principal,  and  has  since 
itself  also  borne  interest.  Hence  a  mortgage,  given  generally 
to  secure  the  customer's  balance,  will  secure  a  balance  of  which 
such  interest,  and  interest  upon  interest,  are  component  parts.^ 
But  where  a  mortgage  is  given  by  the  customer  to  secure  a  specific 
balance  owing  by  him  on  a  certain  day,  and  subsequent  transactions 
are  had  between  the  parties,  in  which,  as  well  as  in  those  which 
had  preceded  the  mortgage,  compound  interest  was  uniformly 
charged,  it  was  nevertheless  held  that  the  precise  sum  secured 
by  the  mortgage  was  thereby  at  once  excepted  from  the  general 
custom  governing  the  other  dealings  of  the  parties,  and  that  in- 
terest could  not  thereafter  be  compounded  thereon,  but  must  be 
calculated  at  simple  rates,  as  in  all  cases  of  ordinary  mortgage 
debts.io 

Death,  Settlement,  or  Insolvency  Destroys  a  Special  Contract  Rate 
of  Interest  on  a  Deposit 

(d)  When  a  judgment  is  recovered  by  the  bank  against  the 
customer  for  overdrafts  or  advances,  interest  will  be  allowed  at 
the  same  rate  which  the  bank  itself  was  paying  upon  deposits  on 
the  same  account.^^  But  where  the  banker  and  the  customer 
arrange  that  all  indebtedness  of  either  to  the  other  shall  bear 
interest  at  a  certain  rate  per  cent,  yet  upon  the  death  of  the  cus- 
tomer, or  upon  his  closing  his  dealings  with  the  banker,  being  at 
the  time  indebted  to  him,  or  upon  his  insolvency,  or  upon  the  death 
of  the  banker,  or  his  ceasing  to  carry  on  business,  or  becoming 
bankrupt,  the  special  arrangement  at  once  ceases  to  operate,  and 
from  the  date  of  such  occurrence  the  balance  of  indebtedness 
then  due  from  either  to  the  other  carries  only  such  simple  interest 
as  is  carried  by  any  other  ordinary  contract  debt,^^ 

Up  to  What  Time  Interest  is  to  he  Cast  on  a  Deposit  in  Case  of 
Acceptance  of  Check 

(e)  In  casting  interest  or  making  the  charge  to  the  drawer,  it 
is  clear  that  the  banker  must  debit  the  drawer  of  a  check,  not 

9  RufPord  V.  Bishop,  supra.  "  Mosse  v.  Salt,  32  Beav.  269. 

"  Gwvnn  v.  Godby,  4  Taunt.  346;   Ikin  v.  Bradley,  5  Price  536. 

12  Cro'sskill  v.  Bower,  32  Beav.  86.     See  People  v.  Merchants'  Trust  Co., 
116  App.  Div.  41  (1906),  101  N.  Y.  S.  255,  affirmed  in  187  N.  Y.  293,  79 
N.  E.  1004. 
580 


INTEREST   ACCOUNTS  §  309 

from  the  date  of  the  drawing  but  from  the  date  of  the  actual 
payment  of  the  check.'^  If  the  banker  accepts  the  check  some 
time  before  actually  paying  it,  it  has  not  been  decided  whether 
he  may  debit  the  drawer  from  the  date  of  the  acceptance  or  from 
that  of  the  paying.  But  it  has  been  said  that  the  accepting  of  a 
check  payable  at  a  day  future  is  equivalent  to  a  loan  of  the  amount 
named,  by  the  drawer  to  the  banker,  for  the  interval.  Following 
this  principle,  it  would  practically  amount  to  a  debiting  at  the 
time  of  payment.  For  if  the  debit  were  made  at  the  time  of  ac- 
ceptance, yet  the  acceptance,  creating  at  once  a  loan  from  the 
depositor  to  the  banker  for  the  interval,  would  cause  interest  to 
run  on  the  same  sum,  for  the  same  period  at  the  same  rate  per 
cent,  from  the  banker  to  the  customer,  and  the  one  amount  would 
exactly  offset  the  other.  But  since  the  acceptance  only  binds 
the  banker,  at  his  own  peril,  to  have  funds  enough  of  the  depositor 
to  meet  it  when  payment  is  demanded,  and  as  until  such  demand 
he  has  the  full  use  of  such  funds,  it  would  seem  interest  should 
in  reason  be  calculated  to  the  date  when  demand  may  be  made. 

Although  this  reasoning  is  good  as  to  an  acceptance  of  a  check 
before  delivery  by  the  drawer,  or  as  to  a  check  payable  at  a  future 
day,  yet  in  other  cases,  as  the  acceptance  amounts  to  payment 
so  far  as  the  drawer  is  concerned,  he  should  not  receive  interest 
upon  the  amount  of  the  check  after  such  certification.  The  money 
is  transferred  at  once  from  the  drawer's  account  to  the  account 
of  certified  checks,  and  becomes  substantially  a  deposit  of  the 
holder  of  the  check,  and  if  any  one  receives  interest  he  should. 
The  drawer  should  not  receive  interest  on  funds  in  which  he  has 
no  interest. 

(/)  From  the  rule  that  the  banker  is  in  no  sense  a  trustee,  or 
quasi  trustee,  for  the  benefit  of  his  customer,  it  follows  that,  under 
an  agreement  to  allow  interest,  he  is  under  no  obligation  annually 
to  balance  the  account  and  credit  the  interest,  so  as  to  pro\-ent 
the  running  of  the  Statute  of  Limitations.^^ 

"  Goodbody  v.  Foster,  cited  to  this  point  in  Byles  on  Bills,  Sharswood's 
ed.  p.  25. 

'"  Pott  V.  Clegg,  16  M.  «fe  W.  321 ;  Foley  v.  Hill,  2  H.  L.  Cas.  40. 


581 


.CHAPTER   XX 

PAYMENT   OF   DEPOSIT 

See  Payment  of  Notes,   §  556.     Of  Checks,    §  362.     Of  Forged 

Cheeks,  §  461. 
Duty  of  Bank. 

(A)  By  contract  implied  '"  from  the  course  of  business,  it  is  the 

duty  of  a  bank  to  pay,  over  its  counter,  or  through  the 

clearing-house,^^*  (according  to  the  manner  of  presentment), 

in  good  money  ^^-  upon  presentment  in  banking  hours  of  a 

Genuine,'*"  vahd,"''  subsisting. 

(The  bank  may  take  time  to  inquire  if  the  order  is  stale 
or  otherwise  suspicious.) 
Written,3i3 

(It  may  pay  on  the  verbal  order,  if  it  so  elects,  but  is 
entitled  to  written  evidence  of  authority  for  a  payment. ) 
Properly  drawn  order  for  the  whole  or  any  part"^  of  the  de- 
posit (if  the  order  is  bona  fide,  in  the  regular  course  of  busi- 
ness, and  not  merely  to  vex  the  bank  by  numerous  suits), 
signed  by  the  depositor,  or  by  his  authorized  agent  'n  or 
representative,  or  by  the  person  who  has  proved  his  owner- 
ship of  the  deposit  against  the  depositor,^«5  and  ^^  if  the 
bank  has  to  the  credit  of  the  drawer  sufficient  available 
funds  to  cover  the  order  (if  the  bank  has  part  funds,  its 
duty  is  to  pay  as  much  as  it  can,  if  the  holder  is  willing 
to  receive  part  payment,  and  is  wiUing  to  give  up  the  order 
to  the  bank,  but  this  view  is  not  uniformly  adopted),  and 
free  from  a  right  of  retention  by  the  bank,  in  consequence 
of  a  lien,323  set-off,^^^  attachment,'"  injunction,'"  adverse 
claim,3^i  or  incumbrance,  by  agreement  or  otherwise,  pro- 
vided that  the  Statute  of  Limitations '^i  has  not  run  against 
the  account. 
MisappUcation."^  And  it  is  no  excuse  for  a  bank's  refusal  to 
honor  an  order  properly  drawn  and  signed,  that  it  has 
reason  to  beUeve  that  the  moneys  (e.  g.  trust  funds)  are  to 
be  appUed  as  the  drawer  has  no  right  to  apply  them,  unless 
it  participates  in  the  profits  of  the  payment  ivith  knowledge, 
actual  or  constructive,  of  the  facts  that  make  the  application 
of  the  money  wrong ;  in  such  case  it  is  not  only  excused, 
but  prohibited  from  making  the  payment. 
But  it  is  an  excuse  that  it  has  been  forced  to  pay  by  a  power 
it  could  not  resist,  as  a  pubhc  enemy. 'i* 
If  the  drawer  has  revoked  the  order  before  the  bank  has  made  pay- 

582 


OBLIGATION    OF   THE    BANK   TO    HOXOR   ORDERS  §  311 

ment  or  bound  itself  to  pay,  it  must  not  pay,  nor  if  the  drawer  is 
insane,  and  the  bank  has  notice"'  of  it,  or  if  the  drawer  is  dead, 
not  being  a  corporation  or  a  firm  (it  is  to  be  hoped  that  tliis  law 
of  revocation  by  death  as  to  checks  will  be  changed  by  statute), 
and  the  payments  made  will  be  appropriated  "'  in  their  order, 
the  first  sum  drawn  being  deemed  a  payment  pro  laulo  of  the 
first  sum  deposited,  even  though  some  of  the  items  of  the  ac- 
count were  trust  moneys. 
This  is  the  general  rule ;  but,  as  a  very  just  modification,  it  has 
been  held  that  a  depositor  will  be  presumed'"  to  be  drawing  his 
own  rather  than  trust  moneys  when  the  two  are  mingled,  though 
the  latter  were  the  earliest  deposits ;  and  if  trust  funds  can  be 
traced  into  a  deposit,  they  will  not  be  deemed  to  come  out,  so 
long  as  the  payments  can  be  otherwise  accounted  for. 
Any  payment  subsequent  to  the  deposit  will  not  touch  it  so  long 
as  there  is  enough  other  money  to  make  the  payment,  even 
though  this  was  put  in  bank  after  the  trust  money,  but  before 
the  payment. 
Over-drafts""^  may  be  a  fraud  on  the  holder  of  the  order,  though 
not  on  the  bank ;  but  if  the  bank  pays,  whether  knowing  the 
facts  or  not,  it  can  recover  from  the  drawer. 

Void  Paper.     §  316. 

Corporate  o])ligations  that  are  ultra  vires  by  circumstances  un- 
known to  the  bank,  if  paid  by  it,  may  be  charged  to  the  obligor ; 
but  it  is  otherwise  if  the  bank  has  notice  of  the  facts  invalidating 
the  paper,  or  if  it  pays  on  paper  that  would  not  be  enforceable 
in  the  hands  of  a  bona  fide  holder  for  value,  as,  for  example, 
such  as  was  signed  under  duress,  or  by  an  infant,  etc. 

Payment  of  Checks.     §  430. 

Payment  op  Notes  and  Acceptances.     §  556. 

(B)  Succession    of   Banks.     §  320. 

When  one  bank  succeeds  to  the  business  and  assets  of  another, 
the  depositors  of  the  swallowed  bank  become  depositors  of  the 
successor,  and  the  transfer  does  not  set  the  Statute  of  Limita- 
tions running  against  them. 

(C)  Unclaimed  Deposits.     §  320  A. 

§311.  Obligation  of  the  Bank  to  honor  Orders. — The  bank 
is  under  the  obUgation  of  honoring  the  eustomer's°  drafts  and 
checks  whenever  the  same  are  presented  for  pa^Tiient,  provided 
that  at  the  time  of  such  presentment  the  bahince  of  the  account, 
if  then  struck,  would  show  a  credit  in  favor  of  the  custcnner  of 
funds,  on  which  the  bank  has  no  hen,  sufficient  to  meet  the  simi 
called  for  by  the  check  or  draft  O"     The  contract  so  to  lionor  the 

0  §  311.  It  is  doubtful  if  he  who  has  the  beneficial  interest  can  maintain 
an  action  for  the  money.  He  cannot  do  so  unless  he  shows  clearly  that  the 
monev  belongs  to  him  and  that  he  is  entitled  to  receive  it.  Xoltuig  •. 
National  Bank,  90  Va.  54,  37  S.  E.  S04  (1901). 

""  But  when  a  bank  is  threatened  w  ith  insolvency  it  may  give  ^e(•u^Uy 
for  the  performaqee  of  its  already  legal  duty.  Wylio  v.  Conunereial  etc. 
Bank,  63  S.  C.  400,  41  S.  E.  504  (1901). 

583 


§  311  PAYMENT   OF  DEPOSIT 

depositor's  orders  is  implied  from  the  usual  course  of  business. 
The  deposit  is  made  with  the  tacit  understanding  that  the  bank 
shall  respond  to  the  depositor's  orders,  so  long  as  there  is  sufficient 
balance  to  his  credit.^ 

A  banker  "  gives  the  community  to  understand  that  those 
who  have  funds  in  his  hands  have  not  only  the  right  to  draw 

1  Downes  v.  Phoenix  Bank,  6  Hill  (N.  Y.)  297 ;  Marzetti  v.  Williams, 
1  Barn.  &  Ad.  415;  Watson  v.  Phoenix  Bank,  8  Met.  (Mass.)  217; 
First  National  Bank  v.  Pease,  68  111.  App.  562 ;  Bates  v.  Capital  State 
Bank,  18  Idaho  429,  110  Pac.  277  (1910) ;  American  National  Bank  v. 
Fidelity  Co.,  129  Ga.  126,  58  S.  E.  867  (1907) ;  Wood  v.  American  Na- 
tional Bank,  100Va.306,40S.E.931  (1902) ;  Callahan  t;.  Bank  of  Anderson, 
69  S:  C.  374,  48  S.  E.  293  (1904) ;  Silisbee  State  Bank  v.  French  Alarket 
Grocery  Co.,  103  Tex.  629,  132  S.  W.  465,  34  L.  R.  A.  (n.  s.)  1207,  n. 
(1910) ;  Petrue  v.  Wakem,  99  lU.  App.  463  (1902) ;  McBee  v.  Pureell,  1 
Ind.  T.  288,  37  S.  W.  55  (1896),  the  money  is  payable  at  the  bank. 

Payment  to  husband  of  depositor  "without  orders  will  not  remove  the 
liabiUty  to  depositor.  Robards  v.  Hamriek,  39  Ind.  App.  134,  79  N.  E.  386 
(1906). 

But  the  bank  is  not  liable  to  a  depositor  if  the  money  received  by  the 
bank  does  not  in  equity  and  good  conscience  belong  to  the  depositor,  or  if 
the  money  has  been  paid  out  on  the  order  of  one  who  had  authority  to 
give  it,  or  if  the  depositor  has  ratified  the  payment.  Warren  etc.  Co.  v. 
Miners'  etc.  Bank,  166  111.  App.  540  (1911). 

If  money  is  deposited  in  a  bank  to  the  credit  of  a  third  party  upon  the 
performance  of  a  condition  for  the  depositor's  benefit,  the  bank  cannot 
pay  out  the  money  to  the  third  party  until  the  condition  is  fulfilled. 
Republic  Life  Ins.  Co.  v.  Hudson  Trust  Co.,  130  App.  Div.  618  (1909), 
115  N.  Y.  S.  503,  affirmed  in  198  N.  Y.  590,  92  N.  E.  1100. 

It  is  no  defense  that  the  officer  receiving  the  money  converts  it  to  his 
own  use.  Scow  v.  Farmers'  etc.  Bank,  136  Iowa  1,  111  N.  W.  32  (1907) ; 
or  had  cancelled  certificates  of  deposit  and  absconded  with  the  money. 
Griffin  v.  Marlette  State  Bank,  150  Mich.  499,  114  N.  W.  325  (1907) ;  or 
had  loaned  the  depositor  money  so  as  to  secure  a  greater  rate  of  interest. 
Short  V.  Butler,  136  Mo.  App.  356,  117  S.  W.  114  (1909). 

And  when  a  private  banker  opens  a  bank  and  receives  deposits  he 
assumes  a  personal  obligation  to  repay  the  same,  and  he  cannot  relieve 
himself  of  such  obligation  by  transferring  the  bank  and  its  deposits  to 
another,  but  he  remains  primarily  obliged  to  repay  to  each  depositor  what 
he  had  on  deposit  at  the  time  of  the  transfer  or  what  he  might  thereafter 
deposit  in  ignorance  of  such  transfer ;  and  the  depositor's  right  is  not 
discharged  by  his  filing  a  claim  with  the  receiver  of  the  assignee  and 
accepting  a  dividend  from  him,  even  though  such  assignee  had  agreed 
to  repay  the  deposit.  Johnson  v.  Shuey,  40  Wash.  22,  82  Pac.  123 
(1905). 

The  bank  does  not  make  payment  because  it  is  the  agent  of  the  deposi- 
tor but  to  discharge  pro  tanto  the  simple  debt  which  it  owes  the  depositor. 
Havana  Central  R.  Co.  v.  Central  Trust  Co.,  204  Fed.  .546  (1913). 

There  is  no  need  of  demand  by  means  of  a  formal  check  when  the  bank 
denies  that  it  holds  any  of  depositor's  monev,  or  is  indebted  to  him. 
Altman  v.  Phillips  County  Bank,  86  Kan.  930,  'l22  Pac.  874  (1912). 

584 


DESCRIPTION    OF    FUNDS    DEPOSITOR    IS    ENTITLED    TO    DRAW       §  312 

upon  the  deposit,  but  that  all  drafts  will  be  paid  on  presentation  ; 
he  opens  virtually  a  letter  of  credit  to  his  depositor,  which  is  a 
guaranty  to  him,  as  well  as  to  all  who  made  advances  on  the  faith 
of  it.  For  all  practical  purposes  it  assimilates  itself  to  a  parol 
promise  to  pay  any  check  that  the  owner  of  the  deposit  ma\'  draw  ; 
and  thus  the  rule  which  binds  the  drawee  of  a  bill  of  exchiinge 
as  an  acceptor,  when  he  has  promised  in  advance  to  honor  it,  fur- 
nishes a  strong  analogy."  ^ 

§  312.  For  what  Description  of  Funds  Depositor  is  entitled 
to  Draw.  —  As  a  general  rule,  the  depositor,  having  once  brought 
his  funds  securely  into  the  hands  of  the  proper  officer,  and  having 
duly  received  his  credit  for  the  amount  in  dollars  and  cents,  has 
thereafter  a  perfect  claim  on  the  bank  for  this  amount,  m  money. ^ 
One  of  the  cited  cases  shows  that  when  a  deposit  was  made  in  good 
faith  of  the  bills  of  a  bank,  supposed  at  the  time  by  both  parties 
to  be  solvent,  but  which  had  in  fact  already  stopped  payment, 
and  the  amount  was  in  ordinary  course  passed  to  the  credit 
of  the  depositor  as  so  much  money,  so  many  dollars,  the  bank  was 
held  to  repay  the  amount  in  good  money ;  although  it  was  sho^^Tl 
as  a  fact  that  the  bills  had  been  kept  by  themselves,  and  not 
mingled  with  the  general  funds  of  the  bank,  and  that  they  still 
continued  so  when  the  insolvency  of  the  issuing  bank  was  dis- 
covered, when  the  receiving  bank  promptly  sought  to  undo  the 
credit.  Precisely  the  same  rule  applies  where  the  bank  under- 
takes to  make  a  collection  for  its  customer,  and  passes  the  amount 
to  his  credit.  (§  248.)  In  neither  case  is  there  any  bailment  of 
the  specific  funds  or  money  received  by  the  bank;  but  at  once, 
upon  the  giving  credit  in  ordinary  form,  the  simple  indebtedness 
accrues  which,  like  any  other  indebtedness,  can  only  be  discharged 
in  funds  which  the  law  makes  a  legal  tender.  This  has  been 
repeatedly  held  in  the  Western  States  where  bank  bills  of  the 
so-called  "  wild-cat  banks "  were  deposited,  and  credit  given 
for  the  nominal  value  in  dollars  and  cents.  Frequently,  the  de- 
preciation of  these  bills  had  begun  at  the  time  of  deposit ;  often 
they  sunk  almost  immediately  afterwards  through  every  stage 
of  depreciation  to  utter  worthlessness.  But  the  courts  uniformly 
held  that  the  credit  given  for  so  much  money  could  only  be  dis- 
charged by  so  much  "  money",  and  that  bills  similar  to  those 
received,  or  even  the  identical  ones,  could  not  be  forced  u]ion  the 

2  McGregor  v.  Loomis,  1  Disney  (Ohio)  251. 
1  §  312.     Thompson  v.  Riggs,  5  Wall.  663,  IS  L.  cd.  704. 

585 


§  312  PAYMENT   OF   DEPOSIT 

customer  in  payment. ^  So  where  the  deposit  was  made  in  bills 
of  the  bank  itself,  and  they  were  at  the  time  greatly  depreciated, 
it  was  held  that  payment  must  nevertheless  be  made  in  full  in 
good  money .^  The  right  of  the  depositor  is  not,  however,  neces- 
sarily to  the  gold  or  silver  coin  of  the  country ;  but  only  to  such 
money  as  is  by  the  law  of  the  land  legal  tender  at  the  time.  Hence 
it  has  been  held  that  a  deposit  made  in  1860  in  gold  could,  after 
the  passage  of  the  Legal  Tender  Act  so  called,  be  paid  off  in  the 
Treasury  notes  of  the  United  States  to  the  same  nominal  amount, 
without  regard  to  their  excessive  depreciation  in  fact.'*  Semble  that 
payment  by  a  bank  within  the  Confederate  States,  made  in  Con- 
federate notes  to  a  United  States  quartermaster,  under  the  stress 
of  military  orders  of  the  United  States  general  commanding  in 
the  place,  may  acquit  the  indebtedness  of  the  bank  to  the  depositor, 
provided  the  original  deposit  was  made  in  Confederate  notes.^ 
But  a  depositor  of  Confederate  notes,  though  at  the  time  of  the 
deposit  they  were  bankable  funds  at  the  place,  was  held  to  be 
not  entitled  afterward  to  recover  the  amount  from  the  bank  in 
good  money  .^  Of  course  any  local  custom  to  make  and  receive 
payments  in  other  than  the  legal  money  cannot,  in  the  absence 
of  an  express  agreement  between  the  parties,  affect  the  rule  of 
law ;  and  evidence  of  such  a  custom  is  impertinent.^  But  if  the 
bank  specially  agrees  only  to  make  payment  in  something  else 
than  legal  tender,  whether,  of  greater  or  of  less  value,  such  a  con- 
tract between  the  bank  and  the  depositor  may  be  binding.^ 

See  also  title  "  Special  Deposit." 

§  313.  Verbal  Order.  —  The  order  is  almost  always  expressed 
in  writing,   by  check  or  otherwise.     But   there  is  no  absolute 

2  Corbet  v.  Bank  of  Smyrna,  2  Harr.  (Del.)  235 ;  Marine  Bank  of  Chi- 
cago V.  Chandler,  27  111.  525;  Marine  Bank  of  Chicago  v.  Birney,  28  id., 
90;  Marine  Bank  of  Chicago  v.  Rusmore,  id.,  463;  Marine  Bank  of 
Chicago  V.  Ogden,  29  id.,  248 ;  Chicago  Mar.  &  Fire  Ins.  Co.  v.  Carpenter, 
28  id.,  360;  Willetts  v.  Paine,  43  id.,  433;  Fort  v.  Bank  of  Cape  Fear,  1 
Phill.  L.  (N.  C.)  417.  See  also  the  pages  on  the  "Payment  of  Checks," 
§430. 

3  Bank  of  the  Commonwealth  of  Kentucky  v.  Wister,  2  Pet.  318,  7  L.  ed. 
437. 

4  Carpenter  v.  Northfield  Bank,  39  Vt.  46 ;  Sandford  v.  Hays,  52  Pa. 
St.  26 ;  Gumbel  v.  Abrams,  20  La.  Ann.  568 ;  and  see  "Special  Deposits." 

5  Nelligan  v.  Citizens'  Bank  of  Louisiana,  21  La.  Ann.  332. 

6  Foster  ;;.  Bank  of  New  Orleans,  21  La.  Ann.  338. 

^  See  cases  from  Illinois  Reports,  above  cited ;  Thompson  v.  Riggs, 
5  Wall.  663,  18  L.  ed.  704. 

8  Thompson  v.  Riggs,  5  Wall.  663,  18  L.  ed.  704. 

586 


PAYMENT   WITHOUT   ORDER   FROM   TUK    DEPOSITOR  §  314 

necessity  for  this.  A  verbal  direction  from  the  customer  to  tlie 
bank  to  pay  a  sum,  or  to  transfer  a  credit,  would  fully  justify 
the  bank  in  so  doing.  If  the  bank  itself  is  willing  to  act  upmi  a 
verbal  order,  this  would  be  a  perfect  defence  to  a  suit  by  the  de- 
positor for  the  amount  transferred  under  it.°  But  though  the 
bank  may,  if  it  choose,  act  upon  such  directions,  it  is  under  no 
obligation  to  do  so ;  by  the  usages  of  the  banking  business  it  is 
entitled  to  demand  some  written  evidence  of  the  order.^ 

If  the  bank  accepts  a  verbal  direction,  and,  either  expressly  or 
by  fair  implication,  consents  to  follow  it,  it  cannot  thereafter  be 
heard  to  say  that  it  is  only  required  to  follow  written  directions.^ 

If  the  bank  substantially  follows  the  instructions  of  the  de- 
positor in  making  payments,  it  is  not  liable.^ 

§  314.  Payment  without  Order  from  the  Depositor.  —  The 
agent  of  H.  deposited  in  the  P.  Bank  money  of  11.,  without  the 
knowledge  of  the  latter,  writing  in  the  bank  register  "  X.  H.  by 
S.  A.  P."  The  bank  issued  a  certificate  payable  to  N.  H.,  and 
afterwards  paid  the  money  to  the  agent  on  his  indorsement  of  the 
certificate  "  N.  H.  by  S.  A.  P."  H.  ratified  the  deposit,  and  sued 
the  bank  for  the  amount.  Held,  that  the  bank  had  no  right  to 
assume  that  N.  H.  was  a  fictitious  principal,  and  that,  as  the  agent 
had  no  authority  to  draw,  the  bank  must  reimburse  II.,  and  that 
the  full  amount  shown  on  two  certificates  of  deposit  could  be 
recovered,  although  the  money  drawn  by  the  agent  on  the  first 
may  have  been  used  to  buy  the  second.^  INIcFarland  and  Pater- 
son,  JJ,,  dissenting. 

0  §  313.  Ellis  V.  First  National  Bank,  22  R.  I.  565,  48  Atl.  936  (1901) ; 
Whitsett  V.  People's  National  Bank,  138  Mo.  App.  81,  119  S.  W.  999 
(1909).  See  Newmark  Grain  Co.  v.  Merchants'  National  Bank,  166  Cal. 
203,  135  Pac.  958  (1903). 

1  Watts  V.  Christie,  11  Beav.  546;  Coffin  v.  Henshaw,  10  Ind.  277 ; 
Walker  v.  Rostron,  9  M.  &  W.  421 ;  McEwen  v.  Davis,  39  Ind.  Ill  ;  First 
National  Bank  v.  Stopf,  105  Ind.  162,  74  N.  E.  987,  112  Am.  St.  Rep. 
214  (1905). 

2  Armour  v.  Bank,  69  ^liss.  706,  11  So.  28  (1892). 

3  Petty  V.  Gacking,  97  Ark.  217,  133  S.  W.  832,  33  L.  R.  A.  (x.  s.)  175,  n. 
(1911). 

1  §  314.  Honig  v.  Pacific  Bank,  73  Cal.  464,  15  Pac.  58 ;  Kerr  v. 
People's  Bank,  158  Pa.  St.  305,  27  Atl.  903. 

A  bank  which  pays  a  certificate  of  deposit  to  an  agent  on  his  indorse- 
ment "J.  P.  Co.,  C.  A.  J.  Supt."  is  lial^le  to  the  true  owner  therefor  unless 
it  proves  that  C.  A.  J.  had  authoritv  to  indorse.  Jackson  Paper  Mfg.  Co. 
V.  Commercial  National  Bank,  199  111.  151,  65  N.  E.  136,  93  Am.  St.  Rep. 
113,  59  L.  R.  A.  657  (1902).  See  Henshaw  v.  State  Bank,  239  111.  515,  88 
N.  E.  214,  130  Am.  St.  Rep.  241  (1909),  indorsed  "H.  W.  C.  Trustee"; 

587 


§  315  PAYMENT   OF   DEPOSIT 

§  315.  Order  may  be  for  Part  of  the  Deposit.  —  Bona  fide  in 
the  regular  course  of  business,  and  not  for  mere  vexation  of  the 
bank,  the  customer  may  draw  out  his  funds  in  such  parcels  as  he 
may  see  fit,  both  as  regards  number  and  amount.  The  rule  of 
law  forbidding  a  creditor  to  split  up  his  demand  does  not  affect 
this  principle,  which  is  based  upon  a  custom  of  the  banking 
business  that  has  been  well  said  to  be  so  ancient,  unquestioned, 
and  well  known  that  courts  will  take  judicial  notice  of  it,  without 
proof.^  But  in  the  case  cited  of  Chicago  Ins.  Co,  v.  Stanford, 
the  court  said,  that  if  there  should  be  a  dispute  between  the  bank 
and  the  customer,  and  the  latter  should  draw  a  multitude  of  checks, 
not  in  the  ordinary  course  of  bona  fide  business,  but  for  the  purpose 
of  vexation  and  of  bringing  a  proportionate  number  of  suits  against 
the  bank,  then  the  court  would  apply  itself  to  find  some  remedy. 
In  England  it  was,  until  lately,  contrary  to  law  to  draw  a  check 
for  less  than  20^. ;  but  by  a  recent  statute  a  check  for  any  sum 
may  be  legally  drawn,  if  it  be  bona  fide  against  funds  of  the 
drawer  actually  in  the  hands  of  the  banker.  In  our  own 
country  the  law  sets  no  limit  whatsoever,  and  annexes  no 
conditions. 

§  316,  Payments  on  Void  Paper.  —  If  obligations  issued  by  a 
depositor  have  been  declared  void,  the  bank,  knowing  this,  must 
not  pay  them. 

Brown  v.  Dougherty,  120  Fed.  526  (1903),  husband  deposited  money  in 
wife's  name  and  subsequently  withdrew  it  without  her  knowledge  or 
consent;  Bates  v.  First  National  Bank,  89  N.  Y.  286;  Heath  v.  New 
Bedford  Safe  Deposit  Co.,  184  Mass.  481,  69  N.  E.  215  (1904),  the  bank 
asked  him  who  made  the  deposit  in  the  name  of  another  to  draw  it  out ; 
Frieano  v.  Columbia  National  Bank,  118  App.  Div.  567  (1907),  103 
N.  Y.  S.  189,  money  paid  to  the  son  of  the  depositor. 

If  certificates  of  deposit  are  payable  to  M.  or  his  guardian,  the  bank  is 
liable  for  having  paid  the  money  to  T.  who  was  not  the  guardian  but  who 
had  changed  the  certificates  so  as  to  read  "pay  to  M.  or  guardian  T." 
McMahon  v.  Germania-American  National  Bank,  111  Minn.  313,  127 
N.  W.  7,  29  L.  R.  A.  (n.  s.)  67,  n.  (1910). 

The  bank  assumes  the  duty  of  seeing  that  the  money  of  its  depositor 
is  paid  to  his  order  or  for  his  use  and  account,  and  if,  as  garnishee,  it 
pays  liis  money  for  one  who  has  the  same  name  it  is  stiU  liable  to  the  de- 
positor for  the  amount  so  paid.  O'Neil  v.  New  England  Trust  Co.,  28 
R.  I.  311,  67  Atl.  63,  125  Am.  St.  Rep.  740,  11  L.  R.  A.  (n.  s.)  248,  n.  (1907). 

The  bank  can  justify  a  payment  on  the  depositor's  account  only  upon 
the  actual  direction  of  the  depositor.  Critten  v.  Chemical  National 
Bank,  171  N.  Y.  219,  63  N.  E.  969,  57  L.  R.  A.  .529  (1902) ;  Seaboard 
National  Bank  v.  Bank  of  America,  193  N.  Y.  26,  85  N.  E.  829  (1908). 

1  §  315.  Munn  v.  Burch,  25  111.  35 ;  Chicago  Ins.  Co.  v.  Stanford,  28 
id.,  168;   Byles  on  Bills.  *21,  Sharswood's  note  (Sharswood's  ed.). 

588 


bank's  duty  as  to  trust  FUNT)  §  317 

A  pension  check  issued  to  a  payee  who  is,  at  the  time  of  issue, 
deceased  is  absolutely  void," 

A  bank  "  could  not  become  the  depositary  of  the  collected 
taxes  of  the  people  for  a  valid  and  legal  purpose,  and,  with  full 
knowledge  of  the  illegal  and  void  character  of  the  bonds,  which 
had  been  over-issued,  permit  the  money  in  its  possession  to  be 
misappropriated  to  the  discharge  of  those  bonds.  To  sanction 
such  a  principle  would  allow  every  trustee  of  moneys  to  account 
for  them  by  the  known  misconduct  of  others,  and  release  him  from 
his  duty  to  see  that  the  trust  fund  under  his  control  is  not  diverted 
from  the  trust  with  his  knowledge  and  consent."  ^ 

If  an  obligation  that  would  be  void  in  the  hands  of  a  bona  fide 
holder  for  value  without  notice  (as  if  signed  under  duress,  or  by 
an  infant)  is  paid  by  the  bank  without  notice,  it  is  in  the  same 
position  as  such  a  holder ;  indeed  it  is  just  such  a  holder  itself, 
and  cannot  charge  the  deposit  with  the  pajTnent  if  the  paper  is 
repudiated  by  the  obligor.  But  if  an  obligation  is  a  corporate 
one  and  merely  ultra  vires  by  circumstance  unknown  to  the  bank, 
it  will  have  a  right  to  charge  the  corporation  with  the  payment. 

§  317.  Bank's  Duty  as  to  Trust  Fund.  Banker  cannot  Inquire  into 
Third  Person's  Affairs,  nor  Refuse  to  Pay  a  Check  merely  because  he 
is  Aware  of  an  Intended  Breach  of  Trust.  —  The  banker  cannot 
excuse  his  disobedience  of  his  customer's  orders,  in  the  due  course 
of  business,  by  setting  up  that  he  knew,  or  had  reason  to  believe, 
that  the  customer's  order  was  given  in  promotion  of  an  unlawful 
purpose."  For  example,  the  banker  is  not  justified  in  refusing 
to  honor  the  depositor's  check  because  he  knows  or  believes  that 
the  check  is  an  appropriation  of  funds  to  a  person  or  for  a  purpose 
to  whom  or  for  which  the  depositor  is  not  lawfully  authorized 
to  appropriate  these  funds.^ 

"  Supposing  that  the  banker  becomes  incidentally  aware  that 

0  §  31G.     United  States  v.  First  National  Bank,  82  Fed.  410  (1897). 

1  Howard  v.  Deposit  Bank,  80  Ky.  496. 

0  §  317.  Merchants  &  Planters'  Bank  v.  Meyer,  56  Ark.  499,  20  S.  W. 
406  (1892) ;  INIcCord  v.  California  National  Bank,  96  Cal.  197,  31  Pae.  51. 

1  Gray  v.  Johnston,  L.  R.  3  H.  L.  Cas.  14,  per  Lord  West  bury ;  Xew- 
buryport  v.  Spear,  204  Mass.  146,  90  N.  E.  522,  134  Am.  St.  Hep.  652 
(1910) ;  Lowndes  v.  City  National  Bank,  82  Conn.  8,  72  Atl.  150.  22  L.  R. 
A.  (n.  s.)  408  (1909);  Interstate  National  Bank  v.  Claxton,  97  Te.x. 
569,  80  S.  W.  604  (1904). 

A  bank  is  not  responsible  for  honoring  a  depositor's  check  wlien  it  has 
no  knowledge  that  part  of  th(>  money  is  trust  money.  Bank  of  Overton 
V.  Thompson,  118  Fed.  798  (1902). 

589 


§  317  PAYMENT    OF   DEPOSIT 

the  customer,  being  in  a  fiduciary  or  a  representative  capacity, 
meditates  a  breach  of  trust,  and  draws  a  check  for  that  purpose, 
the  banker,  not  being  interested  in  the  transaction,  has  no  right  to 
refuse  the  payment  of  the  check,  for  if  he  did  so  he  would  be  making 
himself  a  party  to  an  inquiry  as  between  his  customer  and  a  third 
person." 

But  if  the  depositor  seeks  to  pay  his  own  debt  to  the  banker 
by  an  appropriation  of  funds  to  his  credit  in  a  fiduciary  capacity 
with  the  banker,  then  the  banker  is  affected  with  knowledge  of  the 
unlawful  character  of  the  appropriation,  and  would  be  compelled 
to  refund  .2 

Where  A.  receives  what  he  knows  to  be  an  asset  of  the  estate 
or  trust  from  an  executor  or  trustee,  with  actual  knowledge  de- 
rived from  the  trustee  of  his  intention  to  use  the  proceeds  for  his 
own  private  w^ants,  or  derived  from  facts  as  convincing  as  the  trus- 
tee's declaration,  A.  will  be  compelled  to  surrender  the  money 
paid,  or  assets  pledged  to  or  purchased  by  him.^ 

But  this  principle  does  not  touch  the  payment  of  checks  properly 

-  Gray  v.  Johnston,  L.  R.  3  H.  L.  Cas.  14 ;  Lund  v.  Seamen's  Bank, 
37  Barb.  (N.  Y.)  129 ;  Clark  v.  First  National  Bank,  57  Mo.  App.  277, 
citing  Johnston  v.  Payne  Bank,  .56  Mo.  App.  257 ;  American  Trust  & 
Building  Co.  v.  Boone,  102  Ga.  202,  29  S.  E.  182  (1897) ;  Carroll  County 
Bank  v.  Rhodes,  69  Ark.  43,  63  S.  W.  68  (1900) ;  Coleman  v.  First  National 
Bank,  94  Tex.  605,  63  S.  W.  867,  86  Am.  St.  Rep.  871  (1901) ;  Interstate 
National  Bank  v.  Claxton,  97  Tex.  569,  80  S.  W.  604  (1904) ;  United 
States  Fidelity  etc.  Co.  v.  Adoue  &  Lobit,  104  Tex.  379, 137  S.  W.  648, 1914B 
Ann.  Cas.  667,  n.,  37  L.  R.  A.  (n.  s.)  409,  n. ;  Emerado  Farmers'  Elevator 
Co.  V.  Farmers'  Bank,  20  N.  D.  270,  127  N.  W.  522,  29  L.  R.  A.  (n.  s.)  567 
(1910) ;  Fidelity  etc.  Co.  v.  Ranknn,  33  Okla.  7,  124  Pac.  71  (1912)  ; 
Allen  V.  Puritan  Trust  Co.,  211  Mass.  409,  97  N.  E.  916  (1912) ;  Colum- 
bia etc.  Co.  V.  First  National  Bank,  116  Ky.  364,  76  S.  W.  156  (1903) ; 
Farmers'  etc.  Bank  i;.  Fidelity  etc.  Co.,  108  Ky.  384,  56  S.  W.  671  (1900) ; 
Globe  Savings  Bank  v.  National  Bank  of  Commerce,  64  Neb.  413,  89 
N.  W.  1030  (1902). 

And  when  a  managing  director  of  a  company  fills  out  a  blank  check  of 
the  company  and  deposits  it  in  payment  of  his  own  draft,  the  bank,  acting 
in  good  faith,  is  not  bound  to  inquire  whether  or  not  the  company  owes  its 
managing  director.  Bank  of  New  South  Wales  v.  Goulburn  Valley  Butter 
Co.,  (1902)  A.  C.  543. 

But  see  Lee  v.  Marion  National  Bank,  94  Ky.  43,  21  S.  W.  346  (1893), 
where  a  sheriff,  collector  of  railroad  taxes,  deposited  the  collections  in  a 
bank,  and  requested  that  it  be  applied  to  payment  of  a  debt  owed  by  him 
to  the  bank.  The  sureties  on  the  sheriff's  bond  were  obliged  to  answer 
for  his  default,  and  could  not  require  the  bank  to  account  to  them. 

3  Duncan  v.  Jaudon,  15  Wall.  165,  21  L.  ed.  142 ;  Colt  v.  Lasnier, 
9  Cow.  (N.  Y.)  320 ;  Smith  v.  Ayer,  101  U.  S.  320,  25  L.  ed.  955 ;  M'Leod 
V.  Drummond,  17  Ves.  Jr.  153 ;   Shaw  v.  Spencer,  100  Mass.  382. 

590 


bank's  duty  as  to  trust  fuxd  §  317 

drawn,  even  though  the  bank  may  know  the  money  is  drawn  with 
intent  to  use  it  wronf!;fully,  unless  it  participates  in  misapplying 
the  funds/"  then  it  is  liable.^  A  fortiori,  it  does  not  require  a  bank 
to  inquire  as  to  the  drawer's  intent.''" 

"  The  circumstances  under  which  a  liability  like  that  claimed 
here  will  arise  against  the  banker  is  stated  in  Gray  v.  Johnston  ;  and 
attention  is  there  called  to  an  important  element  in  the  consider- 
ation of  such  cases,  which  is,  that  a  banker  cannot  question  the 
right  of  his  customer  hy  refusing  to  honor  his  demands  by  check  or 
otherwise,  upon  any  theory  that  it  is  the  banker's  duty  to  look  after 
the  appropriation  of  the  trust  funds  when  loithdrawn  from  the  bank, 
and  to  protect  the  trust  by  setting  up  a  jus  tertii  against  the  demand. 
This  case  goes  further  than  any  I  have  found,  in  some  of  its  expres- 
sions, to  justify  the  contention  that  mere  knowledge  of  the  banker 
that  a  breach  of  trust  is  intended  makes  him  privy  to  it  and  lia- 
ble. But  on  scrutinizing  the  cases  cited  it  will  be  found  that 
participation  in  the  profits  of  the  fraud  is,  generally  speaking,  an 
element  in  the  case ;  and  a  mere  reason  to  believe  that  the  trus- 
tees were  misapplying  the  assets  will  not  make  the  banker  liable ; 
for  this  would  be  to  make  every  trustee  accountable  for  his  conduct 
in  the  trust  to  every  agent  whom  he  happened  to  employ,  and 
would  carry  the  principle  of  constructive  trust  to  an  inconvenient, 
and  indeed  to  an  impracticable  length."  ^ 

When  a  depositor  has  a  private  and  a  public  account,  being 
not  only  a  public  officer  but  an  executor,  and  having  an  individual 
account,  the  law  will  not  charge  the  bank  with  knowledge  of 
the  depositor's  fraud,  nor  impose  on  it  the  duty  of  inquiry,  merely 

3"  The  mere  payment  of  the  checks  of  the  depositor  does  not  constitute 
a  participation  in  an  actual  or  intended  misapplication  by  the  fiduciary, 
although  his  conduct  or  course  of  dealings  may  bring  to  the  notice  of  the 
bank  circumstances  which  would  enable  it  to  know  that  he  is  violating  his 
trust.  Interstate  National  Bank  u.  Claxton,  97  Tex.  569,  80  S.  W.  604 
(1904). 

*  Bank  v.  Clapp,  76  N.  C.  482  ;  American  National  Bank  v.  Fidelity  Co., 
129  Ga.  126,  58  S.  E.  867  (1907). 

*"  Where  a  wife's  money  is  deposited  by  her  husband  in  her  name  in  a 
state  where  by  statute  he  has  the  sole  management  of  her  separate  estate, 
he  would  have,  at  least,  as  much  power  over  money  deposited  in  the  bank 
in  her  name  as  any  other  trustee  would  have  over  a  deposit  of  (rust  funds 
and  the  bank  would  bo  under  the  same  liability  to  pay  out  the  money  on 
his  checks.  Coleman  v.  First  National  Bank,  94  Tex.  605,  63  S.  W.  867, 
86  Am.  St.  Rep.  871  (1901). 

5  Walker  v.  Manhattan  Bank,  25  Fed.  2.55 ;  Bank  of  Hartford  v.  Mc- 
Donald, 107  Ark.  232,  154  S.  W.  512  (1913) ;  American  National  Bank  v. 
Fidelity  Co.,  129  Ga.  126,  58  S.  E.  867  (1907). 

591 


§  317  PAYMENT   OF   DEPOSIT 

because  he  has  drawn  on  the  treasurer's  account  checks  payable 
to  himself  or  to  bearer,  or  has  transferred  money  from  one  account 
to  another.^  The  bank  is  not  bound  to  read  the  purpose  of  the 
drawer  between  the  lines  of  the  check. 

A  bank  must  honor  the  checks  and  certificates  ^"  of  its  depositor 
drawn  in  proper  form,  without  regard  to  the  use  the  depositor  is 
going  to  make  of  the  fund ;  the  only  limitation  is  that  the  bank 
must  not  itself  participate  in  the  profits  of  the  fraud  J 

(a)  If  a  bank  participates  in  the  misapplication  of  trust  money 
it  is  liable ;  as  where  money  deposited  by  A.  in  his  own  name 
and  known  by  the  bank  to  belong  to  another  was  applied  by  A. 
to  pay  his  debt  to  the  bank,  it  was  held  liable  to  the  principal.^ 

Where  a  bank  aids  or  participates  in  misapplication  by  entering 
a  check  payable  to  "  H.  W.  C.  trustee  "  to  the  individual  account 
of  the  trustee,  the  bank  is  liable  to  the  trust  estate  ;  ^"^  but  it  is  not 

6  Goodwin  v.  American  National  Bank,  48  Conn.  550  (1881) ;  Central 
National  Bank  v.  Conn.  Mut.  Life  Ins.  Co.,  104  U.  S.  54,  26  L.  ed.  693; 
Newburyport  v.  Spear,  204  Mass.  146,  90  N.  E.  522,  134  Am.  St.  Rep.  652 
(1910) ;  Lowndes  v.  City  National  Bank,  82  Conn.  8,  72  Atl.  150,  22 
L.  R.  A.  (n.  s.)  408  (1909).  Compare  Allen  v.  Puritan  Trust  Co.,  211 
Mass.  409,  97  N.  E.  916  (1912). 

But  where  an  agent  has  two  accounts  at  a  bank,  one  private  and  the 
other  for  the  account  of  his  principal,  the  bank  is  liable  for  transferring 
from  the  principal's  account  to  the  private  account  the  proceeds  of  a 
check  drawn  to  the  order  of  the  principal,  indorsed  by  the  agent  and  de- 
posited to  the  account  of  the  principal.  Molt  Iron  Works  v.  Metropolitan 
Bank,  78  Wash.  294,  139  Pac.  36  (1913). 

«"  McCaflin  v.  Jones,  155  lU.  539. 

7  Walker  v.  Manhattan  Bank,  25  Fed.  255  ;  Keane  v.  Robarts,  4  Madd. 
332,  357 ;  Providence  Assisting  Association  v.  Citizens'  Savings  Bank,  19 
R.  I.  142,  32  Atl.  306  (1895)  ;  Hatch  v.  Johnson  Loan  &  Trust  Co.,  79  Fed. 
828;  State  National  Bank  v.  Reilly,  124  111.  464,  14  N.  E.  657;  Mayor  v. 
Tenth  National  Bank,  111  N.  Y.  447,  18  N.  E.  618  (1888) ;  Merchants  & 
Planters'  Bank  v.  Meyer,  56  Ark.  499,  20  S.  W.  406  (1892) ;  Sayre  v. 
Weil,  94  Ala.  466,  10  So.  546  (1891) ;  Eyriek  v.  Capital  State  Bank,  67 
Miss.  73,  6  So.  615  (1889). 

8  Commercial  Bank  v.  Jones,  18  Tex.  811.  See  also  Clark  v.  First 
National  Bank,  57  Mo.  App.  277 ;  American  Trust  &  Banking  Co.  v. 
Boone,  102  Ga.  202,  29  S.  E.  182  (1897) ;  Armour  v.  Bank,  69  Miss.  705, 
11  So.  28  (1892) ;  citing  Eyriek  v.  Capital  State  Bank.  67  Miss.  60,  6  So. 
615;  Knobelach  v.  Bank,  43  S.  C.  242,  21  S.  E.  13  (1894),  citing  Steele  v. 
Atkinson,  14  S.  C.  154.  But  cf.  Lee  v.  Marion  National  Bank,  94  Ky.  43, 
21  S.  W.  346  (1893) ;  Washbon  v.  Linscott  State  Bank,  87  Kan.  698,  125 
Pac.  17  (1912) ;  Interstate  National  Bank  v.  Claxton,  97  Tex.  569,  80  S. 
W.  604  (1904) ;  American  National  Bank  v.  Fidehty  Co.,  129  Ga.  126,  58 
S.  E.  867  (1907) ;  Lowndes  v.  City  National  Bank,  82  Conn.  8,  72  Atl. 
150,   22  L.  R.  A.  (n.  s.)  408  (1909). 

8«  Duckett  V.  National  Mechanics'  Bank,  86  Md.  400,  38  Atl.  983 

592 


bank's  duty  as  to  trust  fund  §  317 

liable  where  the  check  is  payable  to  trustee  individually,  eveii 
though  the  body  of  the  check  states  that  it  is  due  to  him  as  trustee, 
provided  the  bank  does  not  participate  in  the  deception.^* 

When  a  bank  receives  a  deposit  from  one  acting  in  a  representa- 
tive capacity  it  cannot  justify  a  payment  to  him  of  the  amount 
deposited  if  it  knows,  or  facts  are  presented  which  if  acted  upon, 
would  disclose,  that  the  fund  is  about  to  be  wrongfull\-  and  un- 
lawfully diverted  from  the  true  owner.^*" 

A  banker  who  knows  that  a  fund  on  deposit  with  him  is  a  trust 
fund,  cannot  appropriate  it  to  his  private  benefit,  or,  where  charged 
with  notice  of  the  conversion,  join  in  assisting  others  to  appro- 
priate it  for  their  private  benefit  without  being  liable  to  refund 
the  money  if  the  appropriation  is  a  breach  of  trust.^''" 

If  a  bank  has  notice  or  knowledge  that  a  breach  of  trust  is  being 
committed  by  an  improper  withdrawal  of  funds,^"  or  pays  out 
public  money  for  a  known  illegal  purpose  on  an  order  known  to 
be  drawn  without  legal  authority  it  is  liable  therefor.^'"= 

Where  a  bank  applies  a  deposit  to  the  payment  of  the  trustee's 
individual  debt,  the  act  may  be  ratified  by  the  cestui  que  trust?" 

A  bank  without  inquiry  discounted  notes  drawn  by  a  town 
treasurer  in  his  official  capacity  without  authority.  The  pro- 
ceeds were  placed  to  his  credit  as  treasurer,  and  town  money  was 

(1897) ;    Barroll  v.  Forman,  88  Md.  188,  40  Atl.  883  (1898) ;    Bank  of 
Hickory  v.  McPherson,  102  Miss.  852,  59  So.  934  (1912). 

When  the  check  is  entered  to  the  individual  credit  of  a  guardian  the 
bank  becomes  a  trustee  of  the  fund  and  it  can  be  saved  from  being  com- 
pelled to  account  to  the  ward  therefor  only  upon  the  guardian's  subse- 
quent true  administration  and  accounting  therefor.  United  States  Fidelity 
etc.  Co.  IK  People's  Bank,  127  Tenn.  720,  157  S.  W.  414  (1913).  See 
United  States  Fidelity  etc.  Co.  v.  Adoue  &  Lobit,  104  Tex.  379,  137  S.  W. 
646,  1914B  Ann.  Cas.  667,  n.,  37  L.  R.  A.  (x.  s.)  409,  n. 

But  mere  knowledge  on  the  part  of  the  bank  that  trust  funds  stand  to 
the  credit  of  the  depositor's  personal  account  does  not  charge  the  bank 
with  knowledge  that  the  depositor  is  acting  dishonestly.  Batchelder  v. 
Central  National  Bank,  188  Mass.  25,  73  N.  E.  1024  (1905). 

s''  Duckett  V.  National  Mechanics'  Bank,  supra ;  see  also  and  cf.  Duck- 
ett  V.  Bank,  88  Md.  8,  41  Atl.  161,  1062  (1898) ;  Batchelder  v.  Central 
National  Bank,  188  Mass.  25,  73  N.  E.  1024  (1905). 

s*"  Parks  V.  Knickerbocker  Trust  Co.,  137  App.  Div.  719  (1910),  122 
N.  Y.  S.  522. 

8*"  Allen  ('.  Puritan  Trust  Co.,  211  Mass.  409,  97  N.  E.  916  (1912). 

s*'-  Baker  v.  Baker,  123  Md.  32.  90  Atl.  776  (1914). 

s*"^  Washburn  v.  Lee,  128  Wis.  312,  107  N.  W.  649. 

8<^  Savre  v.  Weil,  94  Ala.  466,  10  So.  546  (1891),  citing  WolfTe  v.  State, 
79  Ala.^206;  Woods  v.  Legg,  91  Ala.  513,  8  So.  342;  S\\ink's  Adra'r  v. 
Snodgrass,  17  Ala.  657. 

VOL.  1—38  593 


§  317  PAYMENT   OF   DEPOSIT 

from  time  to  time  deposited  on  the  account,  and  he  drew  checks 
against  the  funds  as  treasurer  and  used  the  money  for  private 
purposes.  Held,  that  the  bank  could  not  plead  against  the  town's 
demand  for  its  money  so  squandered,  that  it  supposed  the  treas- 
urer had  authority  to  draw  the  notes.  They  must  be  considered 
personal  loans  to  the  depositor ;  and  when  he  drew  out  money 
really  belonging  to  the  town  to  pay  these  notes,  he  did  what  the 
bank  must  be  held  to  know  he  had  no  right  to  do,  and  it  must 
refund  the  town.^ 

And  if  a  bank  receives  from  one  of  its  customers  a  check  drawn 
to  the  order  of  a  town  and  indorsed  in  blank  in  the  name  of  its 
treasurer,  and  pays  out  the  proceeds  thereof  to  such  customer 
it  is  a  conversion  for  which  the  bank  is  liable  to  the  drawer  of  the 
check,  since  the  form  of  indorsement  is  notice  of  defect  of  title.^" 
But  a  town  or  city  treasurer  has  power  to  indorse  to  the  bank 
at  which  a  note  of  the  town  or  city  is  made  payable  a  certified 
check  made  payable  to  the  town  or  city,  in  order  to  provide  the 
bank  with  funds  with  which  to  pay  the  note  ;^^  and  a  banker  having 
no  interest  in  the  matter  who  pays  out  money  on  deposit  on  the 
fraudulent  order  of  a  city  treasurer  who,  by  the  terms  of  the  de- 
posit, has  a  right  to  draw  on  the  account  is  liable  only  when  he 
is  privy  to  the  fraud  of  the  depositor.^ "= 

But  advancing  money  to  a  trustee  and  then  allowing  him  to 
pay  the  loan  by  the  proceeds  of  trust  property  he  has  a  right  to 
sell,  does  not  necessarily  make  the  bank  responsible,  no  circum- 
stances being  shown  sufficient  to  put  the  bank  on  inquiry  as  to 
whether  the  money  advanced  was  to  be  used  for  trust  purposes 
or  not.^° 

Where  a  fund  deposited  by  K.  in  trust  for  D.  is  paid  by  the 
bank  to  K.'s  administrator,  in  the  absence  of  any  notice  from  D. 
the  payment  discharges  the  bank.^"" 

3  Town  of  East  Hartford  v.  American  National  Bank,  49  Conn.  549. 

^^  Franklin  Savings  Bank  v.  International  Trust  Co.,  215  Mass.  231, 
102  N.  E.  363  (1913);  Quincy  Mutual  Fire  Ins.  Co.  v.  International 
Trust  Co.,  217  Mass.  370,  104  N.  e.  845  (1913). 

Where  a  bank,  without  inquiring,  collects  checks  drawn  by  A.  Per  proc, 
credits  the  proceeds  to  the  private  account  of  A.  and  pays  them  out  on 
A.'s  check  it  is  liable  to  the  true  owner  as  for  a  conversion.  Morrison  v. 
London  County  etc.  Bank,  Ltd.  (1914)  3  K.  B.  356. 

s*-  Brown  v.  First  National  Bank,  216  Mass.  298,  103  N.  E.  780  (1914). 

^'  Newburyport  v.  First  National  Bank,  216  Mass.  304,  103  N.  E.  782 
(1914). 

"  Loring  v.  Brodie,  134  Mass.  469. 

"«  Schluter  v.  Bank,  117  N.  Y.  125,  22  N.  E.  572. 

594 


ORDER    OF    PAYMENT  §  319  B 

A  bank  is  not  bound  to  inquire  into  the  propriety  of  any  transfer 
between  the  account  of  an  individual  partner  and  the  partnership 
fund.  It  must  honor  the  check  of  any  partner  drawn  ajj;ainst 
the  firm  deposit."  Of  course  the  check  must  be  signed  in  the  firm 
name. 

Checks  of  a  firm  drawn  on  funds  held  in  trust  and  forwarded 
by  mail  to  the  owner  of  the  funds  before  the  firm's  assignment 
for  benefit  of  creditors,  but  which  were  not  received  until 
after  the  assignment,  should  be  paid  since  the  trust  fund  does 
not  pass  to  the  assignee  for  the  benefit  of  creditors."" 

§  318.  Forced  Pasrment.  —  If  a  bank  has  been  forced  to  pay 
by  an  authority  it  could  not  question  or  resist,  it  will  not  have  to 
repay  the  deposit  to  the  depositor. ^ 

§  319.  Insanity  of  Depositor.  —  If  the  bank  pays  in  good 
faith,  not  knowing  of  the  insanity  of  the  depositor,  it  will  be  pro- 
tected.^  But  the  check  of  one  who  is  adjudged  insane  by  a  court 
of  competent  jurisdiction  is  utterly  void  at  its  inception.^" 

An  agent's  authority  is  not  revoked  by  lunacy  of  his  principal 
until  this  is  judicially  ascertained,  and  the  bank  may  pay  the 
agent  till  then.^ 

§  319^.  Death  of  Depositor.  —  If  payment  of  a  check  given 
without  consideration  is  paid  by  the  bank  after  it  knows  of  the 
death  of  the  drawer,  the  bank  is  liable  for  such  pajnnent.^ 

§  319  A.  Payment  to  Guardian.  —  A  guardian  has  no  authority 
to  draw  funds  from  a  bank  where  such  funds  are  due  to  his  ward 
as  administratrix  of  an  estate.  If  the  bank  makes  the  payment 
without  an  order  of  court  it  is  liable  to  the  ward.^ 

§  319  B.  Order  of  Payment.  —  The  general  rule  in  adjusting 
a  running  account  between  the  bank  and  the  depositor  is  that  the 
first  money  paid  in  is  the  first  money  paid  out.^ 

"  Backliouse  v.  Charlton,  8  Ch.  D.  444  (1878). 

"«  Dicldnson  v.  First  National  Bank,  64  App.  Div.  254  (1901),  72  N.  Y. 
S.  6. 

1  §  318.     Grivot  v.  Louisiana  State  Bank,  24  La.  Ann.  265. 

1  §  319.     Riley  v.  Albany  Savings  Bank,  36  Hun  (N.  Y.)  513. 

1"  American  Trust  &  Banking  Co.  v.  Boone,  102  Ga.  202,  29  S.  E.  182 
(1897). 

2  Wallis  V.  Manhattan  Co.,  2  Kail  (N.  Y.)  495. 

1  §  319^.  Pullen  v.  Placer  County  Bank,  138  Cal.  169,  (j6  Pac.  740, 
94  Am.  St.  Rep.  19  (1902). 

1  §  319  A.  Ryan  v.  North  End  Savings  Bank,  168  Mass.  215,  46  X.  E. 
620  ;  Walker  v.  The  State  Trust  Co.,  40  App.  Div.  (Hun,  X.  Y.)  55  (1899). 

1  §  319  B.  Reid  v.  Charlottevillo  National  Bank,  159  N.  C.  99,  74  S.  E. 
746  (1912). 

595 


§  320  PAYMENT    OF    DEPOSIT 

§  320.  Succession  of  Banks.  —  Where  an  insolvent  bank  trans- 
fers its  assets,  name,  and  franchise  to  another  corporation,  the 
latter  is  responsible  to  the  creditors  of  the  former.^  But  when 
a  bank  does  not  surrender  or  forfeit  its  charter  but  simply  quits 
business  and  transfers  the  accounts  of  its  depositors  to  another 
bank  from  which  it  borrows  money  to  pay  its  depositors,  and 
pledges  its  assets  as  security  for  the  money  so  borrowed,  the  second 
bank  is  not  liable  to  the  creditors  of  the  first  bank.^" 

A  savings  bank  succeeding  to  the  business  of  another  must 
pay  the  certificates  of  deposit  of  the  latter,^  and  always  where 
the  business  and  funds  of  bank  A.  pass  to  bank  B.,  B.  is  liable 
fully  to  the  depositors  of  A.^  in  the  absence  of  agreement  of  the 
depositors  to  the  contrary. 

When  a  bank  accepts  an  assignment  of  all  the  assets  and  liabil- 
ities of  another  bank,  and  credits  on  its  books  the  amount 
of  a  depositor's  (D.)  credit  on  the  books  of  the  assignor  bank,  D. 
becomes  a  depositor  with  the  assignee  bank,  and  his  claim  cannot 
be  barred  by  the  Statute  of  Limitations.^ 

And  when  the  credit  is  held  on  the  same  terms  that  it  was  held 
in  the  other  bank,  if  the  bank  pays  and  charges  to  the 
account  of  the  depositor  a  note  payable  on  the  other  bank 
and  which  the  other  bank  has  been  instructed  by  the  de- 
positor not  to  pay,  it  is  liable  to  the  depositor  for  the  amount  of 
the  unauthorized  payments,  and  the  bank  cannot  contend  that 
it  is  a  bona  fide  purchaser  for  value  before  maturity.  Nor  is  the 
return  of  the  note  which  the  depositor  had  received  with  his 
cancelled  checks  a  condition  precedent  to  bringing  suit.  The 
transferee  bank  succeeded  to  the  rights  of  the  other  bank  and  no 
additional  rights,  and  it  was  bound  to  know  the  terms  on  which 
the  deposit  was  held  by  its  predecessor.  In  regard  to  deposits 
subsequently  made,  the  implied  understanding  that  the  bank 
should  pay  the  depositor's  checks  drawn  on  the  account,  and 
notes  made  by  him  payable  at  the  bank  did  not  include  notes 
made  long  before  payable  at  another  bank.^ 

When  a  bank  which  is  a  successor  to  another  bank  whose  charter 

1  §  320.     Island  City  Savings  Bank  v.  Sachtleben,  67  Tex.  420,  3  S.  W. 
733. 

i«  Overstreet  v.  Citizens'  Bank,  12  Okla.  383,  72  Pac.  379  (1903). 

2  Citizens'  Savings  Bank  v.  Blakesley,  42  Ohio  St.  645. 

3  Eans  V.  Exchange  Bank,  79  Mo.  1S2  ;  Hopper  v.  Moore,  42  Iowa  563. 

4  Green  v.  Odd  FeUows'  Bank,  65  Cal.  71,  2  Pac.  887. 

5  Elliott  V.  Worcester  Trust  Co.,  189  Mass.  542,  75  N.  E.  944  (1905). 

596 


UNCLAIMED    DEPOSITS  §  320  A 

expired  by  limitation  and  whose  affairs  are  in  process  of  liquidation 
sues  to  recover  the  proceeds  of  drafts  fraudulently  issuetl  by  a 
servant  of  the  former  bank,  the  defendant  cannot  ccjUaterally 
attack  the  corporate  integrity  of  the  new  bank  on  the  ^Tound 
that  the  transfer  of  the  assets  of  the  old  bank  to  the  new  bank 
was  invalid.^ 

When  a  depositor  in  a  pri\ate  bank  knows  that  the  bank  has 
been  sold  to  another  he  may  refuse  to  accept  the  other  as  his 
debtor  in  place  of  the  vendor  or  he  may  affirm  the  arrangements 
and  look  to  the  vendee  to  pay  his  deposit/ 

If  a  bank  which  has  voluntarily  gone  into  the  hands  of  a  bank 
examiner  turns  over  its  assets  to  a  new  bank  upon  condition  that 
the  latter  would  care  for  the  creditors  and  depositors  of  the  former 
and  the  new  bank  contracted  in  writing  to  do  so  the  new  bank 
is  liable  to  one  who  was  a  depositor  in  the  old  bank  at  the  time  of 
such  transfer.^ 

Where  a  bank  purchases  the  business  and  premises  of  a  county 
bank  and  opens  the  premises  as  a  branch  bank  there  has  been 
a  succession  to  the  business  of  the  county  bank.® 

§  320  A.  Unclaimed  Deposits.  —  The  state  may  provide  that 
deposits  in  a  bank  unclaimed  for  a  certain  length  of  time  shall 
escheat  to  the  state,  and  pajment  of  such  deposits  to  the  state 
releases  the  bank  from  any  liability  for  such  deposits  to  the 
depositor.^ 

6  Clifford  Banking  Co.  v.  Donovan  Commission  Co.,  195  ^^o.  262, 
94  S.  W.  527  (1900). 

^  Gillett  ;•.  Ivory,  173  Mich.  444,  139  N.  W.  53  (1912). 

8  Miles  IK  Macon  County  Bank,  187  Mo.  App.  230,  173  S.  W.  713  (1914). 

9  Boll  ;-.  National  Provincial  Bank,  (1904)  1  K.  B.  149,  reversing  (1903) 
2  K.  B.  249. 

1  §  320  A.  State  v.  First  National  Bank,  01  Or.  551,  123  Pac.  712, 
1914B  Ann.  Cas.  153,  n. ;  Attorney  General  v.  Provident  Inst,  for  Sa\ings, 
201  Mass.  25,  86  N.  E.  912  (1909). 


597 


CHAPTER   XXI 

STATUTE   OF   LIMITATIONS 

See  §  301. 

Does  not  run  against  a  general  deposit  until  a  right  of  action 
§  322.  accrues,  which  is  not  until  demand  is  made  upon  the  bank, 

—  it  being  a  part  of  the  contract  of  deposit  impUed  by  the 
uniform  course  of  business  that  the  bank  is  in  no  default  in 
not  seeking  the  creditor,  but  may  hold  the  deposit  until  he 
demands  it  (unless  the  bank  obtained  the  money  by  fraud, 
§  322  e),  or  circumstances  arise  making  such  demand  useless, 
as, 

(1)  Suspension  of  payment  by  the  bank. 

(e)     (2)  Notice  by  an  account  stated,  or  otherwise,  that  the 
bank  holds  adversely,  and  will  not  pay. 

But  when  one  bank  succeeds  to  the  business  and  assets  of 
another,  the  transfer  does  not  set  the  statute  running  against 
the  depositors  in  the  expired  bank.      §  320. 

Some  sUght  opposition  has  been  manifested  to  this  view,  but 
the  overwhelming  weight  of  authority,  direct  and  by  analogy, 
favors  it. 

(c)     (1)  As  to  special  deposit,  the  same  rule  holds. 

{d)    (2)  As  to  proceeds  of  collection,  the  same  rule  holds, 

§  322.  Statute  of  Limitations.  —  Suit  by  Depositor  for  his 
Balance.  —  The  indebtedness  of  the  banker  being  an  ordinary- 
indebtedness  at  common  law,  the  Statute  of  Limitations  will 
run  against  it,  as  against  any  other  simple  debt.  But  when  the 
statute  will  begin  to  run  has  not  been  as  yet  conclusively  settled. 
In  Union  Bank  v.  Knapp,^  it  was  said  that  the  statute  would 
begin  to  run  from  the  date  of  the  last  balancing  of  accounts,  as 
in  the  depositor's  bank-book,  if  no  subsequent  transactions  should 
be  had  between  the  parties.  This  is  the  strict  corollary  from  the 
rule  that  the  bank's  liability  to  the  depositor  is  a  simple  debt. 
But  there  is  certainly  room  to  argue  that  this  calculation,  from 
the  date  of  the  last  transaction  between  the  parties,  is  not  founded 
either  in  reason  or  in  sound  law.     Viewing  it  practically,  the 

1  §  322.  3  Pick.  (Mass.)  96 ;  Grant  on  Bankers,  etc.  See  also  Pott 
V.  Clegg,  16  M.  &  W.  321 ;   Bridgman  v.  Gill,  24  Beav.  302. 

598 


SUIT    BY    DEPOSITOR   FOR   HIS    BALANCE  §  322 

longer  the  bank  retains  the  money  unclisturhed,  the  l)etter  it  is 
for  the  bank.  If  it  has  been  allowed  to  reap  extraordinary  gains 
from  the  funds  of  a  customer,  because  it  has  been  allowed  to  retain 
them  undisturbed  for  the  unwonted  space  of  eight,  ten,  or  twelve 
years,  this  would  seem  to  be  no  just  cause  for  allowing  it  to  add 
the  still  more  enormous  gain  of  a  complete  appropriation  of  the 
whole  sum.  If  the  business  of  the  institution  or  firm  is  properly 
conducted,  the  depositor's  balance  will  remain  for  any  period  as 
an  open  and  live  credit  on  the  books  of  the  bank ;  and  therefore 
the  depositor's  draft  for  his  principal,  or  any  part  of  it,  could  never 
operate  as  an  injurious  surprise,  as  a  like  demand  might  do  between 
individuals  under  ordinary  circumstances.  Such  seems  clearly 
to  be  the  fair  reason  of  the  matter.  The  legal  arguments  and  au- 
thorities which  sustain  it  seem  scarcely  less  than  conclusive. 

No  Action  until  Demand,  or  Some  Act  Dispensing  ivith  It 

The  rule  of  the  case  above  cited  can  be  based  only  on  the  as- 
sumption that  the  contract  is  a  perfectly  simple  one  of  unqualified 
indebtedness.  But  this  is  not  so.  We  have  already  seen  that  it 
is  a  contract  specially  modified  by  the  clear  legal  understanding 
that  the  money  shall  be  forthcoming  to  meet  the  order  of  the  cred- 
itor whenever  that  order  shall  be  properly  presented  for  payment. 
It  follows,  therefore,  that  this  demand  for  payment  is  an  integral 
and  essential  part  of  the  undertaking,  and,  it  may  be  said,  even 
of  the  debt  itself.  In  short,  the  agreement  of  the  bank  with  the 
depositor,  as  distinct  and  valid  as  if  written  and  executed  under  the 
seal  of  each  of  the  parties,  is  only  to  pay  upon  demand;  accordingly, 
until  there  has  been  such  demand,  and  a  refusal  thereto,  or  until 
some  act  of  the  depositor,  or  some  act  of  the  bank  made  known 
to  the  depositor,  has  dispensed  with  such  demand  and  refusal, 
the  statute  ought  not  to  begin  to  run,  nor  should  any  presumption 
of  pajTuent  be  allowed  to  arise. 

(a)    Decisions  fully  sustain  these  views. 

In  Minnesota  ^  and  Illinois  ^  demand  is  a  prerequisite  to  the 
maintenance  of  an  action  for  a  general  deposit  unless  circumstances 
exist  amounting  to  a  legal  excuse,  and  the  statute  runs  only 
from  demand.  In  New  York,  Pennsylvania,  INIaryland,  Cali- 
fornia, Georgia,  and  other  States,  the  law  is  the  same.    The  under- 

2  Branch  v.  Dawson,  33  Minn.  399  (1885). 

3  Brahm  v.  Adkins,  77  111.  263. 

599 


§  322  STATUTE   OF    LIMITATIONS 

taking  of  the  bank  is  not  to  pay  immediately  and  absolutely,  but 
when  payment  shall  be  required.  It  is  in  no  default  till  payment 
is  demanded.  Therefore  no  right  of  action  exists,  and  the  statute 
does  not  run  until  demand  is  made  as  stipulated  for  in  the  implied 
contract  of  deposit.* 

Demand  Obligations 

(b)  Analogies  of  the  law  favor  this  view.  The  statute  runs 
in  favor  of  an  indorser  of  a  demand  note  only  from  the  time  of 
demand  and  notice,  however  long  the  demand  may  be  postponed.^ 

(c)  So  in  case  of  a  contract  to  return  securities  left  with  a 
bank  for  safe  keeping,  the  statute  runs  against  the  right  of  action 
for  breach  of  the  contract  only  from  the  time  of  demand,  and  not 
from  the  time  of  conversion.^     If  the  action  were  for  conversion, 

^Downes  v.  Phoenix  Bank,  6  Hill  (N.  Y.)  297;  Adams  v.  Orange  Co. 
Bank,  17  Wend.  (N.  Y.)  514 ;  Girard  Bank  v.  Bank  of  Penn  Township, 
39  Pa.  St.  92 ;  Planters'  Bank  v.  Farmers  &  Mechanics'  Bank,  8  Gill  &  J. 
(Md.)  449;  Farmers  &  Mechanics'  Bank  v.  Planters'  Bank,  10  id.,  422 
(decision  based  on  banking  usage) ;  McGough  v.  Jamison,  107  Pa.  St. 
336;  Bank  v.  Merchants'  National  Bank,  91  N.  Y.  106;  Thomson  v. 
Bank,  82  N.  Y.  1 ;  Hales  v.  Seaman's  Bank,  28  App.  Div.  (Hun,  N.  Y.) 
407  (1898) ;  Finkbone's  Appeal,  86  Pa.  St.  368 ;  Humphrey  v.  County 
National  Bank,  113  Pa.  St.  417,  6  Atl.  155;  Green  v.  Odd  FelloAvs'  Bank, 
65  Cal.  71,  2  Pac.  887  (1884) ;  Mitchell  v.  Beckman,  64  Cal.  117,  28  Pac. 
110;  Munnerlyn  v.  Augusta  Bank,  88  Ga.  337,  14  S.  E.  .554  (1897); 
Smiths'  Cash  Store  v.  First  National  Bank,  149  Cal.  32,  84  Pac.  663,  5 
L.  R.  A.  (n.  s.)  870  (1906) ;  Patten  v.  American  National  Bank,  15  Colo. 
App.  479,  63  Pac.  424  (1900) ;  Koelzer  v.  First  National  Bank,  125  Wis. 
595,  104  N.  W.  838,  110  Am.  St.  Rep.  870,  2  L.  R.  A.  (n.  s.)  571,  n.  (1905) ; 
Schinotti  v.  Whitney,  130  Fed.  780  (1904),  citing  Brown  v.  Pike,  .34  La. 
Ann.  577;  Citizens'  Bank  v.  Fromholtz,  64  Neb.  284,  89  N.  W.  775 
(1902) ;  Citizens'  State  Bank  v.  Worden,  95  Neb.  53,  144  N.  W.  1064 
(1914)  ;  Missouri  Pac.  Ry.  Co.  v.  Continental  National  Bank,  212  Mo.  .505, 
111  S.  W.  574,  17  L.  R.  A.  (n.  s.)  994  (1908) ;  Clark  v.  Farmers'  National 
Bank,  124  Ky.  563,  99  S.  W.  674  (1907) ;  Corbin  Banking  Co.  v.  Bryant, 
151  Ky.  194,  151  S.  W.  393  (1912). 

In  Louisiana  a  suit  for  a  balance  of  deposit  may  be  maintained  where 
there  is  no  plea  of  want  of  amicable  demand  accompanied  by  a  tender  of 
the  balance  due.  McKnight  v.  Bank  of  Acadia,  114  La.  289,  38  So.  172 
(1905). 

If  a  bank  pays  a  claimant  out  of  money  standing  to  the  credit  of  a 
depositor  and  charges  the  customer  the  amount  thus  paid,  he  has  a  right 
of  action  for  the  amount  appropriated  without  a  previous  demand.  Jaselli 
V.  Riggs  National  Bank,  36  App.  Cas.  (D.  C.)  159,  1912C  Ann.  Cas.  119, 
n.,  31  L.  R.  A.  (n.  s.)  763,  n. 

For  facts  amounting  to  demand,  see  Delahunty  v.  Central  National 
Bank,  37  App.  Div.  (Hun,  N.  Y.)  434  (1899). 

5  Parker  v.  Stroud,  98  N.  Y.  379. 

«  Ganley  v.  Troy  City  National  Bank,  98  N.  Y.  487. 

600 


SUIT   BY    DEPOSITOR    FOR    HIS    BALANCE  §  322 

the  rule  would  be  otherwise ;  no  demand  is  necessary  to  main- 
tain trover  when  the  bank  treats  a  special  deposit  as  part  of  its 
assets/ 

Proceeds  of  Note  Left  for  Collateral 

(d)  Where  a  deposit  of  money  is  made  in  bank,  the  Statute 
of  Limitations  does  not  begin  to  run  until  after  demand  is  made. 
So  where  a  note  as  collateral  security  to  a  line  of  discounts  is  de- 
posited in  bank,  and  it  is  converted  into  money  by  the  bank,  the 
Statute  of  Limitations  does  not  begin  to  run  as  to  the  proceeds  of 
the  note  until  after  demand. 

In  such  a  case  in  Pennsylvania  the  court  said  :  "  It  is  a  settled 
rule  of  law,  that  when  a  deposit  is  made  in  a  bank  the  statute 
does  not  begin  to  run  until  after  the  demand  is  made.  It  is  true, 
the  defendant  was  not  technically  a  depositor  of  money  to  be 
drawn  out  on  his  check,  but  we  are  unable  to  see  any  substantial 
difference  between  such  case  and  the  one  in  hand.  He  was  a 
customer  or  dealer  with  the  bank,  was  having  a  line  of  discounts, 
and  the  notes  in  controversy  were  deposited  as  collateral  to  such 
discounts.  What  was  the  duty  of  the  bank  when  the  collateral 
notes  were  paid  ?  It  was  to  deposit  or  carry  the  proceeds  to  the 
credit  of  the  defendant's  account.  He  would  then  occupy  the  posi- 
tion of  any  other  depositor."  * 

Statute  never  Rinis  till  Right  of  Action  Accrues 

(e)  Further,  in  the  case  of  a  naked  debt,  the  statute  never 
begins  to  run  before  a  right  of  action  on  behalf  of  the  claimant 
or  creditor  has  accrued.  If  this  be  a  sound  principle,  it  is  con- 
clusive of  the  present  question.  For  debt  though  it  be  of  the  Ixmk 
to  the  depositor,  it  is  not  such  naked  debt  that  it  can  be  sued  upon 
by  the  depositor  at  any  moment.  The  authorities  are  numerous 
and  overwhelming  that  the  depositor's  right  of  action  does  not 
come  into  existence  until  after  he  has  made  a  demand  upon  the 
bank,  which  there  was  an  implied  and  valid  understanding  between 
them  in  the  outset  that  he  should  make,^  or  until  some  act  of  the 

7  First  National  Bank  of  Monmouth  v.  Dunbar,  10  111.  App.  558  (1SS6). 

8  Humphrey  v.  Countv  National  Bank.  113  Pa.  St.  417,  421,  6  Atl.  155. 

9  Downos  )'.  Phoenix  Bank,  G  Hill  (N.  Y.)  297;  Adams  v.  Orange  Co. 
Bank,  17  Wend.  (N.  Y.)  514;  Johnson  r.  Farmers'  Bank,  1  Harr.  (Del.) 
117  ;  Girard  Bank  r.  Bank  of  Penn  Townslnp,  30  Pa.  St.  02  ;  Union  Bank 
V.  Planters'  Bank.  0  Gill  &  J.  (Md.)  430  ;  Watson  c.  Phcvnix  Bank.  S  Mot. 
(Mass.)  217;  Bellows  Falls  Bank  v.  Rutland  County  Bank,  40  Vt.  3/  /  ; 
Masonic  Benefit  Ass'n  v.  First  State  Bank,  99  Miss.  610,  45  So.  408  (1911). 

fiOl 


§  322  STATUTE    OF    LIMITATIONS 

bank  has  waived  such  demand. ^°  The  duties  of  demand  and  of 
payment  are  reciprocal.  Surely  then  the  legal  results  of  these 
rights  should  be  reciprocal  likewise.  If  the  depositor  cannot  sue 
till  he  has  demanded  payment,  e  converso  he  should  not  lose  his 
right  to  sue  till  the  payment  has  been  refused  ;  for  until  that  time 
he  has  a  right  to  suppose  that  the  original  agreement  between 
himself  and  the  bank,  which  was  entered  into  for  their  mutual 
advantage  and  profit,  and  from  w^hich  his  refraining  from  demand  is 
enabling  the  bank  to  reap  an  unusually  great  advantage  and  large 
profit,  is  still  subsisting  in  unbroken  force. 


Waiver  of  Demand 

The  acts  which  have  been  held  to  waive  demand  by  the  de- 
positor are:  1.  Notification  to  him  by  the  bank  that  his  claim 
will  not  be  paid.^^  2.  The  rendition  to  him  by  the  bank  of  an  ac- 
count, in  which  it  claims  the  money  as  its  own.^^  3^  Suspension 
of  specie  payment  and  discontinuance  of  banking  operations  by 
the  bank,  with  knowledge  thereof  by  the  depositor.^^  4.  Sus- 
pension of  payment  and  closing  the  doors  of  the  bank.^^ 

"  Farmers  &  Mechanics'  Bank  v.  Planters'  Bank,  10  Gill  &  J.  (Md.) 
422 ;  Planters'  Bank  v.  Farmers  &  Mechanics'  Bank,  8  id.,  449 ;  Bank  of 
Missouri  v.  Benoist,  10  Mo.  519  ;  Cooper  v.  Mowry,  16  Mass.  7  ;  Masonic 
Benefit  Ass'n  v.  First  State  Bank,  99  Miss.  610,  5.5  So.  408  (1911). 

Paying  money  improperly  upon  checks  drawn  by  a  receiver  without 
being  countersigned  according  to  order  of  court  is  a  tort,  and  the  statute 
of  limitations  begins  to  run  immediately.  American  National  Bank  v. 
Fidehty  etc.  Co.,  129  Ga.  126,  58  S.  B.  867  (1907) ;  but  see  American 
National  Bank  v.  Fidelity  etc.  Co.,  131  Ga.  854,  63  S.  E.  622  (1909), 
holding  that  if  the  basis  of  the  action  is  actual  fraud  the  statute  does  not 
begin  to  run  until  notice  of  the  fraud. 

"  Farmers  &  Mechanics'  Bank  v.  Planters'  Bank,  supra;  Masonic 
Benefit  Ass'n  v.  First  State  Bank,  supra. 

See  First  National  Bank  v.  Peck,  180  Ind.  649,  103  N.  E.  643  (1913), 
denial  of  liability. 

12  Bank  of  Missouri  v.  Benoist,  supra;  Masonic  Benefit  Ass'n  v.  First 
State  Bank,  supra. 

"  Planters'  Bank  v.  Farmers  &  Mechanics'  Bank,  supra ;  Schinotti  v. 
Whitney,  130  Fed.  780  (1904). 

1^  Cooper  V.  Mowry,  supra;  Board  of  Court  House  and  City  Hall 
Commissioners  v.  Irish-American  Bank,  68  Minn.  470,  71  N.  W.  674  (1897). 

The  appointment  of  a  temporary  receiver  and  his  assumption  of  posses- 
sion of  the  assets  excuses  a  formal  demand  by  the  depositor.  People  v. 
Merchants'  Trust  Co.,  116  App.  Div.  41  (1906),  101  N.  Y.  S.  255;  Sickles 
V.  Herold,  149  N.  Y.  332,  43  N.  E.  852  ;  Richmond  v.  Irons,  121  U.  S.  27, 
30  L.  ed.  864,  7  Sup.  Ct.  788. 

602 


SUIT    BY    DEPOSITOR    FOR   llIS    BALANCE  §  322 

New  Acknoicledgment 

In  Adams  v.  Orange  County  Bank,^^  the  publication  of  a  list 
of  unclaimed  deposits,  made  under  the  State  statute  requiring 
such  publication  at  certain  intervals,  was  held  to  be  an  acknowl- 
edgment of  indebtedness  to  the  depositors  therein  named,  from 
which  a  new  promise  could  be  implied  to  prevent  the  running  of 
the  Statute  of  Limitations;  and  the  court  added,  that  it  would 
seem  that,  if  facts  existed  excusing  payment,  they  should  be  noticed 
in  such  publication,  or  otherwise  should  be  deemed  to  have  been 
waived. 

No  Demand  Necessary  if  the  Bank  Obtained  the  Money  by  Fraud 

If  the  bank  has  obtained  the  money  by  fraud,  or  through  an 
illegal  contract,  suit  by  the  depositor  lies  at  once,  without  demand. 
So  where  the  money  was  paid  in  and  a  receipt  taken  from  the 
cashier,  stipulating  that  payment  should  not  be  made  before  a 
certain  day,  thus  in  fact  transmuting  the  transaction  into  a  loan 
to  the  bank,  being  a  contract  which  in  this  instance  the  cashier 
had  not  power  to  enter  into  on  behalf  of  the  corporation,  it  was 
held  that,  since  the  contract  was  illegal  and  the  bank  could  only 
claim  to  withhold  the  money  from  the  owner  by  virtue  of  this 
illegal  contract,  it  should  not  be  entitled  to  a  prior  demand,  but 
the  owner  might  sue  immediately.^^ 

15  17  Wend.  (N.  Y.)  514. 

i«  White  V.  Franklin  Bank,  22  Pick.  (Mass.)  181. 


603 


CHAPTER   XXII 

LIEN   AND    SET-OFF 

See  Lien  on  Shares.       §  697  et  seq. 
A  Lien 

Is  a  mere  right  of  the  bank  to  retain  in  its  possession  (though 
in  maritime  law  and  in  equity  liens  may  exist  independently 
of  possession)  property,  the  title  of  which  (absolute  or 
special)  is,  or  in  the  case  of  negotiable  paper  purports  to  be, 
in  one  against  whom  the  bank  has  some  demand,  until 
that  demand  is  satisfied. 
Liens  are  particular  or  general. 
A  Particular  Lien 

Attaches  to  a  thing  for  a  claim  growing  out  of  or  connected 
with  that  particular  thing,  and  is  favored  at  common  law 
as  founded  in  equity. 
A  General  Lien 

Is  a  right  of  retention,  not  only  for  charges  growing  out  of  or 
connected  with  that  particular  thing,  but  also  for  charges 
in  respect  of  all  dealings  between  the  parties  of  a  like 
nature.     Such  liens  are  not  favored. 

§  332.     Creation. 

Liens  arise  by  express  agreement,  or  from  the  course  of  busi- 
ness, and  never  exist  where  the  terms  of  agreement,  express 
or  implied,  are  inconsistent  with  the  lien. 

§  326.     Effect. 

A  lien  is  good  against  the  depositor,  whether  he  is  true  owner 

of  the  property  or  not.      §  699. 
A  lien  upon  non-negotiable  property  is  good  against  the  whole 
§  326.  world,  if  the  debtor  is  the  true  owner  at  the  time  the  lien 
arises.     Liens  relate  back  to  the  beginning  of  possession, 
§  331.  unless  the  bank  has  notice  of  intervening  rights  before 
parting  with  the  consideration  that  creates  the  lien,  where- 
fore an  attaching  creditor  or  a  purchaser  from  the  debtor 
takes  it  subject  to  the  liens  of  the  bank,  arising  before  it 
has  notice  of  the  purchase  or  service  of  the  attachment. 
§  324.  A  lien  on  negotiable  property  is  good  against  all  the  world, 

if  the  bank  takes  it  bona  fide  for  value,  without  notice,  and 
in  the  usual  course  of  business. 
§  333.  In  New  York,  Pennsylvania,  etc.,  a  bank  having  possession 

604 


LIEN    AND    SET-OFF 

of  paper  which  really  does  not  V)olong  to  its  debtor  has 
no  lien  if  it  has  not  changed  its  position  on  faith  of  the 
paper,  but  merely  holds  it  against  a  pre-existing  general 
balance.  But  in  most  States  a  pre-existing  deljt  is  a  suffi- 
cient consideration  to  constitute  the  bank  a  holder  for 
value  in  the  usual  course  of  business.  The  New  York 
exception  is  not  recognized. 

On  what  and  fou  what  the  Lien  attaches. 
§  324.  A  bank  has  a  general  lien  upon  all  moneys  and  negotiable 

securities  of  the  depositor  in  its  hands,  in  the  regidar  course 
of  business,  unless  there  is  an  agreement  to  the  contrary,  or 
the  bank  has  notice  of  facts  indicating  that  the  intent  of  the 
depositor  in  making  or  appropriating  the  deposit  is  in- 
consistent with  such  lien. 
Under  this  principle,  a  bank  has  a  lien  for  its  general  l)alance 

upon  business  paper  placed  with  it  for  collection,  and 
On  the  proceeds  of  such  collections. 

On  goods,  bonds,  deeds  etc.,  upon  the  faith  of  which  it  has 
made  advances,  it  has  a  particular  lien. 
§  324.     (c)  But  it  has  no  general  lien  on  securities  left  with  it  after    it 

has  refused  to  lend  money  on  them. 
§  325.  Nor  on  bills  left  to  be  e.xchanged. 

(a)        Or  on  the  surplus  proceeds  of  collaterals  sold. 
{b,  d)     Nor  on  any  moneys  deposited  for  a  special  purpose. 
(c)      Nor  on  a  special  deposit. 
§  326.  The  property  and  the  claim  that  is  the  basis  of  the  lien  must 

(c,  d)  be  due  to  and  from  the  same  funds.  (The  property  of  A. 
cannot  be  held  for  a  delH  due  from  A.  as  administrator  or 
trustee,  or  from  the  firm  to  which  A.  belongs,  nor  can  the 
bank  keep  A.'s  property  for  a  debt  due  from  A.,  unless  it  is 
due  to  the  bank.) 
This  must  be  actually  true  in  case  the  property  is  non-nego- 
tiable ;  but  in  case  of  negotiable  property,  the  ]>ank  may 
presume  that  it  belongs  to  the  depositor,  unless  it  has  notice 
to  the  contrarJ^  If  the  bank  is  aware  that  the  property  is 
not  that  of  the  depositor,  it  can  only  hold  it  for  a  claim  against 
him  who  is  really  entitled  to  it,  and  not  against  a  third 
person  whom  it  supposes  to  be  the  owner. 
§  327.  Appropriation  of  deposits. 

(e)  If  there  are  several  accounts  in  different  branches  of  the 
bank,  or  in  the  same  branch,  wliich  are  really  kept  by 
the  same  depositor  in  the  same  right,  the  bank  may 
apply  a  deposit  in  any  one  to  satisfy  an  overdraft  on 
any  other,  and  if  a  depositor  does  not  apply  his  deposit 
himself,  the  bank  may  appropriate  it,  even  to  a  claim 
(d)  ba'rred  by  the  Statute  of  Liniitations. 
§  328.  Money  received  by  a  depositor  for  the  use  of  the  bank,  but  not 

paid  over,  may  be  charged  against  him  on  general  account, 
and  in  equitv  the  bank  may  retain  a  deposit  for  an 
§  329.  Unmatured  debt. 

As  for  a  note  of  the  depositor,  if  tliere  is  otherwise  danger 
of  loss,  as  l)v  the  depositor's  insolvency,  though  at  law 
there  cannot  be  a  lien  or  set-off  of  a  future  debt  against 
a  present  demand,  except  by  agreement.     §  702. 

C05 


LIEN   AND   SET-OFF 

§  330.  Loss  of  lien. 

Lien  may  be  lost  by  taking  security  for  the  debt,  volun- 
tarily parting  with  possession,  etc.     §  70L 
§  331.  Estoppel. 

The  bank  may,  by  bad  faith,  be  estopped  to  assert  a  lien 
that  would  ordinarily  exist, 
(a)    And  as  to  a  purchaser,  a  bank  cannot  set  up  a  lien  for 
advances  made  after  it  knew  of  the  purchase. 
Set-off.     (See  Set-off  of  bank  bills,  §§  G.33,  639.) 

Is  a  defence  to  a  demand  by  setting  up  an  opposing  demand  to 
counterbalance  it  in  whole  or  in  part. 
§  334.  The  demands  must  be  run  between  the  same  two  real  funds. 

§  335.  They  must  be  certain,  or  capable  of  being  reduced  to  certainty, 

by  computation. 
(This  excludes  demands  for  damages,  the  amount  of  which  a 
jury  must  determine  by  their  own  estimate  and  opinion, 
and  not  merely  by  calculation,  in  case  they  deem  the  claim 
a  good  one.) 
§  336.  The  demands  must  be  money  demands. 

Goods  intrusted  to  the  bank  for  any  purpose  but  to  be  turned 
into  a  money  credit  are  not  the  subject  of  set-off. 
§  336  a.       Certified  check  not  subject  to  set-off  by  bank. 
§  337.     Insolvency, 

Of  depositor. 

The  bank  may  retain  his  deposit  to  satisfy,  so  far  as  it 
will  go,  his  indebtedness  to  it,  and  if  any  part  of  its 
claims  arising  out  of  contract  are  unliquidated  (as  in 
case  of  notes  on  which  the  depositor  was  indorser  and 
the  principals  are  insolvent),  it  may  keep  the  deposit 
till  the  probable  debt  is  ascertained. 
§  338.  Of  a  commercial  bank. 

The  depositor  may  offset  his  deposit  or  other  debt  due 
from  the  bank  against  a  debt  due  from  him,  though 
it  matures  after  the  insolvency. 
But  if  his  claim  against  the  bank  came  into  his  hands  after 
the  insolvency,  he  will  be  allowed  only  what  he  paid 
for  it,  except  under  statute  law. 
§  339.  Of  a  savings  bank. 

Depositor  cannot  offset  his  deposit  after  insolvency  of  the 
bank.  ' 

§  339.     A.     Of  a  savings  and  loan  association. 
§  340.     Death  of  Depositor. 

The  bank  may  offset  against  his  representatives  just  as  against 
him. 
Comparison  of  Lien  and  Set-off. 

(1)  Set-off  is  a  statute  creation  (except  in  Equity),  while  liens 

exist  at  common  law. 

(2)  A  Uen  at  common  law  requires  the  possession  by  the  bank, 

actually  or  constructively,  of  the  property  of  another, 
while  set-off  has  nothing  to  do  with  the  possession  of  any 
specific  property  to  which  the  debtor  has  title. 

(3)  A  lien  gives  a  right  to  retain  specific  articles  of  property, 

the  title  to  which  is  not  in  the  retainer,  while  set-off  can 
never  give  a  right  to  retain  property  owned  by  another. 

606 


ON    WHAT    THE    LIEN    ATTACHES    AND    FOR    WHAT    DEMANDS       §  324 

(4)  It  is  clear,  therefore,  that  the  word  "lien"  cannot  properlj' 
be  used  in  reference  to  the  claim  of  the  bank  upon  a 
general  deposit,  for  the  funds  on  t^eneral  deposit  are  the 
property  of  the  bank  itself.  The  term  "set-ofi"  should 
be  applied  in  such  cases,  and  "lien"  when  a  claim  against 
paper  or  valuables  on  special  or  specific  deposit  is  re- 
ferred to. 

In  the  cases,  the  words  are  used  very  loosely,  and  sometimes 
the  true  force  of  a  case  has  been  mistaken  bj-  text-writers 
through  failure  to  keep  in  mind  this  distinction. 

The  practical  effect  of  lien  and  set-off  is  much  the  same. 
They  result  in  balancing  opposing  claims,  and  since  trans- 
fers of  a  general  deposit  are  subject  to  the  equities  be- 
tween the  bank  and  the  depositor,  until  notice  to  the 
bank,  its  right  of  set-off  is  as  good  in  respect  to  a  general 
deposit  as  its  lien  in  respect  to  a  specific  deposit  for  collec- 
tion or  as  collateral. 

§  324.  On  what  the  Lien  attaches  and  for  what  Demands.  — 
The  rule  may  be  broadly  stated,  that  the  bank  has  a  general 
lien  on  all  moneys  and  funds  of  a  depositor  °  in  its  possession  for 
the  balance  of  the  general  account. ^     Of  course,  so  long  as  the  bal- 

«  §  324.  Bankers  cannot  claim  a  banker's  lien  except  upon  the  cus- 
tomer's own  property.  Cuthbcrt  v.  Robarts  etc.  Co.,  (1909)  2  Ch.  22G; 
and  funds  coming  into  the  possession  of  the  bank  after  the  death  of  the 
depositor  cannot  be  treated  as  the  customer's  money,  Padgett  i'.  Bank 
of  Mountain  View,  141  Mo.  App.  374,  125  S.  W.  219  (1910). 

1  Ford  V.  Thornton,  3   Leigh  (Va.)  695;    State  Bank  v.  Armstrong, 

4  Dev.  (N.  C.)  519;  McDowell  v.  Bank  of  Wilmington,  1  Harr.  (Del.) 
369;  Commercial  Bank  of  Albany  v.  Hughes,  17  Wend.  (N.  Y.)  94; 
Dawson  v.  Real  Estate  Bank,  5  Pike  (Ark.)  283;  Bank  of  United  States 
V.  Macalester,  9  Barr  (Pa.)  475;  Beckwith  v.  Union  Bank,  4  Sandf. 
Super.  (N.  Y.)  604  ;  Marsh  v.  Oneida  Bank,  34  Barl).  (N.  Y.)  298  ;  Davis 
V.  Bowsher,  5  Term  488 ;  Jourdaine  v.  LefevTe,  1  Esp.  N.  P.  66 ;  Bolton 
V.  Puller,  1  B.  &  P.  539;  Giles  v.  Perkins,  9  East  12;  Scott  ;•.  Franklin, 
15  East  428;  Brandao  p.  Barnett,  12  CI.  &  F.  787  ;   Jones  ;•.  Peppercorne, 

5  Jur.  N.  s.  140 ;  28  L.  J.  Ch.  153 ;  In  re  Williams,  3  Ir.  Eq.  346  :  BulTalo 
Countv  Bank  v.  Hanson,  34  Neb.  455,  51  N.  W.  1035  (1892) ;  Gibbons  v. 
Hecox^  105  Mich.  509,  63  N.  W.  519;  People's  Bank  ;•.  Tufts,  35  Atl. 
792  (1896);  Jones  v.  Merchants'  National  Bank,  72  Hun  (N.  Y.)  344; 
London  Chartered  Bank  v.  White,  4  App.  Cases  413 ;  Rice  v.  National 
Bank,  77  Mich.  414,  56  N.  W.  776;  Merchants'  National  Bank  v.  Maple, 
65  111.  App.  484;  Bank  v.  Brewing  Co.,  50  Ohio  St.  151.  33  N.  E.  1054 
(1893) ;  Mt.  Sterling  National  Bank  v.  Green,  99  Ky.  262,  35  S.  W.  911 
(1896) ;  Garrison  v.  Union  Trust  Co.,  139  Mich.  392,  102  N.  W.  97S.  HI 
Am.  St.  Rep.  407,  n.  (1905);  Records  ;•.  McKim,  115  Md.  299,  SO  Atl. 
968  (1911);  Wagner  v.  Citizens'  Bank,  122  Tenn.  KU,  122  S.  W.  245, 
135  Am.  St.  Rep.  809,  28  L.  R.  A.  (n.  s.)  484,  n.  (1909)  ;  Ililler  r.  Bank  of 
Columbia,  92  S.  C.  445,  75  S.  E.  789  (1912) ;  First  National  Bank  v.  City 
National  Bank,  102  Mo.  App.  357,  76  S.  W.  489  (190:?) ;  Wilson  v.  Farmers' 
First  National  Bank,  176  Mo.  App.  73.  162  S.  W.  1047  (1914) ;  Sachs  v. 
Sachs,  181  111.  App.  342  (1913) ;  Manitou  v.  First  National  Bank.  37  Colo. 

607 


§  324  LIEN   AND   SET-OFF 

ance  is  in  favor  of  the  depositor,  the  hen  has  no  vitaHty  in  it.^" 
But  when  payment  upon  an  overdraft,  a  discount,  an  acceptance, 
or  other  species  of  advance  or  loan  by  the  bank  to  him,  creates 
an  indebtedness  on  his  part,  all  the  funds  which  the  bank  has  or 
obtains  to  his  credit  may  be  applied  upon  such  indebtedness  until 
it  is  fully  discharged,  and  without  any  request  or  direction  from 
him.i" 

A  bank  which  becomes  assignee  of  a  lessor  and  has  in  its  pos- 
session securities  of  the  lessee,  has  not  a  lien  upon  such  securities 
for  rent,  and  cannot  apply  collection  thereon  to  the  payment 
of  rent  without  the  lessee's  consent.^'' 

The  funds  thus  applicable  have  been  said  to  be  not  alone  the  gen- 

344,  86  Pac.  75  (1906) ;  Bank  of  Lawrenceville  v.  Roekmore,  129  Ga. 
582,  59  S.  E.  291  (1907) ;  Smith  v.  Sanborn  State  Bank,  147  Iowa  640, 
126  N.  W.  779  (1910) ;  Padgett  v.  Bank  of  Mountain  View,  141  Mo.  App. 
374,  125  S.  W.  219  (1910). 

The  funds  include  money  which  has  been  paid  into  the  bank  by  a 
vendee  of  property  to  the  credit  of  the  vendor  as  part  payment  of  the 
purchase  price  of  property,  even  though  the  vendee  subsequently  rescinds 
the  contract.     Blair  v.  Baird,  43  Tex.  Civ.  App.  134,  94  S.  W.  116  (1906). 

In  South  Carolina  if  the  bank  fails  to  notify  the  depositor  that  it  has 
applied  his  funds  to  the  extinguishment  of  past  due  claims  it  is  liable  to 
him  for  dishonoring  his  check.  Callaghan  v.  Bank  of  Anderson,  69  S.  C. 
374,  48  S.  E.  293  (1904). 

The  general  rule  does  not  apply  when  the  money  comes  into  the  bank 
through  inadvertence  or  mistake  and  without  laches  on  the  part  of  the 
owner.  McLennan  v.  Farmers'  Savings  Bank,  131  Iowa  696,  109  N.  W. 
291,  117  Am.  St.  Rep.  4.39  (1906);  Mingus  v.  Bank  of  Ethel,  136  Mo. 
App.  407,  117  S.  W.  683  (1909) ;  Wilson  v.  Farmers'  First  National  Bank, 
176  Mo.  App.  73,  162  S.  W.  1047  (1914). 

A  lien  cannot  be  asserted  upon  a  fund  in  a  borrower's  hands  which  at 
an  earUer  stage  might  have  been  subjected  to  it,  if  by  consent  of  the 
claimant  it  has  become  part  of  the  borrower's  general  estate.  National 
City  Bank  v.  Hotchkiss,  231  U.  S.  50,  58  L.  ed.  115,  34  Sup.  Ct.  20  (1913). 

The  right  to  detain  depositor's  money  for  a  general  balance  may  be 
controlled  by  a  special  agreement.  Furber  v.  Dane,  203  Mass.  108,  89 
N.  E.  227  (1909) ;  First  Denton  National  Bank  v.  Kenney,  116  Md.  24, 
81  Atl.  227,  1913B  Ann.  Cas.  1337,  n. 

1°  The  word  "lien"  is  inaptly  appUed  to  a  general  deposit  in  a  bank 
which  is  the  property  of  the  bank  itself.  Wynn  v.  Tallapoosa  County 
Bank,  168  Ala.  469,  53  So.  228  (1910) ;  Davenport  v.  State  Banking  Co., 
126  Ga.  136,  54  S.  E.  977,  115  Am.  St.  Rep.  68,  n.  (1906) ;  Luthersville 
Banking  Co.  v.  Hopk-ins,  12  Ga.  App.  488,  77  S.  E.  589  (1913).  See 
also  Furber  v.  Dane,  203  Mass.,  108,  89  N.  E.  227  (1909). 

1"  Knapp  P.  Cowell,  77  Iowa  528,  42  N.  W.  434 ;  Globe  Savings  Bank 
V.  National  Bank,  64  Neb.  413,  89  N.  W.  1030  (1902) ;  Wynn  v.  Tallapoosa 
County  Bank,  168  Ala.  469,  53  So.  228  (1910);  Tallapoosa  County 
Bank  v.  Wynn,  173  Ala.  272,  .55  So.  1011  (1911) ;  Commonwealth  v. 
Wathen,  126  Ky.  573,  104  S.  W.  364  (1907). 

i*-  Buffalo  County  Bank  v.  Hanson,  34  Neb.  455,  51  N.  W.  1035  (1892). 

608 


ON    WHAT    THE    LIEN    ATTACHES    AND    FOR    W  HAT    DEMANDS       §  324 

eral  deposit  of  the  customer,  but  any  business  paper,  as  notes  or 
bills,  belonging  to  him  and  which  he  has  intrusted  to  the  bank 
for  collection,"  and  dividends  which  come  into  its  hands> 

Upon  precisely  what  property  belonging  to  the  customer  in 
the  possession  of  the  bank  the  lien  will  attach,  is  a  subject  upon 
which  there  have  been  few  decisions  in  America.  In  Alabama 
it  is  held  that  a  bank  has  a  lien  upon  all  moneys  and  securities  of 
a  customer,  coming  into  its  possession  in  the  regular  course  of  busi- 
ness,^* for  any  balance  due  it  on  general  account.^ 

In  Iowa  a  lien  given  by  Rev.  Sts.  1887  and  3448  on  all  property 
of  the  customer  in  the  hands  of  the  bank  covers  property  taken 
only  in  the  ordinary  course  of  business  and  does  not  include 
property  that  cannot  conveniently  pass  into  the  actual  possession 
of  the  bank.s" 

A  bank  may  set  off  a  deposit  of  a  customer  against  an  indebted- 
ness due  from  him  to  an  indorser.^" 

When  a  customer  deposits  with  a  bank  securities  to  cover 
overdrafts  not  exceeding  a  specified  amount,  the  bank's  general 
lien  is  displaced  and  the  bank  cannot  hold  the  securities  for  over- 
drafts exceeding  the  specified  amount.^* 

When  a  bank  which  is  a  purchaser  for  value  of  time  acceptances 
learns  that  the  acceptor  thereof  has  a  defence  it  may  set  off 

"^Ex  parte  Pease,  1  Rose  232;  Ex  -parte  Wakefield  Bank,  1  id.,  243; 
19  Ves.  Jr.  25;  but  see  Lord  BoHngbroke's  Case,  in  Joy  v.  Campbell, 
1  Sch.  &  Lef.  346;   Cockrill  v.  Joyce,  62  Ark.  216,  35  S.  W.  221  (1S96). 

2"  Simpson  v.  Thompson,  43  Tex.  Civ.  App.  273,  95  S.  W.  94  (1900). 

^  A  bank  has  no  lien  on  money  obtained  as  a  result  of  mistake.  Mingus 
V.  Bank  of  Ethel,  136  Mo.  App.  407,  117  S.  W.  683  (1909)  ;  Wilson  v. 
Farmers'  First  National  Bank,  176  Mo.  App.  73,  162  S.  W.  1047  (1914). 

3  Lehman  v.  Tallassee  Manuf.  Co.,  64  Ala.  567 ;  //(  re  Tallassee  &  Co., 
64  Ala.  595.  But  if  the  depositor  has  obtained  the  money  by  fraudulent 
representations  which  authorize  a  recision  of  the  contract  under  which  it 
is  paid  the  bank  can  have  no  lien  thereon  unless  it  has  appropriated  the 
deposit  to  the  payment  of  its  claim  before  it  receives  notice  of  another's 
right  thereto.  Batson  v.  Alexander  City  Bank,  179  Ala.  490,  60  So.  313 
(1912).  See  also  Matter  of  McElheny,  91  App.  Div.  131  (1904),  86  X.  Y. 
S.  326. 

30  In  re  Gesas,  146  Fed.  734  (1906). 

^  Van  Winkle  Gin  Co.  v.  Citizens'  Bank,  89  Tex.  147,  33  S.  W.  862 
(1896). 

s*  Earl  of  Strathmore  v.  Vane,  33  Ch.  Div.  586 ;  First  National  Bank  v. 
Germania  Safety  etc.  Co.,  112  Ky.  734,  66  S.  W.  716  (1902). 

The  lien  attaches  upon  securities  and  money  of  the  customer  deposited 
in  the  usual  course  of  business  for  advances  which  are  supposed  to  have 
been  made  upon  their  credit.  Furber  i'.  Dane,  203  Mass.  108,  89  N.  E. 
227  (1909). 

VOL.  1  —  39  609 


§  324  LIEN   AND   SET-OFF 

the  funds  of  the  payee  on  deposit  at  the  time  such  acceptance 
fell  due.^<= 

A  bank  which  holds  warrants  of  a  town  that  are  subject  to  call 
and  payment,  may,  when  the  town  notifies  it  that  they  will  not 
be  paid,  apply  funds  in  its  hands  belonging  to  the  town  in  pay- 
ment of  the  warrants.^'' 

Discount  on  Faith  of  Goods 

(a)  A  bank  discounting  a  draft  on  faith  of  goods  shipped  by 
the  drawer  acquires  an  equitable  lien  on  the  proceeds  of  the  goods.* 

Proceeds  of  Collection 

(b)  A  bank  holding  a  depositor's  demand  note  has  a  lien  on 
the  proceeds  of  drafts,  though  collected  after  the  filing  of  a  peti- 
tion in  bankruptcy.^ 

No  Lien  on  Securities  in  Bank's  Possession  Accidentally,  not  in 
Course  of  Business 

(c)  A  bank  has  no  lien  for  a  general  balance  upon  securities 
accidentally  in  its  possession  or  not  in  its  possession  in  the  course 
of  business  as  a  bank,  for  example,  securities  left  with  the  bank 
after  its  refusal  to  discount  them  or  lend  money  on  them.^ 

Symbolical  Pledge 

(d)  It  is  a  necessary  condition  of  a  sjonbolical  pledge  by  delivery 
of  bills  of  lading,  warehouse  receipts,  etc.,  that  the  property 
itself  be  in  the  possession  of  some  other  person  than  the  pledgor, 
and  that  it  be  separated,  capable  of  identification.'^ 

3-  Johnson  Co.  Sav.  Bank  v.  Renfro,  57  Tex.  Civ.  App.  160,  122  S.  W. 
37  (1909). 

3<i  Manitou  v.  First  National  Bank,  37  Colo.  344,  86  Pac.  75  (1906). 

4  Flour  City  National  Bank  v.  Garfield,  30  Hun  (N.  Y.)  579. 

5  In  re  Farnsworth,  Brown  &  Co.,  5  Biss.  223. 

6  Petrie  v.  Myers,  54  How.  Pr.  (N.  Y.)  513  ;  Lucas  v.  Dorrien,  7  Taunt. 
278-  s  c  1  Moore  29;  First  National  Bank  v.  Gatton,  172  111.  625,  50 
N  E.  121  (1898) ;  Bank  v.  Weems,  69  Tex.  489,  6  S.  W.  802  (1888),  citing 
Rose  V.  Houston,  11  Tex.  .324;  Chapman  v.  Allen,  15  Tex.  278;  King  v. 
Gilleland,  60  Tex.  271 ;  Glassock  v.  Hamilton,  62  Tex.  143  ;  First  National 
Bank  V.  Cleland,  36  Tex.  Civ.  App.  478,  82  S.  W.  3.37  (1904). 

'  Union  Trust  Co.  v.  Trumbull,  137  111.  146,  27  N.  E.  24. 

610 


SPECIFIC   AND   SPECIAL   DEPOSITS  §  325 

§  325.  Specific  and  Special  Deposits.  —  Any  special  purpose 
attaching  to  the  deposit  inconsistent  with  a  general  lien  will 
prevent  it,  as  giving  bills  to  a  banker  to  exchange  for  others.' 
Money  deposited  under  an  agreement,  understood  by  the  cashier, 
and  intended  to  benefit  all  creditors,  cann(;t  V)e  retained  by  the 
bank  as  an  offset  against  its  claims  upon  the  dei)(jsitor.'''  So 
where  securities  are  pledged  for  a  particular  loan  or  debt,  the 
banker  has  no  lien  on  them  to  secure  payment  of  a  general  balance, 
or  of  other  demands  and  indebtedness,^  unless  there  is  a  special 
agreement  to  that  effect.^"  And  this  is  true  even  where  collaterals 
are  allowed  to  remain  in  the  bank  after  the  debt  secured  by  them 
is  paid. 2''  So,  if  a  check  is  deposited  to  take  up  the  check  of  another 
person,  the  bank  cannot  apply  it  to  satisfy  the  depositor's  debt 
to  the  bank.* 

1  §  325.  Barnett?'.  Brandao,  12  Clark  &  Fin.  787,  805,  800:  Fitz^rer- 
ald  V.  State  Bank,  04  Minn.  409  (1890) ;  Armstrong  v.  Chemical  National 
Bank,  41  Fed.  234;  First  National  Bank  v.  Germania  Safety  etc.  Co., 
112  Ky.  734,  66  S.  W.  716  (1902) ;  Wagner  v.  Citizens'  Bank  etc.  Co., 
122  Tenn.  164,  122  S.  W.  245,  135  Am.  St.  Rep.  809,  28  L.  R.  A.  (x.  s.) 
484,  n.  (1909) ;  Ballard  v.  Home  National  Bank,  91  Kan.  91,  130  Pac.  935 
(1913) ;  In  re  Davis  119  Fed.  950  (1903) ;  Eshbach  v.  Byers,  104  111.  App. 
449  (191 1) ;  Furber  v.  Dane,  203  Mass.  108,  89  N.  E.  227  (1909) ;  Hanover 
National  Bank  v.  Suddath,  215  U.  S.  110,  54  L.  ed.  115,  30  Sup.  Ct.  58 
(1909). 

i»  Fitzgerald  v.  State  Bank,  64  ]Minn.  4C9,  07  N.  W.  361 ;  Lyman  v. 
Belfast  National  Bank,  98  ISIe.  448,  57  Atl.  799  (1904) ;  Walters  National 
Bank  v.  Bantock,  41  Okla.  1.53,  137  Pac.  717,  1915C  L.  R.  A.  531. 

2Wyckoff  ('.  Anthony,  90  N.  Y.  442;  and  see  Davis  v.  Bowsher, 
5  Term  491 ;  Duncan  v.  Brennan,  83  N.  Y.  487 ;  Robinson  v.  Frost,  14 
Barb.  (N.  Y.)  536;  Lane  v.  Bailey,  47  Barb.  (N.  Y.)  395;  Woolley  v. 
Louisville  Banking  Co.,  81  Ky.  527  (1884) ;  Teutonia  National  Bank  of 
New  Orleans  v.  Loeb,  27  La.  Ann.  110  (1875);  Reynes  v.  Dumont,  130 
U.  S.  3.54,  32  L.  ed.  934,  9  Sup.  Ct.  486  (1889) ;  :Masonic  Savings  Bank  v. 
Bangs,  84  Ky.  140  (1886) ;  Loyd  v.  Lynchburg  National  Bank.  86  Va. 
694,  11  S.  E.  104  (1890) ;  Furber  v.  Dane,  203  Mass.  108,  89  N.  E.  227 
(1909).  ^       ^ 

■^  Merchants'  Bank  r.  Denmere,  92  Ga.  739,  19  S.  E.  38  (1893) ;  Loyd 
V.  Lynchburg  National  Bank,  80  Va.  694,  11  S.  E.  104  (1890). 

■'*"  Bacon's  Adm'rs  v.  Bacon's  Trustees,  94  Va.  680,  27  S.  E.  .576  (1897). 

3  Straus  V.  Tradesmen's  National  Bank,  30  Hun  (N.  Y.)  451  ;  National 
Bank  v.  Insurance  Co.,  104  U.  S.  54.  20  L.  ed.  093  ;  Continental  etc.  Bank  v. 
Chicago  etc.  Trust  Co.,  199  Fed.  704  (1912) ;  Smith  r.  Sanliorn  State  Bank, 
147  Iowa  040,  120  N.  W.  779,  140  Am.  St.  Rep.  330.  30  L.  R.  A.  (n.  s.) 
517  (1910) ;   Dolph  v.  Cross,  1.53  Iowa  289,  133  N.  W.  (HiO  (1911). 

If  notes  are  sent  to  a  bank  for  discount  and  credit  a  general  lien  in 
favor  of  the  bank  cannot  attach  to  them ;  and  the  bank  is  not  justified  in 
retaining  the  notes  as  a  lien  under  an  agreement  giving  it  a  general  lien 
on  all  securities  deposited  by  the  sender.  Hanover  National  Bank  i-. 
Suddath,  215  U.  S.  110,  54  L.  ed.  115,  30  Sup.  Ct.  58  (1909). 

611 


I  325  LIEN   AND   SET-OFF 

Surplus  from  Sale  of  Collateral 

(a)  And  if  a  bank  sells  collateral  security,  and  there  is  a  sur- 
plus of  proceeds  after  the  debt  secured  is  paid,  the  surplus  cannot 
be  applied  on  general  balance.* 

Where  a  note  is  pledged  by  a  bank  to  another  bank  to  secure 
a  loan,  and  the  maker  being  threatened  with  suit  pays  said  note 
to  the  pledgee  without  being  allowed  to  set  off  a  deposit  to  his 
credit  in  the  pledgor  bank,  the  maker  is  equitably  entitled  to  re- 
cover, in  preference  to  general  creditors,  from  a  receiver  of  the 
pledgor  bank,  who  holds  surplus  of  collaterals  in  excess  of  debt 
secured  to  the  pledgee,  the  amount  of  such  deposit  which  the  maker 
would  have  been  allowed  to  set  off  had  the  original  bank  retained 
the  note.*'' 

No  General  Lien  if  Bank  has  Notice  of  Facts  Irwonsistent  with  it, 
as  a  Sjjecial  Purpose  in  the  Deposit 

(6)  In  Bank  of  United  States  v.  Macalester  ^  the  general  rule 
was  laid  down  that  funds  deposited  in  a  bank  for  a  special  pur- 
pose, known  to  the  bank,  cannot  be  withheld  from  that  purpose, 
to  the  end  that  they  may  be  set  off  by  the  bank  against  a  debt 
due  to  it  from  the  depositor.  Accordingly,  certain  coupons  of 
the  State  bonds,  issued  by  the  State  of  Illinois,  having  been  made 
payable  at  the  Bank  of  the  United  States,  and  funds  to  precisely 
the  amount  necessary  to  meet  these  coupons  having  been  deposited 
by  the  State  in  the  bank  just  before  they  fell  due,  it  was  held  that 
the  bank,  understanding  the  purpose  of  the  deposit,  could  not  re- 
fuse to  apply  the  money  to  the  payment  of  the  coupons  on  the 
ground  of  a  prior  undischarged  indebtedness  of  the  State  to  the 
bank.  The  same  general  rule  is  laid  down  by  Grant  in  his  English 
Treatise,  p.  372.  He  says  that  the  claim  of  a  general  lien  by  the 
bank  would  be  inconsistent  with  its  special  undertaking.     The 

4  Brown  v.  New  Bedford  Savings  Inst.,  137  Mass.  262;  Wolstenholm 
V.  Sheffield  Union  Banking  Co.,  54  Law  T.  R.  n.  s.  746;  Hathaway  v. 
Fall  River  National  Bank,  131  Mass.  14 ;  Appl.  of  Bank  of  Commerce, 
44  Pa.  St.  423. 

^o  Becker  v.  Seymour,  71  Minn.  394,  73  N.  W.  1096  (1898). 

Where  A.  promises  the  bank  to  deposit  $1000  in  the  bank  and  to  leave 
it  there  until  the  debt  of  B.  to  the  bank  is  paid  the  deposit  becomes  a 
pledge  and  gives  the  bank  a  lien  thereon  until  the  note  should  be  paid. 
Thompson  v.  Hazelwood  Trust  Co.,  234  Pa.  St.  452,  83  Atl.  284  (1912). 

5  9  Barr  (Pa.)  475.  See  Van  Zandt  v.  Hanover  National  Bank,  149  Fed. 
127  (1906). 

612 


SPECIFIC    AND   SPECIAL   DEPOSITS  §  325 

reasoning  in  the  above  case,  however,  and  that  in  Mr.  Grant's 
work,  both  tend  to  show,  though  it  is  not  directly  stated,  that  if 
the  deposit  were  so  made  that  the  bank  (Hd  not,  as  matter  of  fact, 
know,  or  at  least  did  not  have  such  strong  cause  that  it  could  not 
reasonably  insist  that  it  did  not  know,  that  the  deposit  was  in- 
tended to  meet  the  special  purpose,  and  tliat  it  could  not  tlierefore 
be  subjected  to  the  lien,  then  the  lien  might  attach.  For  if  the 
bank  had  not  such  knowledge,  or  ample  means  of  obtaining  such 
knowledge,  it  may  well  be  urged,  that,  with  an  unpaid  indebted- 
ness to  the  customer  to  the  bank  already  subsisting,  it  would  re- 
fuse to  have  further  dealings  with  him,  if  they  were  to  be  of  such 
a  qualified  and  unusual  nature. 

The  English  cases  eliminate  from  the  operation  of  the  lien  all 
property  which  comes  into  the  banker's  hands  plainly  ear-marked 
or  appropriated  for  any  special  purpose.  A  customer's  security, 
specifically  stated  to  be  for  the  amount  "  which  shall  or  may  be 
found  due  on  the  balance  of  his  account",  was  held  to  be  security 
for  the  then  existing  balance  only,  and  not  to  be  applicable  upon 
the  subsequent  floating  balance.^  In  like  manner,  a  security 
specifically  given  for  a  contemporaneous  advance  of  one  thousand 
pounds  by  the  banker,  was  held  not  to  be  applicable  against  an 
independent  indebtedness  of  five  hundred  pounds,  afterwards  aris- 
ing upon  the  ordinary  running  account.^ 

Special  Deposit 

(c)  It  seems,  too,  that  the  deposit  should  be  made  with  the 
banker  in  his  character  as  such,  and  should  not  be  in  the  nature 
of  a  special  deposit  for  a  particular  purpose  not  connected  with 
the  banking  business.  Thus,  for  example,  a  chest  of  plate  con- 
fided to  the  banker,  not  as  a  banker  but  as  a  custodian,  merely 
for  safe  custody  in  his  vaults,  was  held  not  subject  to  the  lien.^ 

Specific  Deposit  cannot  be  Appropriated  to  Debt  of  the  Depositor  to 

Bank 

(d)  Money  deposited  for  a  specific  purpose  must  be  applied  to 
that  and  no  other.  Where  a  State  had  two  deposits  in  a  bank, 
one  to  pay  coupons  and  bonds  issued  by  the  canal  commissioners, 

« In  re  Medewe,  26  Beav.  588 ;   28  L.  J.  Ch.  891. 

7  Vanderzee  v.  Willis,  3  Bro.  C.  C.  21 ;  Zinck  c.  Walker,  2  W.  Bl.  1154. 
«  Ex  parte   Eyre,  1  Ph.  235;    Brandao  i-.  Barnett,  12  CI.  &  F.  809; 
O'Connor  v.  Majoribanks,  4  Man.  &  G.  435. 

613 


§  325  LIEN   AND   SET-OFF 

the  other  under  control  of  the  fund  commissioner,  the  latter  being 
overdrawn,  the  bank  applied  the  former  deposit  to  settle  the 
deficit.  Held,  that  this  could  not  be  done  by  the  bank;  it  was 
the  agent  of  the  coupon  holders  to  the  extent  of  the  sum  set  apart 
for  their  payment.^ 

§  326.  The  opposing  Claim  and  the  Property  must  be  due  to  and 
from  the  same  two  Funds.  —  The  lien  and  the  right  of  set-off  only 
exist  where  the  individual,  who  is  both  depositor  and  debtor, 
stands  in  both  these  characters  in  precisely  the  same  relation  and 
on  precisely  the  same  footing  towards  the  bank.  That  is  to  say, 
for  instance,  the  bank  can  claim  no  lien  on  the  deposit  of  a  partner, 
made  on  his  separate  account,  in  order  to  set  off  the  same  against 
a  debt  owing  them  from  the  firm ;  ^  and  this  not  even  if  property 
specifically  pledged  to  the  bank  by  the  partner  on  his  separate 
account  afterwards  becomes  the  property  of  the  firm.  Even 
then,  if  the  firm  fails,  the  banker  can  hold  the  property  thus  pledged 
solely  as  security  for  any  separate  indebtedness  of  the  individual 
partner.2  Yot  it  is  not  in  the  bank's  possession  as  the  property 
of  the  firm  ;  so  far  as  the  firm  is  concerned  the  bank's  possession 
is  accidental.  And  the  surplus  above  the  indebtedness  of  a  firm 
cannot  be  applied  by  the  bank  to  the  individual  debt  of  a  partner 
without  the  consent  of  the  partner.^"  Neither  can  the  individual 
partner  and  the  firm  so  shift  their  respective  credits  and  debits 
as  to  set  them  off,  the  one  against  the  other,  when  the  bank  itself 
is  insolvent.^  When  a  bank  makes  a  loan  to  a  partner  in  the 
firm  name,  on  the  authority  of  the  firm,  with  a  knowledge  that 
such  a  loan  is  to  be  used  to  pay  an  individual  indebtedness  to  the 
bank,  the  firm  is  not  bound .^^  In  like  manner,  it  has  been  held 
that  the  joint  and  several  note  of  A.  as  principal,  and  B.  and  C. 
as  sureties,  cannot  be  paid  out  of  the  individual  deposit  even  of  A.* 

But  later  decisions  hold  that  the  bank  may  apply  the  amount 
credited  to  a  depositor  to  a  debt  due  to  it  by  such  depositor  jointly 
with  another."*" 

9  Judy  V.  Farmers  &  Traders'  Bank,  81  Mo.  404. 

1  §  326.     Watts  V.  Chi-istie,  11  Beav.  546. 

2  Ex  parte  McKenna,  30  L.  J.  Bank  20. 

2"  Bank  of  Grange  v.  Cotter,  101  Ga.  134,  28  S.  E.  644  (1897) ;  Bank  of 
Lawreneeville  v.  Rockmore,  129  Ga.  582,  59  S.  E.  291  (1907). 
\,^  Watts  V.  Christie,  11  Beav.  .546;   26  L.  J.  Ch.  711. 

3a  E\Ticli  V.  Capital  State  Bank,  67  Miss.  74  (1889). 

*  Dawson  v.  Real  Estate  Bank,  5  Pike  (Ark.)  283. 

*"  Evrich  v.  Capital  State  Bank,  67  Miss.  71,  6  So.  615  (1889),  citing 
Moody  V.  Willis,  41  Miss.  347. 

614 


DEPOSIT  AND  DEBT  MUST  BE  DUE  TO  AND  FROM  SAME  FUND   §  326 

The  decision  in  Dawson  v.  Bank  ^  was  based  on  two  grounds  — 
one  that  the  charter  of  the  bank  prohibited  such  set-off,  the  other 
because  the  debts  were  not  mutual.  On  the  latter  ground  this 
decision  followed  Trammell  v.  IlarrcU  ■"'  which  was  overruled  by 
Leach  v.  Lambeth/'^ 

So,  also,  a  bank  with  which  certain  notes  belonging  to  A.  and 
B.  as  co-owners  are  left  for  collection  has  a  lien  on  A.'s  half  of  said 
notes  for  any  balance  due  to  it  from  A.  on  general  account/'' 

The  funds  of  a  corporation  cannot  be  applied  to  the  individual 
debt  of  the  corporation's  president.^* 

Money  deposited  by  a  person  to  the  credit  of  himself,  as  "  dep- 
uty treasurer",  cannot  be  applied  by  the  bank  to  the  payment  of 
an  overdraft  by  another  person,  as  "  county  treasurer."  ^ 

A  bank  which  has  received  money  on  deposit  for  an  agent  who 
has  a  beneficial  interest  therein  cannot  disregard  that  interest 
and  apply  the  money  to  a  debt  due  to  it  from  the  agent's  prin- 
cipal."* 

In  the  first  case  cited  in  this  paragraph,  the  facts  were  these. 
The  bankers  stopped  payment,  being  at  the  time  indebted  to 
A.,  but  having  a  balance  due  from  the  firm  of  A.  and  B.  Before 
they  had  actually  committed  an  act  of  bankruptcy,  A.  assigned 
his  credit  to  the  firm,  and  notified  the  bankers.  But  it  was  held 
that  the  assignment  could  not  be  legally  made.  In  short,  it  may 
be  laid  down  as  a  general  rule,  based  upon  and  illustrated  by  many 
of  the  cases  cited  and  commented  upon  in  this  and  the  imme- 
diately preceding  paragraphs,  that,  if  a  customer  has  any  duplex 
relationship  with  his  banker,  the  line  of  demarcation  shall  be  care- 
fully preserved.  If  he  borrows  a  specific  sum,  and  gives  specific 
security  for  it,  all  transactions  relating  thereto  shall  be  kept 
accurately  distinct  from  the  transactions  growing  out  of  his  ordi- 
nary connection  with  the  bank,  as  a  simple  depositor.^ 

Trust  Account 

(a)  If  the  same  person  keeps  separate  accounts  at  the  same 
bank  in  distinct  characters,  the  one  being  his  individual  account, 

46  4  Ark.  602.  *"  14  Ark.  0G8. 

"  Greene  v.  Jackson  Bank,  18  R.  I.  779,  30  Atl.  90.3. 

*'  Ferrv  v.  Home  Savings  Bank,  114  Mich.  321.  72  X.  W.  181  (1897). 

V  Citizens'  National  Bank  v.  Alexander,  120  Pa.  St.  47(),  14  Atl.  402. 

*'  Nolting  V.  National  Bank,  99  Va.  54,  37  S.  E.  804  (1901). 

8  Moose  V.  Salt,  32  Beav.  269 ;  32  L.  J.  Ch.  756. 

615 


§  326  LIEN   AND   SET-OFF 

and  the  other  being  kept  by  him  under  any  species  of  trust,  if  the 
bank  has  notice  of  the  nature  of  this  second  account,  it  will  be 
bound  to  keep  the  two  distinct.  If  the  bank  wrongfully  permits 
the  depositor  to  intermingle  the  accounts,  or  to  make  transfers 
from  the  trust  account  to  his  personal  account,  when  in  fact  he 
had  no  right  so  to  do,  it  may  possibly  render  itself  liable  to  reim- 
burse the  beneficiary  or  principal  who  has  been  unjustly  stripped 
of  his  property ;  in  which  case,  if  the  customer  has  drawn  against 
his  own  account,  so  that  his  balance  no  longer  furnishes  means  of 
remuneration  to  the  bank,  it  will  have  no  recourse  but  to  bear 
the  loss.^  The  decision  in  this  case  was  based  upon  the  ground 
that  the  bankers  had  actual  cognizance  of  the  circumstances  which 
rendered  the  conduct  of  their  customer  fraudulent ;  and  so  were, 
in  the  view  of  the  law,  privy  to  the  fraud.  Where  the  circum- 
stances fail  to  show  real  or  implied  knowledge  of  this  description 
on  the  part  of  the  bank,  the  reason  of  this  cause  would  not  reach. 

(6)  Where  a  bank  knew  that  the  account  of  a  depositor  was 
opened  by  him  as  general  agent,  to  facilitate  his  business  as  agent 
of  an  insurance  company,  by  accumulating  premiums  on  policies, 
—  held,  that  the  bank  was  chargeable  with  notice  of  the  equitable 
rights  of  the  company,  although  he  deposited  other  money  in  the 
same  account  and  drew  checks  upon  it  for  his  private  use ;  and 
the  company  might  enforce  its  beneficial  ownership  therein  against 
the  bank,  claiming  a  lien  thereon  for  a  debt  due  to  it  which  he 
contracted  for  his  individual  use.^ 

(c)  The  deposit  and  the  debt  must  be  due  to  and  from  the 
same  fund.  A  bank  cannot  keep  a  deposit  made  by  D.  as  assignee, 
for  D.'s  individual  debt.^ 

Funds  of  Principal  not  Applicable  to  Agent's  Debt 

Where  an  agent  deposits  money  of  his  principal  in  his  own  name 
as  "  agent",  the  bank  knowing  the  trust  character  of  the  funds 
cannot  appropriate  them  to  the  individual  debt  of  the  agent, 
even  with  his  consent,  to  the  prejudice  of  the  principal.^     So  where 

s  Bodenham  v.  Hoskins,  13  Eng.  L.  &  Eq.  222. 

7  Central  National  Bank  v.  Conn.  Mut.  Life.  Ins.  Co.,  104  U.  S.  54, 
26  L.  ed.  69.3  (1881) ;  Globe  Savings  Bank  v.  National  Bank,  64  Neb. 
413,  89  N.  W.  1030  (1902). 

^  Lawrence  v.  Bank  of  Republic,  35  N.  Y.  320. 

^  Baker  v.  New  York  National  Exchange  Bank,  100  N.  Y.  31,  2  N.  E. 
452. 

616 


DEPOSIT    AND   DEBT   MUST    BE   DUE    TO    AND    FROM    SAME    FUND      §  326 

funds  are  deposited  in  the  name  of  "  J.  C.  W.,  Trustee",  the  bank 
cannot  apply  them  to  a  debt  due  from  J.  C.  W.'° 

But  if  a  check  is  drawn  payable  to  "  \V.  H.  D.  Atty."  is  indorsed 
by  "  \V.  II.  1)."  and  dei)()sited  this  does  not  necessarily  inform 
the  bank  that  the  money  is  trust  money  and  so  it  may  be  applied 
to  a  debt  due  from  "  W.  II.  D."  unless  the  bank  has  knowledge 
that  it  is  trust  mone}'.'"^" 

Overdraft  of  Old  Firm 

(d)  A  bank  cannot  apply  the  funds  of  a  new  partnership  to 
settle  the  overdraft  of  the  old  firm  now  dissolved,  though  one  of 
the  two  partners  in  the  old  firm  continues  in  the  business." 

But  the  bank  may  apply  a  deposit,  made  by  a  surviving  partner, 
in  behalf  of  an  insolvent  firm,  to  an  indebtedness  of  the  firm  to 
the  bank."" 

On  Money  of  C.  in  the  Possession  of  B.,  and  Deposited  in  the  Xame 
of  A.,  Bank  has  no  Lien  for  B.'s  Debt,  though  it  Thought  the 
Money  was  B.'s 

(e)  A  firm  finding  itself  in  embarrassed  circumstances  deposited 
a  certain  sum  in  the  bank  with  which  it  was  accustomed  to  do 
business,  but  made  the  deposit  in  the  name  of  the  book-keeper 
of  the  firm.  The  sum  in  question  was  due  to  persons  for  whom 
the  depositing  firm  acted  as  agents.  The  bank  had  knowledge 
that  the  deposit,  though  in  the  name  of  the  book-keeper,  was  of 
money  of  the  firm,  but  did  not  know  that  it  was  of  money  which 
the  firm  had  received  in  the  course  of  an  agency.  It  was  held  that 
the  bank  had  no  lien  on  this  deposit  for  indebtedness  of  the  firm 
to  it.^-  In  order  to  apply  money  deposited  in  A.'s  name  to  the 
debt  of  B.,  the  baidv  must  show  not  only  that  it  is  not  A.'s  money, 
but  that  it  is  actually  the  money  of  B.'-" 

i»Bundy  v.  Town  of  IMontifcllo,  84  Ind.  110  (1S82).  See  Indiana 
Trust  Co.  V.  International  Buildinji  Ass'n,  1()5  Ind.  .'>97,  7G  X.  E.  304 
(1905) ;   State  Bank  v.  McCabo,  135  Mich.  479,  98  N.  W.  20  (19<')4). 

i<^  First  Denton  National  Bank  ;•.  Kennev,  IKi  Md.  24.  81  Atl.  227. 
1913B  Ann.  Cas.  1337,  n.  (1911). 

"  Richardson  v.  International  Bank,  11  111.  Aj^p.  .")S2. 

""  Hodgin  V.  People's  National  Bank,  124  N.  C.  540,  32  S.  E.  887 
(1899). 

12  Falkland  v.  St.  Nicholas  National  Bank.  84  N.  Y.  145.  Sec  NoltinR 
V.  National  Bank,  99  Va.  54,  37  S.  E.  804  (1901). 

i2»  Thomas  v.  Exchange  Bank,  99  Iowa  202,  08  N.  W.  780  (189G). 

617 


I  326  LIEN   AND   SET-OFF 

Trust  Property 

(/)  Neither  shall  the  banker  have  his  lien  upon  non-negotiable 
property  subject  to  a  trust,  and  improperly  left  with  him  or  pledged 
to  him  by  the  trustee,  though  the  bank  is  without  notice  of  the 
trust ;  unless,  indeed,  the  cestui  que  trust  shall  have  done  some 
act  or  been  guilty  of  some  negligence  such  as  to  deprive  him  of 
his  counter  rights. ^^  And  a  deposit  in  the  name  of  A.  as  agent 
or  trustee,  or  in  the  name  of  A.  if  the  bank  has  notice  that  it 
belongs  to  another,  cannot  be  applied  by  the  bank  to  A.'s  debt 
to  itself,  nor  will  it  have  any  lien  on  a  fiduciary  deposit.  If  the 
trust  property  is  traceable  into  the  debt  now  due  from  the  bank 
to  the  depositor,  the  true  owner  can  claim  the  fund.^* 

{g)  But  if  the  trust  property  consists  of  bills  or  notes,  payable 
to  bearer,  or  other  property  transferable  by  delivery  merely,  and 
be  not  ear-marked  as  trust  property,  if  the  customer  deposit  them 
as  if  they  were  his  own,  and  the  banker  receives  them  in  due 
course,  bona  fide  and  with  no  notice  of  the  trust,  he  shall  hold 
them  under  his  lien.^^ 

In  the  case  of  money,  or  any  negotiable  securities,  it  has  been 
frequently  held  that  where  the  bank  has  no  notice  that  they  do 
not  belong  to  the  depositor,  it  acquires  a  valid  lien-  for  his  indebted- 
ness.^^    Though  it  has  been  held,  that,  if  A.  delivers  promissory 

13  Manningf  ord  v.  Toleman,  1  Coll.  670 ;  Stackhouse  v.  Countess  of 
Jersey,  30  L.  J.  Ch.  421 ;  Murray  v.  Pinkett,  12  CI.  &  F.  704 ;  Locke  v. 
Prescott,  32  Beav.  261 ;   Fisher  v.  Knight,  61  Fed.  491. 

"  National  Bank  v.  Insurance  Co.,  104  U.  S.  54,  26  L.  ed.  693  ;  Knatch- 
bul  V.  Hallett,  L.  R.  13  Ch.  Div.  696 ;  Cook  v.  TulUs,  18  Wall.  332,  21 
L.  ed.  933;  Burtnett  v.  First  National  Bank,  38  Mich.  630;  Neely  v. 
Rood,  54  Mich.  134, 19  N.  W.  920.  See  Title,  §  565 ;  Clemmer  v.  Drovers' 
National  Bank,  157  111.  206,  41  N.  E.  728 ;  Union  Stock  Yards  Bank  v. 
Gillespie,  137  U.  S.  411,  34  L.  ed.  724,  11  Sup.  118  (1890) ;  Preston  v. 
Prather,  137  U.  S.  604,  34  L.  ed.  788,  11  Sup.  Ct.  162  (1891) ;  Boyle  v. 
Northwestern  National  Bank,  125  Wis.  498,  103  N.  W.  1123,  1  L.  R.  A. 
(N.  s.)  1110,  n.  (1905);  Emigh  v.  Earling,  134  Wis.  565,  115  N.  W. 
128,  27  L.  R.  A.  (n.  s.)  243,  n.  (1908) ;  Indiana  Trust  Co.  v.  Inter- 
national Building  Ass'n,  165  Ind.  597,  76  N.  E.  304  (1905) ;  Shuman  v. 
Citizens'  State  Bank,  27  N.  D.  599,  147  N.  W.  388,  191.5A  L.  R.  A.  728. 

If  the  bank  has  used  the  money  it  is  liable  in  conversion  to  the  owner. 
Globe  Savings  Bank  v.  National  Bank,  64  Neb.  413,  89  N.  W.  1030  (1902). 

15  Barnett  u.  Brandao,  6  M.  &  G.  630. 

1^  As  where  the  deposit  was  really  trust  money,  or  a  note  belonging  to 
another,  though  unknown  to  the  bank,  the  latter  may  apply  it  on  the 
depositor's  debt.  School  District  v.  First  National  Bank,  102  Mass.  174 ; 
Wood  V.  Boylston  National  Bank,  129  Mass.  358;  Gordon  v.  Kearney, 
17  Ohio  572;    Meyers  v.  New  York  Co.  National  Bank,  36  App.  Div. 

618 


,s 


SEVERAL  ACCOUNTS   IN    THE   SAME    KIGUT  §  327 

notes  to  B.  to  get  discounted  for  him,  and  B.  takes  them  to  his 
own  banker  for  that  purpose,  who  insists  on  placing  them  to  the 
credit  of  B.,  B.'s  account  then  showing  a  balance  against  him, 
equity  would  still  compel  the  banker  to  account  to  A.^^ 

And  if  the  bank  has  notice  that  paper  does  not  belong  to  the 
debtor,  as  where  one  bank  sends  paper  to  another  indorsed  "  for 
collection  on  account  of  A.  B.",  the  receiving  bank  cannot  apply 
the  proceeds  to  the  debt  of  the  transmitting  bank,  as  it  may  in 
the  absence  of  any  notice  that  it  does  not  belong  to  the  debtor 
bank  ^^  (except  in  New  York,  etc.,  in  some  cases,  see  Title,  §  565). 

§  327.  Several  Accounts  in  the  Same  Right.  —  Where  a  de- 
positor keeps  several  accounts  with  his  banker,  as,  for  example, 
a  general  account,  a  loan  account,  and  a  discount  account,  all 
being  in  fact  kept  by  him  in  his  own  right,  nothing  short  of  a  clear 
and  distinct  contract  to  that  effect  will  prevent  the  bank  from 
fastening  its  lien  upon  any  securities  it  may  obtain  for  reimburse- 
ment of  any  of  these  accounts  which  may  be  overdrawn.^ 

If  the  customer  has  more  than  one  account  with  his  bank,  it  is 
his  privilege,  upon  making  any  deposit,  to  declare  to  the  credit 
of  which  account  it  shall  be  carried,  and  the  banker  cannot  alter  thi? 
appropriation.  But  if,  at  the  time  of  depositing,  the  depositor 
neglects  to  appropriate,  then  the  bankers  may,  within  any  reason- 
able time  thereafter,  appropriate  the  amount  to  either  of  the  cus- 
tomer's accounts  that  they  see  fit.^  The  importance  of  this 
privilege  to  the  bank  is  easily  seen  to  be  great  when  it  happens 
that,  at  the  time  of  making  the  deposit,  the  customer  has  over- 
drawn any  one  of  his  several  accounts,  for  then  the  bank  may  apply 
upon  this  account  the  amount  of  any  unappropriated  deposit. 
But,  except  for  this  privilege,  the  bank  must  preserve  the  distinc- 

(Hun,  N.  Y.)  102  (1899) ;  London  and  River  Plate  Bank  v.  Hanover 
National  Bank.  3G  App.  Div.  (Hun,  X.  Y.)  487  (1899) ;  Pcderson  v.  So 
Omaha  National  Bank,  h2  Neb.  95,  71  N.  W.  973  (1897) ;  First  National 
Bank  v.  City  National  Bank,  102  Mo.  App.  357,  76  S.  W.  489  (1903) ; 
Matter  of  McElheny,  91  App.  Div.  131  (1904),  8G  N.  Y.  S.  326.  See 
Title,  §  565. 

1'  Grant  on  Banking.  Lord  Bolingbroke's  Case,  in  Joy  v.  Campbell, 
1  Sch.  &  L.  346.  ,  ^    ^^     ^.    ^ 

18  Bank  of  Metropolis  v.  First  National  Bank,  22  Blatrhf.  58 ;  \!  irst 
National  Bank  v.  Reno  Co.  Bank,  3  Fed.  257 ;  Claflin  v.  Wilson,  51  Iowa 
15,  50  N.  W.  578 ;  White  v.  National  Bank,  102  U.  S.  658,  26  L.  ed.  2o0 : 
Blaine  v.  Bourne,  11  R.  I.  119. 

1  §  327.  In  re  European  Bank,  8  L.  R.  App.  41 ;  and  see  Pedder  v. 
Preston,  9  Jur.  n.  s.  496;  11  C.  B.  n.  s.  535;  Gruenther  r.  Bank  of 
Munroe,  90  Neb.  280,  133  N.  W.  402  (1911). 

619 


§  327  LIEN   AND   SET-OFF 

tion  between  the  accounts,  and  could  not  transfer  from  one  to 
supply  a  deficiency  in  another,^  nor  appropriate  a  deposit  expressed 
to  be  made  to  the  one  to  any  other ;  ^  unless  indeed  the  accounts, 
though  in  form  distinct,  are  yet  both  in  fact  kept  by  the  depositor 
in  the  same  right,  in  which  case  it  seems  that  the  bank  may  pro- 
tect itself  by  such  process  of  transferring  credits  and  debits  be- 
tween the  two  as  may  be  necessary.^ 

(a)  An  entry  in  the  customer's  books  has  been  held  not  to  be 
evidence  of  an  appropriation  by  him.^ 

It  has  been  held  that  a  banker  may  appropriate  a  deposit,  not 
appropriated  by  the  depositor,  to  the  credit  of  an  account  or  in- 
debtedness owing  by  this  depositor  to  this  banker  and  a  former 
partner  of  his ;  although,  at  the  same  time,  the  depositor  is  also 
indebted  upon  a  further  account  to  the  banker  himself  as  successor 
to  the  old  firm  7 

(b)  But  if  a  stipulation  of  suretyship  in  terms  expressly  ap- 
pears to  provide  for  and  cover  a  series  of  future  advances,  to  be 
constantly  paid  off  and  renewed,  it  is  obvious  that  the  surety  is 
not  discharged  when  the  amount  named  in  the  bond  has  been 
once  met  by  deposits.^ 

(c)  Where  a  running  account  contains  legal  and  illegal  items 
mingled  together,  payments  will  be  considered  as  appropriated 
to  discharge  the  legal  items,  in  their  own  order,  in  preference  to 
the  illegal  items.^ 

{d)  An  unappropriated  deposit  may  be  appropriated  by  the 
banker  to  the  discharge  of  an  indebtedness  of  the  depositor  barred 
by  the  Statute  of  Limitations.^" 

Bank  may  Combine  the  Accounts  of  its  Branches 

(e)  A  depositor's  balance  in  one  branch  of  a  bank  may  be  ap- 
plied to  his  debt  in  another  branch.     A.  had  a  balance  at  the  L, 

2  Simson  v.  Ingham,  2  Barn.  &  Cr.  72 ;  State  Bank  v.  Armstrong, 
4  Dev.  (N.  C.)  519. 

^  Ex  parte  Kingston,  In  re  Gross,  6  L.  R.  Ch.  App.  632. 
*  Farley  v.  Turner,  26  L.  J.  Ch.  710. 

^  Pedder  v.  Preston,  9  Jur.  n.  s.  496 ;  11  C.  B.  n.  s.  535 ;  and  see  In  re 
European  Bank,  8  L.  R.  App.  41. 

^  Manning  v.  Westerne,  2  Vern.  606. 
^  Snead  v.  Williams,  8  L.  T.  n.  s.  115. 
8  Henniker  v.  Wigg,  4  Q.  B.  792. 

3  Ex  parte  Randleson,  2  Deac.  &  C.  534 ;  Wright  v.  Laing,  3  Barn.  & 
Cr.  165. 

1"  Williams  v.  Griffith,  5  M.  &  W.  300. 

620 


UNMATURED    DEBT  §  320 

branch  of  a  bank,  and  owed  the  B.  branch.  He  drew  a  check  on 
the  L.  branch,  but  the  bank  combined  the  accounts  of  the  two 
branches,  thus  reducing  A.'s  assets  below  the  amount  of  the  check, 
and  refused  to  pay  it.  There  being  no  special  contract,  it  was 
held  that  the  bank  could  rightfully  combine  the  accounts." 

§  328.  What  can  be  charged  on  General  Account.  —  A.  had 
deposited  money,  notes,  checks,  etc.,  on  general  account,  so  that 
at  his  death  the  bank  owed  him  $930.  But  the  bank  had  a 
judgment  against  him  more  than  enough  to  offset  this,  and  A. 
had  moreover  kept  a  sum  of  money  that  had  been  given  him  to 
deposit  in  the  bank.  Upon  the  question  whether  the  bank  had 
a  right  to  charge  against  A.'s  general  account  the  sum  received 
for  use  of  the  bank,  and  which  he  refused  to  pay  over,  the  court 
said :  "  There  can  be  no  question  that,  if  the  bank  had  paid  off 
a  note  or  acceptance  of  his,  payable  at  the  bank,  this  would  have 
constituted  a  proper  debit  in  the  account.  It  is  not  to  be  doubted 
also  but  that  they  had  a  right  to  apply  his  funds  in  their  hands 
to  the  payment  of  any  note  or  acceptance  of  his  held  by  them. 
From  the  nature  of  this  account  as  an  open  running  account  of  the 
cash  transactions  of  the  parties,  embracing  a  variety  of  receipts 
and  payments,  debits  and  credits,  from  the  manner  of  their  deal- 
ing, etc.,  either  has  a  right  to  retain  for,  or  to  charge  in  account 
against  the  other,  money  received  by  the  latter  for  the  use  of  the  former, 
so  that  the  balance  thus  ascertained  shall  be  the  true  debt."  ^ 

§  329.  Unmatured  Debt.  —  The  lien  of  the  bank  does  not 
attach  until  some  indebtedness  is  actually  in  existence  and 
matured. 1  Thus,  a  bank  holding  a  note  of  a  depositor  has  no 
right  of  set-off,  and  no  valid  lien,  before  the  note  matures  ;  '^  so 
that  it  has  been  held  that  if,  in  the  interval  before  the  maturity, 

11  Garnett  v.  M'Kewan,  Law  R.  8  Ex.  10  (1872). 

1  §  328.  State  Bank  ;-.  Armstrong:,  4  Dev.  (N.  C.)  519.  See  Dale  v. 
ScoUet,  4  Burr.  213.3 ;  Greene  v.  Farmer,  4  Burr.  2214 ;  Sachs  v.  Sachs, 
181  111.  App.  342  (1913) ;  Bloom  v.  Winthrop  State  Bank,  121  Iowa  101, 
96N.  W.  733  (1903). 

1  §  329.  Jordan  v.  National  Shoe  «fc  Leather  Bank,  74  N.  Y.  4(37 : 
Heidelbach  v.  National  Park  Bank,  87  Hun  (N.  Y.)  117;  Pearsall  v. 
Nassau  National  Bank,  74  App.  Div.  89  (1902),  77  N.  Y.  S.  11 ;  Steelman 
V.  Atehley,  98  Ark.  294,  135  S.  W.  902  (1911). 

A  demand  note  is  due  at  once  for  the  purpose  of  set-off.  Citizens' 
Savings  Bank  v.  Vaughan,  115  Mich.  15(),  73  N.  W.  143  (1897). 

1°  With  tlie  consent  of  the  depositor  the  bank  may  charge  off  the  amount 
of  a  note  before  it  matures.  Steiner  v.  Mutual  Alliance  Trust  Co..  139 
App.  Div.  (i54  (1910),  124  N.  Y.  S.  184;  Commercial  National  Bank  i-. 
Brinton,  45  Utah  265,  145  Pac.  42  (1915). 

621 


§  329  LIEN   AND   SET-OFF 

the  depositor  makes  an  assignment  of  his  funds,  without  the  knowl- 
edge of  the  bank,  but  otherwise  legal,  the  amount  of  his  balance 
will  pass  to  the  assignee.^  So  in  Illinois  and  Missouri  it  is  held 
that  a  bank  has  no  lien  on  the  funds  of  a  depositor  to  apply  them 
on  a  debt  not  yet  due,^  and  cannot  retain  them  against  a  check- 
holder.'* 

Equity  will  Guard  against  Danger  of  Loss  if  it  Exists,  hy  Allowing 
the  Bank  to  Retain  the  Deposit  against  Immature  Debt 

This  is  a  strict  law.  But  it  would  seem  that  in  equity  the  bank 
might  have  a  safeguard.  The  case  has  arisen  where  a  depositor's 
note  had  been  discounted  by  the  bank;  before  its  maturity  he 
died ;  at  the  time  of  his  death  the  amount  of  his  deposit  exceeded 
the  amount  of  the  note  ;  by  a  court  of  equity  it  was  held,  upon  ap- 
plication by  the  bank,  and  proof  of  danger  of  the  insolvency  of 
his  estate  and  also  of  the  indorsers  on  the  note,  that  equity  would 
allow  the  bank  to  retain  enough  of  the  deposit  to  meet  the  note ; 
though  it  was  said,  in  law  the  debt  in  futuro  could  not  be  set  off 
against  the  debt  in  prcBsenti?  The  sound  justice  of  this  is  ob- 
vious. For  it  is  certain  that  bankers  will  often  make  loans  and 
discounts  to  a  good  customer,  whose  balance,  though  constantly 
shifting,  is  generally  good,  with  the  fair  expectation  that,  in  the 
ordinary  course  of  dealing,  they  will  in  time  have  funds  enough 
come  to  their  hands  to  secure  them  against  loss.     But  where  the 

2  Giles  V.  Perkins,  9  East  12,  per  Lord  Ellenborough ;  Beckv/ith  v. 
Union  Bank,  4  Sandf.  Super.  (N.  Y.)  604,  is  sometimes  cited  to  the  same 
point,  but  it  is  not  a  very  satisfactory  authority.  Jones  v.  Manufacturers' 
Bank,  10  Week.  No.  Cas.  (Pa.)  102  ;  ElHs  v.  First  National  Bank,  22  R.  I. 
565,  48  Atl.  936  (1901). 

3  Merchants'  National  Bank  v.  Ritizinger,  20  III.  App.  29  (1886) ; 
Com.  National  Bank  v.  Proctor,  98  111.  558;  Johnson  County  Savings 
Bank  v.  Renfro,  57  Tex.  Civ.  App.  160,  122  S.  W.  37  (1909) ;  Elzy  v. 
Morrison,  ISO  111.  App.  711  (1913). 

*  Zelle  V.  German  Savings  Institution,  4  Mo.  App.  401  (1887) ;  Co- 
lumbia National  Bank  v.  German  National  Bank,  56  Neb.  804,  77  N.  W. 
346  (1898) ;  First  Dearborn  National  Bank  v.  Blumenzeverg,  46  111.  App. 
297;  Wiley  v.  Bunker  Hill  National  Bank,  183  Mass.  495,  67  N.  E.  655 
(1903). 

But  if  a  note  matures  between  the  death  of  a  depositor  and  the  com- 
mencement of  action  by  the  administrator  of  the  deceased  for  the  amount 
on  deposit  in  the  name  of  the  deceased  the  note  may  be  set  off  by  au- 
thority of  Pierce's  Code,  §§  380,  1091  and  1093.  Fishburne  v.  Merchants' 
Bank,  42  Wash.  473,  85  Pac.  38  (1906). 

5  Ford's  Adm'r  v.  Thornton,  3  Leigh  (Va.)  695.  See  also  Thomas  v. 
Exchange  Bank,  99  Iowa  202,  68  N.  W.  780  (1896). 

622 


UNMATURED   DEBT  §  329 

bank  discounted  the  customer's  note  for  SoOOO,  placing  the  amount 
to  his  general  credit,  and  he  gave  his  check  for  SIOOO,  and  then 
became  bankrupt,  it  was  held  that,  as  against  the  owner  of  the 
check,  the  bank  had  no  lien  on  the  general  deposit  account  to  secure 
the  note,  which  had  not  yet  matured  at  the  time  when  the  check 
was  presented  for  payment.^  This  case  arose  in  Illinois,  where 
the  check-holder's  right  of  action  against  the  bank  is  recognized. 
In  the  absence  of  such  a  right  of  action,  it  is  not  impossible  that  the 
bank  might  have  simply  refused,  with  impunity,  to  honor  the  check, 
and  so  ultimately  secured  all  the  advantages  of  the  lien  which  the 
law  expressly  declares  not  to  exist. 

It  has  been  held  also,  in  Missouri,  Minnesota,  Kentucky,  Iowa, 
Georgia,  Maryland  and  Texas,  that  if  a  depositor  is  insolvent  his 
deposit  may  be  retained  for  an  unmatured  debt.^ 

But  in  Xew  York  a  bank  has  no  lien  upon  the  property  or  funds 
of  an  insolvent  depositor  for  a  note  discounted  by  the  bank  until 
the  note  becomes  due.'^'' 

6  Fourth  National  Bank  of  Chicago  v.  City  National  Bank  of  Grand 
Rapids,  G8  111.  398. 

7  Knecht  v.  United  States  Savings  Institute,  2  Mo.  App.  563 ;  Sweetser 
V.  People's  Bank,  69  Minn.  196,  71  N.  W.  934  (1897);  Stolze  v.  Bank, 
67  Minn.  172,  69  N.  W.  813  (1897) ;  Kentucky  Flour  Company's  Assignee 
V.  Merchants'  National  Bank,  90  Ky.  229,  13  S.  W.  910  (1890) ;  Thomas  v. 
Exchange  Bank,  99  Iowa 202,  68  N.  \V.  780  (1896) ;  Georgia  Seed  Co.  v. 
Talmage,  96  Ga.  256  (1895),  22  S.  E.  1001 ;  Brown  v.  Sheldon  State  Bank, 
139  Iowa  83,  117  N.  W.  289  (1908),  citing  cases  from  Pennsylvania, 
Michigan,  North  Carolina,  New  Jersey  and  the  United  States ;  Neely  i-. 
Grayson  Co.  National  Bank,  25  Tex.  Civ.  App.  513,  61  S.  W.  559  (1901) ; 
Owens  V.  American  National  Bank,  36  Tex.  Civ.  App.  490,  81  S.  W.  988 
(1904) ;  Ilayden  v.  Citizens'  National  Bank,  120  Md.  163,  87  Atl.  672, 
1915A  Ann.  Cas.  686,  n.,  46  L.  R.  A.  (n.  s.)  1059,  n. ;  Little's  Adm'r  v. 
City  National  Bank,  115  Ky.  629,  74  S.  W.  699,  103  Am.  St.  Rep.  349 
(1903).  See  also  dictum  in  Jordan  v.  National  Shoe  &  Leather  Bank, 
74  N.  Y.  473. 

'»  Smith  V.  Eighth  Ward  Bank,  31  App.  Div.  (Ilun.  N.  Y.)  6  (1898) ; 
Irish  r.  Citizens'  Trust  Co.,  163  Fed.  880  (1908) .  But  see  Frank  ;•.  Mercan- 
tile National  Bank,  100  App.  Div.  449  (1905),  91  N.  Y.  S.  488  ;  Delahunty 
V.  Central  National  Bank,  ()3  App.  Div.  177  (1901),  71  N.  Y.  S.  416. 

In  South  Carolina  a  depositor's  consent  is  necessary  before  a  bank 
can  applv  funds  subject  to  check  to  a  depositor's  unmatured  notes.  Calla- 
han V.  Bank  of  Anderson,  69  S.  C.  374,  48  S.  E.  293  (1904) ;  Bank  of 
Spartanburg  v.  Mahon,  78  S.  C.  408,  .59  S.  E.  31  (1907). 

In  Massachusetts  a  bank  has  no  right  of  equita1>le  set-off  entitling  it 
to  refuse  to  pay  its  customers'  check  so  as  to  apply  the  funds  to  the  notes 
of  the  depositor  not  yet  due  on  the  ground  of  the  depositor's  insolvency 
if  proceedings  in  insolvency  or  bankruiitcy  have  not  been  instituted  by 
or  against  him  and  he  has  made  no  common  law  assignment.  Wiley  v. 
Bunker  Hill  National  Bank,  183  Mass.  495,  67  N.  E.  655  (1903). 

623 


§  329  LIEN   AND   SET-OFF 

And  in  Michigan  mere  insolvency  is  insufficient  to  allow  the 
bank  an  equitable  set-off  of  unmatured  guaranteed  notes.^^  In 
Jordan  v.  National  Bank/  there  was  no  insolvency  or  any  element 
on  which  an  equitable  set-off  could  be  based.  The  case  rested  on 
the  statute,  and  the  court  decided  that  the  bank  had  no  lien  or  set- 
off for  an  unmatured  debt,  no  fact  being  averred  on  which  to  found 
an  equitable  jurisdiction. 

Equitable  set-offs  existed  before  statutory  ones,  and  are  inde- 
pendent of  the  latter ;  ^  and  although  future  debt  cannot  at  law 
be  offset  against  present  debt,^  yet  equity  will  always,  upon  proof 
of  danger,  as  by  the  probable  insolvency  of  the  debtor,  allow  the 
bank  to  retain  his  deposit.^*^ 

So  in  Ohio  an  unmatured  note  discounted  by  the  bank  can  be 
set  off  against  the  deposit,  saving  harmless  bona  fide  check-holders.^^ 

Authority  given  by  the  depositor  to  the  bank  to  apply  deposits  to 
the  payment  of  unmatured  debts  is  only  a  naked  power,  not  coupled 
with  an  interest,  and  is  revoked  by  notice  of  the  depositor's  debt.^^*^ 

When  a  depositor  promises  to  keep  a  fair  balance  at  the  bank, 
it  does  not  imply  that  the  balance  is  to  be  held  by  the  bank  for 
unmatured  debts.^^^ 

§  330.  Loss  of  Lien.  —  A  lien  may  be  lost,  if,  after  it  has  been 
established,  the  banker  takes  security  for  the  debt,  payable  at  a 
distant  day.^ 

So  a  lien  may  be  lost  by  voluntarily  giving  up  possession  of  the 
property,^"  or  by  conversion,  or  express  agreement.  But  loss  of 
possession  by  force,  fraud,  or  mistake  will  not  destroy  a  lien,  nor 
will  a  proper  repledging  of  pledged  property  on  the  first  pledgee's 
account,  if  the  repledging  does  not  go  beyond  the  first  pledgee's 
right  in  the  property. 

7'' Merchants'  National  Bank  v.  Stone,  45  Mich.  648  (1898).  See 
also  note  to  Fera  v.  Wickham,  17  L.  R.  A.  456  (N.  Y.). 

8  Story's  Equity,  ch.  38;  Ex  parte  Stephens,  11  Ves.  Jr.  24;  Ex  parte 
Flint,  1  Swans.  30 ;    Ex  parte  Blagden,  19  Ves.  Jr.  466. 

3  Martin  v.  KunzmuUer,  37  N.  Y.  396,  and  cases  cited. 

1"  See  note  7. 

11  Skunk  V.  Merchants'  National  Bank,  19  Chic.  Leg.  N.  83. 

"«  Gardner  v.  First  National  Bank,  10  Mont.  149  (1890). 

"''  Comer  v.  Bank  of  Commerce,  140  Mo.  225,  41  S.  W.  790  (1897). 

1  §  330.  Cowell  V.  Simpson,  16  Ves.  Jr.  278 ;  Hewison  v.  Guthrie, 
3  Scott  311 ;   2  Bing.  N.  C.  7.55. 

1°  But  when  the  cashier  allows  the  transfer  of  funds  of  a  notoriously 
insolvent  depositor  to  the  account  of  his  assignee  who  knows  that  the 
cashier  is  transcending  his  authority  the  right  of  lien  is  not  lost.  Ellis 
V.  First  National  Bank,  22  R.  I.  565,  48  Atl.  936  (1901). 

624 


BANK   ESTOPPED   TO   ASSERT   A    LIEN  §  331 

The  right  of  lien  on  a  note  of  a  depositor  is  not  affected  by  the 
fact  that  the  bank  has  pledged  such  note  as  security  to  a  third 
person. 2 

§  331.  Bank  estopped  to  assert  a  Lien.  —  Where  a  bank  made 
a  mistake  in  settlement,  but  waited  until  two  years  after,  when 
the  former  depositor  opened  a  new  account,  and  then  sprung  the 
claim  upon  him,  it  was  held  that  such  conduct  was  not  up  to  the 
proper  standard  of  good  faith,  that  the  bank  should  have  notified 
the  depositor  at  once  of  the  error,  and  that  its  silence  had  misled 
the  depositor  into  making  a  new  deposit,  and  the  bank  could  not 
retain  it.^ 

It  seems  clear  that  the  bank's  conduct  was  not  fair,  but  that 
alone  is  not  enough  to  change  legal  rights ;  the  further  question 
must  be  answered,  Did  the  neglect  of  the  bank  to  notify  the  depos- 
itor occasion  him  any  loss,  or  render  the  evidence  of  the  matter 
obscure?  If  the  mistake  could  be  clearly  proved,  and  the  bank, 
knowing  the  man,  preferred  the  method  it  selected  to  a  lawsuit, 
and  no  injury  was  done  to  the  depositor,  we  cannot  see  why  the 
bank  might  not  retain  the  deposit.  But  if  the  depositor  drew 
checks  against  the  new  deposit,  and  only  on  their  presentation 
was  notified  of  the  claim,  the  bank  should  be  held  estopped. 

The  Bank  is  Estopped  to  Assert  a  Lien  against  R.  as  to  Advances 
Made  after  R.  Purchased  a  Part  of  the  Land  C&cered  by  the  Lien 
with  the  Bank's  Knowledge 

(a)  B.,  after  depositing  title  deeds  with  a  bank  to  secure  all 
sums  to  become  due  on  a  general  balance  of  his  account  with  the 
bank,  contracted,  with  the  bank's  knowledge,  to  sell  part  of  the 
land  to  R.,  who  knew  of  the  terms  of  deposit  of  the  deeds.  B. 
afterwards  paid  into  the  bank  more  than  the  balance  due  it  at 
the  time  of  the  contract  of  sale,  thus  (according  to  Clayton's 
Case,  1  Meriv.  585)  discharging  his  debt.  The  bank,  without 
notifying  R.,  made  fresh  advances  to  B.,  keeping  him  always  in 
debt  to  the  bank.  R.  paid  the  purchase  money  by  instalments 
to  B.     Held,  that  the  bank  had  no  charge  on  the  land  as  against 

2  Clute  I'.  Warner,  8  N.  Y.  App.  Div.  40. 

1  §  331.     Hancock  v.  Citizens'  Bank,  32  La.  Ann.  590. 

If  the  bank  fails  to  notify  the  depositor  that  it  has  exercised  its  right 
of  set-off  until  a  check  is  presented  to  it  for  payment  in  favor  of  a  third 
person  it  is  liable  for  damages  for  dishonoring  the  check.  Callahan  i'. 
Bank  of  Anderson,  G9  S.  C.  374,  48  S.  E.  293  (1904). 

VOL.  1  —  40  625 


§  331  LIEN   AND    SET-OFF 

R.  for  the  fresh  advances ;  also,  that  the  bank  had  no  charge  upon 
the  purchase  money. 

The  bank  was  estopped  from  claiming  a  lien  against  R.  for  a 
cause  arising  subsequent  to  R.'s  purchase  with  the  knowledge  of  the 
hank?' 

B.  bought  cotton  borrowed  from  the  F.  Bank  and  deposited 
the  warehouse  receipts  with  the  bank  as  security  for  this  and  other 
debts.  B.  owed  the  bank  a  large  amount  and  was  insolvent.  A. 
bought  the  cotton  from  B.  with  the  bank's  assent  and  without 
notice  that  the  bank  claimed  a  lien  on  it.  The  lien  being  unre- 
corded, and  unknown  to  A.,  it  had  no  effect  against  him.^ 

When  a  bank  upon  inquiry  from  the  indorser  of  a  certificate 
of  deposit  issued  to  one  of  its  customers,  assures  him  that  the  same 
would  be  paid  upon  its  presentment,  and  he  is  thus  lulled  into  a 
feeling  of  security  which  prevents  him  and  the  holder  to  whom 
he  communicates  the  information  from  taking  steps  to  protect 
themselves,  the  bank  is  estopped  to  assert  the  defence  of  lien  for 
an  overdraft.* 

§  332.  General  Liens  are  not  favored,  and  must  rest  upon 
special  agreement,  course  of  dealing  between  the  parties,  or  gen- 
eral usage.* 

And  if  there  is  any  circumstance  inconsistent  with  the  claim  of 
a  lien,  it  will  not  be  upheld,  as  where  securities  are  delivered  to 
a  bank  for  a  specific  purpose. ^ 

§  333.  A  Banker's  Lien  in  Pennsylvania,  New  York,  etc.  — 
The  pledge  of  securities  for  an  antecedent  debt,  being  founded 
on  no  present  valuable  consideration,  is  taken  subject  to  the 
equities  subsisting  between  the  pledgor  and  third  parties.^ 

The  doctrine  in  Pennsylvania  is,  that  a  banker  has  a  general 
lien  on  securities,  unless  deposited  under  express  contract,  or 
under  circumstances  showing  an  implied  inconsistent  contract ; 
but  a  holder  merely  for  an  antecedent  debt  is  not  protected  against 
equities  existing  in  third  parties,  and  the  courts  say  that  neither 
decisions  out  of  Pennsylvania  nor  usage  can  affect  the  rule.     It 

2  London  &  Co.  Banking  Co.  v.  Rateliffe,  L.  R.  6  App.  Cas.  722  (1881). 

3  Bank  v.  Slayden,  8  Tex.  Civ.  App.  63. 

*  Old  National  Bank  v.  Exchange  National  Bank,  50  Wash.  418,  97 
Pac.  462  (1908). 

1  §  332.  Grant  v.  Taylor,  35  N.  Y.  Super.  Ct.  351 ;  American  National 
Bank  v.  Minor,  142  Ky.  792,  135  S.  W.  278  (1911). 

2  Bank  of  Metropolis  v.  New  England  Bank,  1  How.  234, 11  L.  ed.  115. 
1  §  333.     Liggett  Spring  &  Axle  Co.'s  Appeal,  111  Pa.  St.  291. 

626 


SET-OFF.  —  THE    DEBTS    MUST    BE    IN    THE    SAME    RIGHT       §  334 

is  very  probable,  however,  tkat  they  are  mistaken  in  this,  and 
that  succeeding  judges  may  find  a  way  to  bring  Pennsylvania  into 
harmony  with  her  sister  States. 

In  California  a  bank  cannot  set-off  against  a  deposit  an  amount 
due  it  on  a  mortgage  indebtedness.- 

§  334.  Set-off.  —  The  Debts  must  be  in  the  same  Right.  — 
The  rules  of  law  as  to  the  right  of  set-off  between  the  l)ank  and  its 
depositors  are  not  different  from  those  applicable  to  other  parties." 

The  debts  must  be  between  the  same  parties  and  in  the  same 
right. ^  A  deposit  due  to  A.  as  executor  cannot  be  offset  against 
A.'s  personal  debt,  nor  vice  versa?'     It  is  not  necessary  that  the 

"McKean  v.  German-American  Savings  Bank,  118  Cal.  334,  50  Pac. 
656  (1897). 

«  §  334.     Eyrich  v.  Capital  State  Bank,  67  Miss.  70,  6  So.  615  (1889). 

The  bank  has  a  right  to  set  off  from  a  general  deposit  a  balance  of  the  gen- 
eral account  of  its  depositor.  Wynn  v.  Tallapoosa  County  Bank,  168  Ala. 
469,  53  So.  228  (1910) ;  Bank  of  Lawrenceville  ;;.  Rockmore,  129  Ga. 
582,  59  S.  E.  291  (1907);  Hiller  v.  Bank  of  Columbia,  92  S.  C.  445,  75 
S.  E.  789  (1912) ;   id.,  96  S.  C.  74,  79  S.  E.  899  (1913). 

1  Miller  v.  Mickel,  9  Colo.  331,  12  Pac.  240;  Scott  v.  Fritz,  51  Pa.  St. 
418;  Fryt;.  Evans,  8  Wend.  (N.  Y.)  530;  Canonsburg  Iron  Co.  r.  Union 
National  Bank,  34  Pitts.  L.  J.  93  (1886);  Stuart  v.  Commonwealth, 
8  Watts  (Pa.)  74;  Grew  v.  Burditt,  9  Pick.  (Mass.)  265;  Thomas  v. 
Hopper,  5  Ala.  442;  Nolting  v.  National  Bank,  99  Va.  54,  37  S.  E.  804 
(1901). 

A  bank  may  show  that  a  transaction  in  the  name  of  the  president  of 
another  bank  is  really  the  transaction  of  the  bank  of  which  he  is  president. 
Kendrick  State  Bank  v.  First  National  Bank,  213  Fed.  610  (1914) ;  id., 
206  Fed.  940  (1913). 

When  a  deposit  in  the  name  of  R.  &  Co.  is  attempted  to  be  set  off  against 
an  indebtedness  of  R.  the  bank  may  introduce  evidence  to  show  that  R.  & 
Co.  is  really  R.  Bank  of  Lawrenceville  v.  Rockmore,  129  Ga.  582,  59 
S.  E.  291  (1907). 

A  bank  has  no  right  to  apply  money  of  its  depositor  to  the  payment 
of  a  note  on  which  he  is  surety  or  guarantor.  O'Grady  v.  Stotts  City 
Bank,  106  Mo.  App.  366,  80  S.  W.  696  (1904). 

A  certificate  of  deposit  acquired  by  a  depositor  by  assignment  from  a 
third  person  subsequent  to  the  bank's  insolvency  cannot  be  set  off  against 
a  claim  due  the  bank  by  said  depositor.  Gates  v.  Smith,  176  Ala.  39, 
57  So.  438  (1912) ;  but  Nix  v.  EUis,  118  Ga.  345,  45  S.  E.  404,  98  Am. 
St.  Rep.  Ill  (1903)  holds  that  a  claim  purchased  by  one  after  assignment 
for  benefit  of  creditors  may  be  set  off. 

2  See  cases  above,  and  Tobey  v.  Manuf.  National  Bank,  9  R.  I.  236. 

A  deposit  due  to  A.,  as  County  treasurer,  or  as  trustee,  cannot  be  set 
off  against  the  individual  indelitedness  of  A.  Skipwith  ;•.  Hurt,  94  Tex. 
322,  60  S.  W.  423  (1901);  Walters  National  Bank  v.  Bantock,  41  Okla. 
153,  137  Pac.  717,  1915C  L.  R.  A.  531 ;  Wagner  v.  Citizens'  Bank  etc. 
Co.,  122  Tenn.  164,  122  S.  W.  245,  135  Am.  St.  Rep.  869,  28  L.  R.  A. 
(n.  s.)  484,  n.  (1909).  See  Blood  v.  Kane,  130  N.  Y.  514,  29  N.  E.  994, 
15  L.  R.  A.  490.     But  the  fact  that  the  depositor  had  Adm'r.  added  to 

627 


§  334  LIEN   AND    SET-OFF 

claim  should  run  between  the  nominal  parties  to  the  suit,  if  they 
are  really  due  to  arid  from  the  same  funds  on  both  sides;  as  where  a 
note  was  discounted  for  the  benefit,  not  of  the  maker,  but  of  the 
indorser,  it  was  held  in  a  suit  by  the  bank  against  the  maker, 
that  a  deposit  to  the  credit  of  the  indorser  should  be  set-off  against 
the  note.^ 

And  in  another  case  where  a  note  was  discounted  for  an  indorser, 
and  the  amount  credited  to  him  and  partly  drawn  out  by  him, 
it  was  said  that  the  bank  could,  if  it  so  desired,  apply  the  balance 
remaining  to  the  indorser's  credit  toward  payment  of  the  note.* 
An  individual  deposit  cannot  be  offset  against  a  partnership 
debt.^  Nor  can  the  debt  of  one  partner  on  a  note  indorsed  by  the 
other  partner  be  set  off  by  the  bank  against  the  deposit  of  the 
firm.^" 

It  would  seem  that  set-off  could  only  be  availed  of  by  the 
bank  in  respect  of  the  personal  deposits  of  the  depositor.  But 
where  money  was  deposited  in  the  name  of  the  depositor's  wife, 
the  depositor  being  at  the  time  insolvent  and  indebted  to  the 
bank,  set-off  w^as  allowed  upon  proof  that  the  money  thus  de- 
posited had  been  raised  upon  the  mortgage  of  the  husband's 
property,  in  which  the  wife  had  joined  in  the  usual  form.^ 

his  name  will  not  prevent  the  set-off  where  the  bank  did  not  know  the 
money  belonged  to  the  estate  of  which  he  was  administrator.  Sparrow 
V.  State  Exchange  Bank,  103  Mo.  App.  338,  77  S.  W.  168  (1903) ;  and 
when  money  deposited  in  a  bank  is  without  the  knowledge  of  the  bank 
mingled  by  the  depositor  with  trust  money,  the  bank  may  set  off  against 
such  deposit  an  antecedent  debt  of  the  depositor  if  the  application  to  the 
debt  is  consented  to  by  the  depositor,  which  consent  will  be  implied  if 
the  deposit  is  made  in  the  face  of  an  overdraft  or  past  due  obUgation. 
Shuman  v.  Citizens'  State  Bank,  27  N.  D.  599,  147  N.  W.  388,  1915A 
L.  R.  A.  728. 

Mutuality  is  not  always  controlling  in  an  action  by  or  against  personal 
representatives  of  an  estate  which  involves  its  assets,  but  it  will  be  de- 
parted from  where  it  appears  that  permitting  the  offset  to  be  interposed 
cannot  in  any  respect  embarrass  the  administration  of  the  estate  or  prej- 
udice the  rights  or  interests  of  any  other  party  interested  in  its  assets. 
People  V.  California  Safe  etc.  Co.,  168  Cal.  241,  141  Pac.  1181,  1915A 
L.  R.  A.  299,  n. 

3  Shackamaxon  Bank  v.  Kinsler,  16  Week.  No.  Cas.  (Pa.)  509. 

^  Ticonic  Bank  v.  Johnson,  21  Me.  426. 

5  International  Bank  of  Chicago  v.  Jones,  119  111.  407  (1887),  9  N.  E.  885  ; 
Adams  v.  Bank,  113  N.  C.  335, 18  S.  E.  513  (1893) ;  KroU  v.  Union  Trust 
Co.,  133  Mich.  638,  95  N.  W.  735  (1903). 

^  Hodgin  V.  People's  National  Bank,  124  N.  C.  540,  32  S.  E.  887 
(1899).  See  Bank  of  Lawrenceville  v.  Rockmore,  129  Ga.  582,  59  S.  E. 
291  (1907). 

«  Citizens'  Bank  of  Garnett  v.  Bowen,  21  Kan.  354. 
628 


GOODS   AS    SUCH    NOT   A    SUBJECT    OF   SET-OFF  §  336 

Where  a  wife  deposits  in  a  l)ank,  in  her  own  name,  money  of  her 
general  estate,  and  the  bank  becomes  insolvent,  the  husband,  being 
indebted  to  the  bank,  has  a  right  to  set  off  the  wife's  deposit 
against  his  indebtedness/ 

§335.  Certainty. — The  claims  set  off  must  be  certain,  i.e. 
either  already  reduced  to  precise  figures,  or  capable  of  being 
liquidated  by  calculation  v.ithout  the  intervention  of  a  jury  to 
estimate  the  sum.^  And  when  the  claim  sought  to  be  used  as  an 
offset  requires  the  decision  of  a  jury  on  the  question  of  negligence 
before  the  claim  is  established,  it  cannot  be  offset,  even  though 
the  amount  of  the  judgment  is  very  clear,  provided  there  should 
be  any  judgment  in  favor  of  the  claim.  As  where  a  bond  deposited 
as  collateral  for  a  note  was  lost,  and  in  suit  by  the  bank  on  the  note 
the  maker  tried  to  offset  the  loss  of  the  bond.^ 

A  judgment,  or  contract  claim,  that  can  be  sued  in  debt,  as- 
sumpsit, or  covenant,  may  be  set  off.^  But  a  demand  that  must 
be  sued  upon  in  tort,  or  by  bill  in  equity,  cannot  be  set  off.'' 

§  330.  Goods  as  such  not  a  Subject  of  Set-ofE.  —  Certified 
Check  in  Set-off.  —  A  bank  may  set  off  a  discounted  note  held 
by  it  against  pecuniary  credits  to  the  maker  upon  the  hitter's 
insolvency.  Goods  merely  in  the  possession  of  the  bank,  and  not 
intrusted  to  it  to  be  turned  into  a  money  credit,  are  not  the  sub- 
ject of  set-off.^ 

Herein  set-off  differs  from  a  lien.  Set-off  cannot  confer  a  right 
to  detain  property  the  title  to  which  is  in  another,  but  only  to  set 
one  money  claim  against  another.^" 

7  Hall  V.  New  Farmers'  Bank,  98  Ky.  146,  32  S.  W.  400  (1895). 
A  bank  cannot  set  off  a  wife's  money  against  a  debt  of  her  husband. 
Robards  v.  Hamrick,  .39  Ind.  App.  134,  79  N.  E.  38G  (1900). 

1  §  335.  Wilmot  v.  ITurd,  11  Wend.  (N.  Y.)  584;  Thomson  v.  Red- 
man, 11  M.  &  W.  487;  Tallapoosa  County  Bank  v.  Wynn,  173  ^Vla.  272, 
55  So.  1011  (1911);  Marine  Bank  r.  Stirling,  115  ]SId.  90,  80  Atl.  73G 
(1911). 

2  Winthrop  Savings  Bank  v.  Jackson,  67  Me.  570. 

3  Hutchinson  v.  Sturges,  Willes  261. 

*  Dean  v.  Allen,  8  .Johns.  (N.  Y.)  390;  Gilchrist  v.  Leonard,  2  Bailey 
(S.  C.  )  135 ;  Ben  Uov  Irvine  r.  Dean,  93  Tenn.  350,  27  S.  W.  666  (1894) ; 
Tallapoosa  County  Bank  /•.  Wvnn,  173  Ala.  272,  55  So.  1011  (1911); 
Elliott  V.  Peet,  192  Fed.  t)99  (1912). 

I  §  336.  Stetson  v.  Exchange  Bank,  7  Gray  (Mass.)  425,  citing  Dem- 
mon  V.  Bovlston  Bank,  5  Cush.  (:Mass.)  194;  Rose  v.  Hart,  8  Taunt. 
499. 

•"  Tn  strictness  a  set-off  is  a  counter  claim  which  the  defendant  may 
interpose  by  waj'  of  cross  action  against  the  plaintiff.  Studley  v.  Boylston 
National  Bank,  229  U.  S.  523,  57  L.  ed.  1313,  33  Sup.  Ct.  800  (1913). 

629 


§  336  LIEN   AND   SET-OFF 

(a)  A  banker,  upon  whom  a  check  has  been  drawn,  and  who 
has  certified  it,  cannot  set  off  against  the  same  any  debt  or  demand 
which  he  may  have  against  the  hokler  when  the  check  is  finally 
presented  for  payment.  For,  it  is  said,  the  check  is  not  a  payment 
made  by  the  drawer  to  the  holder,  creating,  therefore,  a  new 
debt  from  the  banker  to  the  holder,  but  is  merely  a  means  of  pro- 
curing payment ;  and  if  that  means  should  fail  from  any  cause, 
be  it  such  a  set-off  or  other  circumstance,  the  drawer  remains 
liable.2  This  reasoning  seems  by  no  means  beyond  criticism. 
The  unquestionable  weight  of  the  authorities  is  to  the  purport 
that  the  certification  does  create  a  direct  debt  from  the  bank  to 
whomsoever  is  or  may  come  to  be  the  holder  of  the  check,  and  that 
such  holder  occupies  the  position  of  a  simple  contract  creditor  or 
depositor;  also  that  the  drawer  does  not  remain  liable  on  his 
original  debt.  If  such  be  the  case,  it  is  hard  to  see  why  the  set-off 
might  not  be  allowed. 

§  337.  When  Depositor  is  insolvent.  —  The  various  items  of 
deposit  with  and  payment  by  the  bank  form  a  running  account 
between  the  bank  and  the  customer.  For  any  indebtedness 
accruing  from  the  customer  to  itself,  the  bank  has  the  right  to 
set-off.  If  the  depositor  becomes  bankrupt,  his  deposit  becomes 
security  for  the  payment  of  his  debt  to  the  bank.  If  this  debt 
be  contingent  in  character,  or  if  it  be  a  claim  for  unliquidated 
damages  arising  out  of  a  contract,  then  the  bank  may  retain 
possession  of  the  deposit  until  such  time  as  the  probable  in- 
debtedness shall  be  ascertained,  when  the  deposit  may  be  set  off 
against  it.i     The  rule  was  laid  down  by  Judge  Lowell  in  the  case 

2  Brown  v.  LecMe,  43  111.  497. 

1  §  337.  In  re  North,  16  National  Bankr.  Reg.  (Mass.  Dist.)  420;  Ex 
'parte  Howard  National  Bank,  2  Low.  487.  See  Kelly  &  Co.  v.  Phelan,  5 
Dill.  228  ;  Ex  parte  Hornby,  De  Gex  69 ;  Farmers'  Deposit  National  Bank 
V.  Penn  Bank,  123-  Pa.  St.  283,  16  Atl.  761 ;  Georgia  Seed  Co.  v.  Sal- 
madge,  93  Ga.  259,  22  S.  E.  1001  (1895),  citing  Belcher  ?).Wilcox,  40  Ga. 
391 ;  Ricks  v.  Broyles,  78  Ga.  610,  3  S.  E.  772;  Penn  Bank  v.  Farmers' 
Deposit  National  Bank,  130  Pa.  St.  209,  20  Atl.  150 ;  Cox  v.  First  National 
Bank,  126  La.  88,  52  So.  227  (1910) ;  Wiley  v.  Bunker  HiU  National 
Bank,  183  Mass.  495,  67  N.  E.  655  (1903) ;  Furber  v.  Dane,  203  Mass. 
108,  89  N.  E.  227  (1909) ;  Templeman  v.  Hutcliings,  24  Tex.  Civ.  App. 
1,  57  S.  W.  868  (1900) ;  Steinhardt  v.  National  Park  Bank,  120  App. 
Div.  255  (1907),  105  N.  Y.  S.  23;  Booth  v.  Prete,  81  Conn.  636,  71  Atl. 
938,  20  L.  R.  A.  (n.  s.)  863,  n.  (1907) ;  Lyman  v.  Belfast  National  Bank, 
98  IVIe.  448,  57  Atl.  799  (1904) ;  In  re  Hill  Co.,  130  Fed.  315  (1904) ; 
Wheaton  v.  Daily  Telegraph  Co.,  124  Fed.  61  (1903) ;  Irish  v.  Citizens' 
Trust  Co.,  163  Fed.  880  (1908) ;  Walsh  v.  First  National  Bank,  201  Fed. 
522  (1913) ;  Germania  etc.  Tr.  Co.  v.  Loeb,  188  Fed.  285  (1911) ;  Whitaker 

630 


WHEN    DEPOSITOR   IS    INSOLVENT  §  337 

cited,  that  "  the  credit  should  be  set  off  against  the  wlujle 
uhimate  debt  of  the  bank,  that  is  to  say  against  the  aggregate 
amount  of  the  notes  of  the  bankrupt  in  which  he  is  the  prin- 
cipal debtor ;  and  as  to  those  on  which  he  is  indorser  so  far  and 
so  far  only,  as  is  made  necessary  by  the  insolvency  of  the  real 
principals." 

Judge  Lowell  further  said,  tliat  he  understood  "  the  practice 
in  England  to  be,  that  a  banker  who  has  discounted  notes  for  his 
customer  may  prove  for  the  whole  money  as  so  much  lent  to 
the  customer,  exhibiting  a  list  of  his  notes  or  bills,  which 
are  called  securities.  Any  deposit  the  banker  has  in  hand  would 
come  out  of  this  sum  total.  If,  however,  any  bill  or  note  is  paid 
by  other  parties  after  the  proof  has  been  admitted,  its  amount 
is  to  be  deducted  from  the  total  debt  proved.  In  other  words, 
the  proof  is  considered  as  made  on  each  note  or  bill  separately, 
though  not  so  in  form."  ^ 

When  a  bank  has  refused  to  discount  notes  sent  to  it  for  that 
purpose  its  duty  is  to  return  the  notes,  and  if  it  retains  them  it 

V.  Crowder  State  Bank,  26  Okla.  786,  110  Pac.  776  (1910);  Frank  v. 
Mercantile  National  Bank,  100  App.  Div.  449  (1905),  91  N.  Y.  S.  488; 
New  York  County  National  Bank  v.  Massey,  192  U.  S.  138,  48  L.  ed. 
380,  24  Sup.  Ct.  'l99  (1904)  ;  Studley  v.  Boylston  National  Bank,  229 
U.  S.  523, 57  L.  ed.  1313, 33  Sup.  Ct.  806  (1912) ;  Habegger  v.  First  National 
Bank,  94  Minn.  445,  103  N.  W.  216,  110  Am.  St.  Rep.  379  (1905). 

An  agreement  whereby  a  bank  is  authorized  to  declare  a  note  due  and 
payable  upon  the  insolvency  of  the  depositor  and  to  apply  his  deposit 
in  payment  thereof  is  simply  an  option  or  privilege  which  cannot  be  ex- 
ercised after  the  appointment  of  a  receiver.  Eastern  Mill  etc.  Co.  v. 
Eastern  Mill  etc.  Co.,  146  Fed.  761  (1900)  ;  Corn  Exch.  National  Bank  v. 
Locher,  151  Fed.  764  (1907). 

If  the  bank  has  mortgage  security  for  a  debt  it  must  exhaust  that  se- 
curity before  it  can  apply  the  money  on  deposit  to  the  reduction  or  can- 
cellation of  the  debt.  Guarini  v.  Swiss  American  Bank,  162  Cal.  181, 
121  Pac.  726  (1912). 

When  the  money  does  not  reach  the  bank  until  after  the  death  of  the 
depositor  there  can  be  no  set-off.  Padgett  v.  Bank  of  Mountain  View, 
141  Mo.  App.  374,  125  S.  W.  219  (1910).  Nor  can  there  be  a  set-off  for 
moneys  collected  on  paper  sent  by  another  bank  which  becomes  insolvent 
before  remittance.     //(  re  Northrup,  159  Fed.  686  (1908). 

The  bank  is  not  bound  to  exercise  its  right  of  set-off  and  if  prior  to 
the  time  when  the  right  is  claimed  liy  the  bank  some  creditor  has  inter- 
vened and  by  legal  process  obtained  a  claim  upon  the  (U>positor's  account, 
superior  to  the  bank's  right  of  set-off,  such  right  is  lost  and  cannot  be 
exercised  bv  the  bank.  Luthersville  Banking  Co.  v.  Hopkins,  12  Ga. 
App.  488,  77  S.  E.  589  (1912). 

2  Ex  parte  Burn,  2  Rose  55 ;  Ex  parte  Barratt,  1  Gl.  &  J.  327 ;  Ex 
■parte  Hornby,  De  Gex  69. 

631 


§  337  LIEN   AND   SET-OFF 

cannot,  as  against  general  creditors,  set  off  against  the  notes  or 
their  proceeds  the  insolvent's  overdraft  although  made  after  re- 
fusal to  discount  the  notes  and  pending  their  retention.^ 

§  338.  Insolvency  of  the  Bank.  —  Commercial  Bank.  —  Where 
the  bank  itself  stops  payment  and  becomes  insolvent,  the  cus- 
tomer may  avail  himself  in  set-off  against  his  indebtedness  to  the 
bank  of  any  indebtedness  of  the  bank  to  himself,  as,  for  example, 
the  balance  due  him  on  his  deposit  account.^  So  also,  even 
though  the  debt  to  him  has  not  matured  at  the  time  of  the  insol- 
vency .^    The  right  is  an  equitable,  not  a  legal,  one.^" 

The  right  to  set  oft'  an  unmatured  debt  is  not  contrary  to  the 
National  Banking  Law,  §  5242.26 

The  maker  ^  or  indorser  ^  of  a  note  falling  due  after  insolvency 
may  set  off  his  deposit,  or  a  debt  due  him  at  the  time  of  the  as- 
signment, but  not  a  claim  coming  to  him  or  due  ^^  after  the  assign- 
ment.^ 

The  set-off  may  be  made  equally  well  though  the  money  de- 
posited is  not  the  money  of  the  depositor,  but  the  property  of 
others  held  by  him  in  trust  or  as  custodian,  and  deposited  by  him 

3  Hanover  National  Bank  v.  Suddath,  215  U.  S.  110,  54  L.  ed.  115, 
30  Sup.  Ct.  63  (1909). 

1  §  338.  McLaren  v.  Pennington,  1  Paige  (N.  Y.)  102 ;  Receiver  v. 
Paterson  Gas  Light  Co.,  23  N.  J.  L.  233;  Piatt,  Receiver,  v.  Bentley, 
11  Am.  Law  Reg.  171 ;  Bernstein  v.  Coburn,  49  Neb.  734,  68  N.  W.  1021 
(1896) ;  Mercer  v.  Dyer,  15  Mont.  317,  39  Pac.  314  (1894) ;  The  State  v. 
Brobston,  94  Ga.  99,  21  S.  E.  140  (1893),  citing  Ray  v.  Dennis,  5  Ga. 
357 ;  Morse  v.  Chapman,  24  Ga.  249 ;  Scott  v.  Armstrong,  146  U.  S.  499, 
36  L.  ed.  1059,  13  Sup.  Ct.  148  (1892) ;  Salladin  v.  Mitchell,  42  Neb.  860, 
61  N.  W.  127;  Garrison  v.  Union  Trust  Co.,  139  Mich.  392,  102  N.  W. 
978,  111  Am.  St.  Rep.  407,  n.  (1905). 

2  Bruyn  v.  Receiver,  9  Cow.  (N.  Y.)  413,  n. ;  People  v.  St.  Nicholas 
Bank,  76  Hun  (N.  Y.)  .522. 

If  the  debt  of  the  bank  is  on  a  lease  for  rent  which  is  not  due  at  the 
time  of  the  insolvency  there  can  be  no  set-off.  McGraw  v.  Union  Trust 
Co.,  135  Mich.  609,  98  N.  W.  390  (1904). 

2«  Scott  V.  Armstrong,  146  U.  S.  499,  36  L.  ed.  1059,  13  Sup.  Ct.  148 
(1892). 

»  Mercer  v.  Dyer,  15  Mont.  317,  39  Pac.  314  (1894). 

3  Jordan  v.  Sharlock,  84  Pa.  St.  366 ;  Adams  v.  Spokane  Drug  Store,  57 
Fed.  888. 

*  Arnold  v.  Niess,  36  Leg.  Int.  (Pa.)  437;  Davis  v.  Industrial  Manu- 
facturing Co.,  114  N.  C.  334  (1894)  ;  O'Connor  v.  Brandt,  12  N.  Y.  App. 
596 ;  Williams  v.  Ross,  218  Fed.  898  (1914) ;  Curtis  v.  Davidson,  164 
ipp.  Div.  597  (1914),  150  N.  Y.  S.  305. 

4°  Storts  V.  George,  1.50  Mo.  1,  51  S.  W.  489  (1899). 

5  Venango  National  Bank  v.  Tavlor,  56  Pa.  St.  15  ;  Storts  v.  George,  150' 
Mo.  1,  51  S.  W.  489  (1899) ;   Davis  v.  Knipp,  92  Hun  (N.  Y.)  297. 

632 


INSOLVENCY    OF   THE    BANK  §  338 

as  trustee.^  But  the  accounts  (jf  individuals,  as  such,  and  of  a 
firm  of  which  they  are  members,  cannot  be  thus  availed  of." 
See  §  5G0. 

Where  a  judgment  debtor  of  a  bank  deposits  money  with  its 
branch,  subject  to  his  own  check,  and  the  money  is  lost  by  the 
failure  of  the  bank,  the  deposit  does  not  discharge  the  judgment^" 

An  assignee  of  a  deposit  in  an  insolvent  bank  takes  subject  to 
the  right  of  set-off  for  both  assignor's  and  his  own  debtsJ^ 

The  assignee  of  a  deposit  in  an  insolvent  bank  cannot  set  off 
the  amount  on  a  note  of  his  own  held  by  the  bank,  pending  the 
receivership.^" 

In  an  action  by  a  receiver  of  an  insolvent  bank  on  a  note,  de- 
fendant offering  as  set-off  a  certificate  of  deposit  must  show  that 
he  received  it  before  the  filing  of  the  bill  by  which  the  assets  of 
the  bank  were  impounded  for  benefit  of  all  its  creditors.^ 

A  receiver  takes  choses  in  action  of  a  bank  in  the  same  plight 
in  which  they  existed  at  the  time  of  the  filing  of  the  proceedings 
under  which  he  was  appointed,  and  subject  to  all  set-offs  which 
might  have  been  pleaded  thereto  in  a  suit  by  the  bank  itself.^" 

A  deposit  cannot  be  set  off  against  a  liability  as  surety  on  a 
note  if  the  principal  is  solvent.^" 

A  stockholder  is  not  entitled  to  set  off  against  an  assessment 
on  his  stock  the  amount  of  his  individual  claim  against  the 
bank.^^ 

Where  a  bank  borrows  money  from  another  bank,  and  author- 
izes its  cashier  in  his  own  name  to  pledge  ])r()missory  notes  taken 
in  the  name  of  the  cashier,  but  belonging  to  the  borrowing  bank, 
as  security  for  the  loan,  and  the  loaning  bank  fails,  having  on 

« Miller  v.  Receiver  of  Franklin  Bank,  1  Paige  (N.  Y.)  444.  See 
People  V.  California  Safe  etc.  Co.,  1G8  Cal.  41,  141  Pac.  1181  (1914). 

^  Watts  r.  Christie,  11  Beav.  546. 

7"  Spilman  v.  Pavne,  84  Va.  439,  4  S.  E.  749  (1888). 

7''  Davis  V.  Industrial  Manufacturing  Co.,  114  N.  C.  329,  19  S.  E.  371 
(1894). 

'•^Borough  Bank  v.  Rosenweig,  147  App.  Div.  175  (1911),  132 
N.  Y.  S.  84. 

8  Smith  V.  Mosby,  9  Heisk.  (Tenn.)  501  (1872). 

80  Ni.x  V.  Ellis,  118  Ga.  345,  45  S.  E.  404,  98  Am.  St.  Rep.  Ill  (1903) ; 
Steelman  v.  Atchlev,  98  Ark.  294,  135  S.  W.  902  (1911). 

8a  New  Farmers'  Bank's  Trustee  (-.  Young,  100  Kv.  083,  39  S.  W.  46 
(1897);  Edmondson  v.  Thomasson,  112  Va.  326,  71  S.  E.  536,  1913A 
Ann.  Cas.  1300,  n. ;  Knaffle  v.  Knoxville  Banking  Co.,  128  Tenn.  181,  159 
S.  W.  838  (1913). 

s*  Williams  v.  Rose,  218  Fed.  898  (1914). 

633 


§338 


LIEN   AND   SET-OFF 


deposit  money  belonging  to  the  borrowing  bank  in  excess  of  the 
amount  borrowed  on  the  pledged  promissory  notes,  the  borrow- 
ing bank  may  institute  suit  in  its  own  name  against  the  receiver 
of  the  failing  bank  for  the  recovery  of  the  promissory  notes 
pledged,  and  in  such  suit,  upon  proper  allegation  and  proof,  is 
entitled  to  the  return  of  the  notes,  and  to  have  the  sum  borrowed 
on  them  set  oS  against  the  amount  on  deposit.^'' 

§  339.  Insolvency  of  Savings  Bank.  —  So  long  as  the  bank 
is  solvent  a  depositor  may  offset  his  deposit  against  his  debt  to 
the  bank,  but  so  soon  as  the  bank  becomes  insolvent  this  cannot 
be  allowed.  The  depositors  reap  the  profits,  and  must  bear  the 
losses  resulting  from  the  business  of  the  bank.^ 

§  339  A.  Insolvency  of  Savings  and  Loan  Association,  —  A 
stockholder  in  a  savings  and  loan  association  organized  under 
the  laws  of  Ohio,  is  entitled,  when  the  association  becomes  in- 
solvent, to  set  off,  as  against  its  assignee  for  the  benefit  of 
creditors,  a  claim  for  money  which  he  has  on  deposit  with  the 
association,  against  his  liability  for  the  unpaid  part  of  his  stock 
subscription.^ 

§  340.  Set-ofE  as  against  Debtor's  Representatives.  —  If  the 
debt  be  mature  at  the  time  of  the  debtor's  death,  the  bank  has  the 
right  of  set-off  as  against  the  heirs,  executors,  and  administrators 
of  the  deceased,  whether  the  estate  be  solvent  or  insolvent,  pre- 
cisely as  it  would  have  enjoyed  the  same  right  against  the  cus- 
tomer himself  in  his  lifetime.^ 

8^  Rankin  v.  Blain  County  Bank,  20  Okla.  68,  93  Pac.  536,  18  L.  R.  A. 
(n.  s.)  512,  n.  (1907). 

1  §  339.  Hannon  v.  Williams,  34  N.  J.  Eq.  255 ;  Lawrence  v.  Nelson, 
21  N.  Y.  158.  Contra,  Matter  of  Receiver  of  New  Amst.  Savings  Bank 
V.  Tartter,  54  How.  Pr.  (N.  Y.)  385;   s.  c.  4  Abb.  N.  C.  (N.  Y.)  215. 

In  Florida  depositors  in  savings  banks  have  the  same  rights  as  depositors 
in  other  banks  and  a  set-oflf  will  be  allowed.  But  deposits  of  others, 
purchased  after  the  bank's  insolvency,  are  not  subject  to  the  right  of  set- 
off.    Robinson  v.  Aird,  43  Fla.  30,  29  So.  633  (1901). 

1  §  339  A.     Niles  v.  Olszak,  87  Ohio  St.  229,  100  N.  E.  820  (1912). 

1  §  340.     State  Bank  v.  Armstrong,  4  Dev.  (N.  C.)  519. 


634 


CHAPTER   XXIII 
ADVERSE    CLAIM 

§  342.         Justifiable  payment.  ,.,.•,.     ^v, 

A  payment  otherwise  good  is  not  invalidated  by  the  exist- 

fi  344  ence  of  a  claim  of  which  the  bank  has  no  notice  at  the 

time  of  payment. 
But  after  notice  of  an  adverse  title,  a  bank  pays  at  its  peril ; 

§  342  yet,  if  sued  or  threatened  with  suit  by  the  depositor  or  his 

§  343'  attaching  creditor,  the  bank  cannot  itself  set  up  the  adverse 

(b)  title,  but  mav  resort  to  a  bill  of  interpleader.     If  it  does  not 

secure  itself  in  this  way,  or  by  obtaining  a  bond  of  indemnity, 

it  may  have  to  pay  a  second  time. 

The  true  owner  can  recover  in  a  suit  against  the  bank,  even 

§  343  though  he  did  not  give  notice  of  his  claim  till  after  ser\ace  of 

attachment  on  the  deposit  by  a  creditor  of  the  depositor, 
but  the  court  will  require  him  to  give  the  bank  a  bond  of 
indemnity.  . 

The  substance  of  the  matter  is,  that,  as  the  bank  is  not  at  all 
interested  in  such  disputes,  it  should  not  be  annoyed  and  put 
to  expense  and  danger  by  them.     The  bank,  not  being  m 
any  fault,  should  not  be  compelled  to  bear  the  consequences 
of  \he  faults  of  others.     Whenever  an  adverse  claim  exists, 
the  bank  should  not  be  required  to  pay  until  the  disputants 
have  settled  the  matter  between  themselves,  or  one  of  them 
will  give  the  bank  a  bond ;    and  if  either  claimant  sues  the 
bank,  it  should  ha^■e  the  privilege  of  sending  the  service,  or 
referring  the  officer  maldng  service,  to  the  opposing  party, 
whereupon  he  should  be  considered  the  real  party  to  the  suit 
and  be  bound  thereby,  so  that  payment  in  accordance  wnth 
the  judgment  rendered  would  forever  release  the  bank.     Mere 
notice  to  the  bank  of  adverse  claim  should  only  affect  it 
long  enough  for  the  claimant  to  proceed  against  the  depositor 
directly  ;  and  if  he  does  not  promptly  do  this,  the  bank  should 
be  free  to  act  as  if  it  had  never  received  notice  of  his  claim. 
A  statute  is  in  order  to  amend  the  unjustice  of  the  common  law 
in  this  matter,  which  puts  the  bank  to  the  expense  of  defend- 
ing itself  in  suits  in  which  it  has  no  interest,  or  to  the  expense 
of  a  bill  of  interpleader  (in  those  cases  where  it  will  be  allowed, 
for  it  is  not  a  remedv  that  can  be  used  in  all  cases  of  adverse 
claim,  it  onlv  applies  where  the  claims  are  founded  in  pnpty 
or  common  contract,  and  strangers  cannot  be  compelled  to 

035 


§  342  ADVERSE    CLAIM 

interplead,  especially  where  tort  has  intervened).  2  Story's 
Eq.  Juris.  §§  812,  817-820  ;  Story  on  Agency,  §  217  ;  Viner's 
Abr.  Interpleader. 

§  342.  Payments  in  Case  of  Adverse  Claims.  —  A  bank  is  jus- 
tified in  paying  to  the  depositor  or  his  order,  or  to  the  order  of  one 
designated  by  the  depositor,  until  the  fund  is  claimed  by  some 
other  person. 1  But  if  notified  that  the  deposit  belongs  to  another, 
it  will  pay  the  depositor  at  its  peril.^ 

After  notice  that  a  third  person  claims  under  a  superior  title, 
and  intends  to  enforce  the  claim  adversely  to  the  depositor,  the 
bank  should  hold  the  funds  until  the  title  is  settled,  or  take  a 
bond  of  indemnity,  otherwise  it  may  be  the  loser ;  2»  as  where  a 
deposit  in  the  name  of  A.  was  garnisheed  as  her  husband's,  the 
court  decided  that  it  belonged  to  him,  and  the  bank  paid  it  into 
court ;  but  in  a  subsequent  suit  it  was  shown  to  belong  to  A.,  and 
the  bank  had  to  repay  the  amount. ^ 

(a)  A  bank  cannot  defeat  the  suit  of  its  depositor  by  showing 
adverse  title  in  another.  That  other,  or  his  attaching  creditor, 
may  dispute  the  depositor's  title,  but  not  the  bank ;  *  and  as  we 
have  just  seen,  even  a  payment  under  judgment  will  not  save 

1  §  342.  McEwen  v.  Davis,  39  Ind.  109 ;  Martin  v.  Kansas  National 
Bank,  66  Kan.  65.5,  72  Pac.  218  (1903). 

2  First  National  Bank  v.  Bache,  71  Pa.  St.  213.  So  where  a  bank  paid 
money  standing  to  "Trustees  of  Post  13,  G.A.R."  to  one  of  the  trustees 
after  notice  from  the  Post  not  to  do  so,  it  was  liable.  Arnold  el  al,  Post 
No.  13  V.  Macungie  Savings  Bank,  71  Pa.  St.  287  ;  Jaselli  v.  Riggs  National 
Bank,  36  App.  Cas.  (D.  C.)  159,  1912C  Ann.  Cas.  119,  n.,  31  L.  R.  A.  (n.  s.) 
763,  n. ;  Drumm-Flato  Com.  Co.  v.  Gerlach  Bank,  92  Mo.  App.  326 
(1901) ;  Parks  v.  Knickerbocker  Trust  Co.,  137  App.  Div.  719  (1910),  122 
N.  Y.  S.  521. 

The  bank  may  be  restrained  from  paying  a  depositor  even  after  he  has 
sued  the  bank  and  recovered  judgment.  Spaulding  Mfg.  Co.  v.  Chaudoin, 
87  Ark.  418,  112  S.  W.  1087  (1908). 

When  a  wife  takes  money  of  her  husband  and,  -without  his  knowledge 
deposits  it  in  her  name  he  has  a  right  of  action  against  the  bank  for  its 
recovery.  Phillips  v.  Suffolk  Savings  Bank,  219  Mass.  597,  107  N.  E. 
401  (1914).  . 

2«  If  the  claimant  does  not  assert  his  right  within  a  reasonable  time 
he  will  be  estopped.  Drumm-Flato  Com.  Co.  v.  Gerlach  Bank,  107  Mo. 
App.  426,  81  S.  W.  503  (1904) ;   id.,  92  Mo.  App.  326  (1901). 

3  Crumb  v.  Treiber,  Cuyahoga  Dist.  Ct.  Ohio,  4  Ohio  Dec.  R.  492; 
Townsend  v.  Webster  Five  Cents  Sa\angs  Bank,  143  ^Mass.  147,  9  N.  E.  521 ; 
Bessemer  Savings  Bank  v.  Anderson,  134  Ala.  343,  32  So.  716,  92  Am.  St. 
Rep.  38  (1901). 

*  First  National  Bank  of  Lock  Haven  v.  Mason,  95  Pa.  St.  113.  See 
German  Bank  v.  Himstedt,  42  Ark.  62 ;  Parks  v.  Knickerbocker  Trust 
Co.,  137  App.  Div.  719  (1910),  122  N.  Y.  S.  521 ;   France  Milling  Co.  v, 

636 


PAYMENT   IN    CASE    OF   ADVERSE    CL.\IMS  §  342 

the  bank  from  liability  to  the  depositor.  A  bank  may  be  able  to 
save  itself  from  future  loss  by  persuading  the  party  to  whom  it 
makes  payment  to  give  it  a  bond  of  indemnity. 

Bill  of  Interpleader 

(b)  And,  if  possible,  the  elaims  should  be  adjusted  without 
resorting  to  a  bill  of  interpleader ;  but  if  a  settlement  cannot  be 
reached  that  will  insure  safety  to  the  bank,  and  it  has  reason  to 
believe  that  the  claim  adverse  to  the  depositor  is  well  founded, 
it  should  bring  the  bill.^ 

But  interpleader  will  not  be  decreed  in  some  cases  where  it  is 
most  essential  to  the  interest  of  the  bank  that  it  should  be.  A 
New  Jersey  case  strongly  illustrates  this.  The  Vice-Chancellor 
said :  ^  — 

"This  is  a  bill  of  interpleader.  Its  object  is  to  compel  the 
defendants,  Philip  W.  Crater  and  Maria  L.  Bininger,  to  inter- 
plead in  respect  to  the  hostile  title  they  set  up  to  three  govern- 
ment bonds,  of  the  par  value  of  S2,500,  deposited  with  the  com- 
plainants by  Abraham  M.  Bininger,  to  indemnify  two  gentlemen 
who  became  his  sureties  on  a  recognizance,  given  by  him  on  suing 
out  a  writ  of  error  to  remove  a  judgment  against  him. 

"  Mr.  Crater  and  Mrs.  Bininger  set  up  independent  adverse 

First  National  Bank,  138  App.  Div.  645  (1910),  122  N.  Y.  S.  736 ;  Winkle- 
bleck  ('.  Butler  County  Bank,  151  Mo.  App.  9,  131  S.  W.  905  (1910). 

The  bank  may  show  that  it  paid  out  the  deposit  by  transfer  on  its 
books  to  another  pursuant  to  tlie  agreement  and  direction  of  the  depositor. 
Whitsett  V.  People's  National  Bank,  138  Mo.  xVpp.  81,  119  S.  W.  999 
(1909). 

6  Bell  V.  Hunt,  3  Barb.  Ch.  (N.  Y.)  391 ;  Bedell  v.  Hoffman,  2  Paige 
(N.  Y.)  199;  German  Exchange  Bank  v.  Commissioners,  6  Abb.  N.  C. 
(N.  Y.)  394;  Marvin  v.  Elhvood,  11  Paige  (N.  Y.)  365;  .JaseUi  v.  Riggs 
National  Bank,  36  App.  Cas.  (D.  C.)  159,  1912C  Ann.  Cas.  119,  n.,  31 
L.  K.  A.  (N.  a.)  763,  n. 

Where  a  husband  of  testatrix  and  her  executrix  both  claimed  a  dejinsit 
in  a  savings  bank,  a  bill  of  interpleader  was  properly  aUowed.  PhilHps 
V.  Suffolk  Savings  Bank,  219  Mass.  r>97,  107  N.  E.  401  (1914). 

Under  section  15  of  the  l^anking  laws  of  New  York  (Laws  1892,  chap. 
689)  when  an  administrator  of  a  depositor  claims  funds  in  a  sa\ings  bank 
before  an  action  is  brought  by  the  assignee  of  an  alleged  donee  to  recover 
the  deposit,  the  administrator  may  be  made  party  defendant.  McGuire 
V.  Auburn  Savings  Bank,  78  App.  Div.  22  (1902),  79  N.  Y.  S.  91.  But 
the  statute  has  no  application  when  a  claim  is  set  up  by  those  who  have 
only  a  futiu-e  interest.  Gifford  i'.  Oneida  Savings  Bank,  99  App.  Div.  25 
(1904),  90  N.  Y.  S.  693. 

«  First  National  Bank  of  Morristown  v.  Bininger,  26  N.  J.  Eq.  345 
(1875). 

C37 


§  342  ADVERSE   CLAIM 

titles.  Mr.  Crater's  title  is  founded  in  the  ownership  of  Bininger. 
He  claims  by  virtue  of  a  judgment  against  Bininger  and  seizure 
and  sale  of  the  bonds  under  it.  Mrs.  Bininger,  who  is  the  wife 
of  Abraham,  claims  that  the  bonds  were  purchased  for  her,  with 
her  own  money  ;  that  her  husband  never  had  any  interest  in  them  ; 
that  their  deposit  with  the  complainants  was  wrongful  or  tortious 
as  to  her,  and  that  the  complainants,  in  withholding  them  against 
her  demand,  are  wrongdoers. 

"  It  will  thus  be  seen  that  the  position  of  the  complainants 
towards  the  opposing  claimants  is  radically  different.  To  one 
they  are  under  the  obligations  of  a  bailee.  He  may  recover  the 
bonds  without  showing  title.  When  the  object  of  the  bailment 
was  accomplished,  they  were  bound  to  surrender  them  without 
inquiry  as  to  title.  As  to  the  other,  if  her  claim  is  true,  they  were 
wrongdoers,  and  disputed  her  right  to  the  possession  of  the  bonds, 
at  their  peril. 

"  Under  this  state  of  facts,  have  the  complainants  a  right  to 
require  the  opposing  claimants  to  interplead  ? 

"  This  question  may  be  fully  answered  by  simply  quoting  from 
elementary  authorities. 

"  Judge  Story,  in  his  work  on  Bailments,  §  110,  says :  '  Where 
the  parties  claim  in  absolute  adverse  rights,  not  founded  in  any 
privity  of  title,  or  any  common  contract,  there  the  bailee  must 
defend  himself  as  he  may,  for,  generally  speaking,  he  cannot 
compel  strangers  to  interplead  with  each  other.  Indeed,  our 
law  goes  to  the  extent  of  ordinarily  denying  a  bailee  any  right  to 
set  up  the  interest  or  title  of  a  third  person  against  the  title  of  his 
own  bailor.' 

"  In  his  work  on  Equity  Pleadings,  §  293,  he  states  the  rule 
as  follows  :  '  Where  the  claimants  assert  their  rights  under  adverse 
titles,  and  not  in  privity,  and  where  the  claims  are  of  different 
natures,  the  bill  is  wholly  unmaintainable.' 

"  And  in  his  work  on  Equity  Jurisprudence,  §§819,  820,  he 
gives  the  following  illustration,  and  then  states  what  he  under- 
stands to  be  settled  principle :  '  Where  a  person  is  in  possession 
of  property  as  bailee,  to  which  the  bailor  himself  has  no  property 
title,  but  he  is  a  mere  tortious  possessor,  and  the  rightful  owner 
demands  it  of  the  bailee,  in  such  a  case  the  question  may  arise 
whether  he  can  compel  the  bailor  and  the  rightful  owner  to  inter- 
plead with  each  other.  Upon  principle,  it  would  seem  that  he 
cannot,  for  not  only  is  there  no  privity  between  him  and  the  right- 
638 


PAYMENT    IN    CASE    OF    ADVERSE    CLAIMS  §  342 

fill  owner,  but  he  is  himself  liable  to  be  deemed  a  wrongful  possessor, 
if  he  should,  after  notiee,  withhold  the  property  from  the  rightful 
owner.' 

"  '  The  true  doctrine  would  seem  to  be,  that,  in  cases  of  ad- 
verse independent  titles,  the  party  holding  the  property-  must 
defend  himself  as  well  as  he  can  at  law,  and  he  is  not  entitled  to 
the  assistance  of  a  court  of  equity,  for  that  would  be  to  assume 
the  right  to  try  merely  legal  titles  upon  a  controversy  between 
different  parties,  where  there  is  no  privity  of  contract  between 
them  and  the  third  person  who  calls  for  an  interpleader.' 

"  Lord  Brougham,  in  Pearson  v.  Cardon,  2  Kuss.  &  ■\I>-lne,  000, 
in  commenting  on  the  question  as  to  whether  an  agent  or  bailee  had 
a  right  to  compel  his  principal  to  litigate,  with  a  stranger,  the  title 
to  property  held  by  him  for  his  principal,  denied  its  existence  in 
the  following  emphatic  language :  '  Upon  such  a  state  of  facts, 
can  I  hold  this  to  be  a  common  case  of  a  claim  by  an  agent  against 
his  principal,  and  of  another  party  claiming  by  another  title, 
foreign  to  the  title  of  the  principal?  That  an  agent  should  have 
the  power  of  filing  a  bill  of  interpleader,  when  his  principal  demands 
the  re-delivery  of  his  goods  bailed  with  him,  appeared  to  me  so 
monstrous  a  proposition,  and  to  involve  such  frightful  consequences 
in  mercantile  transactions,  that  I  could  not  suppose  it  was  meant 
to  contend  for  any  such  doctrine.  For,  in  fact,  it  amounts  to  this  : 
that  an  agent  may,  at  any  moment,  treat  his  principal  to  a  chan- 
cery suit ;  and  I  was  therefore  relieved  to  find  that  the  plaintiff's 
counsel  went  entirely  on  the  peculiarity  of  this  case.' 

"  The  contract  of  bailment,  as  given  by  the  president  of  the 
complainants,  was  that  the  complainants  were  to  hold  the  bonds 
as  indemnity  to  the  two  gentlemen  who  had  become  bail  for  Mr. 
Bininger.  Though  there  was  no  express  stipulation  to  that  efTect. 
the  law  made  it  the  duty  of  the  complainants  to  surrender  the 
bonds  to  Mr.  Bininger  when  the  liability  of  his  l)ail  ended.  The 
relation  of  the  complainants  to  iSIr.  Bininger  and  his  bail  grew  out 
of  a  contract,  which  provided  for  the  surrender  of  the  bond  in  spite 
of  any  claim  which  might  be  made  by  a  third  person. 

"The  complainants  seek  to  ])ut  their  case  on  the  ground  that 
they  are  stakeholders  or  trustees.  It  seems  to  me  impossible 
to  say  they  hold  eitlier  of  these  relations  to  Mrs.  Bininger.  At 
the  time  of  the  bailment  she  was  unknown,  she  had  no  connection 
with  it,  and,  if  her  claim  is  true,  the  complainant's  possession  of 
the  bonds,  if  not  tortious  at  its  inception,  became  so  after  demand 

G39 


§  342  ADVERSE   CLAIM 

and  refusal.  A  stakeholder  is  a  third  person,  chosen  by  two  or 
more  persons,  to  keep  in  deposit  property  the  right  or  possession 
of  which  is  in  dispute,  until  some  one  of  them  establishes  his  right 
to  it.  A  trustee  is  a  person  who  holds  the  legal  title  to  certain 
property,  the  beneficial  use  of  which  belongs  to  another.  I  think 
it  would  be  an  unwarrantable  misuse  of  well  defined  terms  to 
hold  the  complainants  were  either  stakeholders  or  trustees  of 
Mrs.  Bininger. 

"  If  this  was  a  case  of  first  impression,  no  difficulty  would  be 
found  in  declaring  it  fell  clearly  within  the  purposes  designed 
to  be  accomplished  in  the  establishment  of  a  court  of  equity. 
But  the  rule,  denying  the  right  of  the  complainants  to  require 
Mrs.  Bininger  to  interplead  with  the  other  defendants,  is  too 
firmly  established  to  be  changed  by  anything  short  of  legislative 
power.     (2  Story's  Eq.  Jur.  §  320.) 

"  I  cannot  break  through  a  rule  so  firmly  established  as  to  be, 
in  the  judgment  of  Judge  Story,  no  longer  open  to  discussion, 
even  if  it  were  clear  that  a  better  could  be  invented.  Stability 
in  legal  rules  is  more  important  than  that  they  should  accomplish 
complete  justice  in  every  case." 

Here  we  have  a  case  in  which  the  bank  could  not  successfully 
defend  itself  at  law  against  its  bailor,  because  it  could  not  set  up 
the  title  of  a  stranger ;  yet  if  the  title  of  the  stranger  was  really 
good,  the  bank  was  guilty  of  tort  in  refusing  to  deliver  to  Mrs. 
Bininger ;  and  still  equity  calmly  says  it  cannot  interfere  to  de- 
cree interpleader  because  the  rule  is  well  settled  that  the  parties 
must  be  in  privity  in  order  to  the  granting  of  such  decree.  A 
stronger  call  for  legislative  correction  could  hardly  be  imagined, 
and  it  might  be  urged  with  force,  that  although  stability  in  the  law 
is  valuable  and  not  lightly  to  be  interfered  with,  and  when  the  law 
is  only  a  formal  one,  this  rule  is  paramount,  yet  that  where  real 
injustice  exists  under  the  name  of  law,  to  give  stability  to  that 
law  is  to  fortify  injustice.  The  question  is.  Would  greater  harm 
result  from  change  than  from  continuance  ?  Change  in  this  par- 
ticular case  would  not  result  in  any  commercial  disturbance,  and 
it  is  hard  to  see  why  a  court  of  equity,  acknowledging,  as  the  New 
Jersey  court  did,  the  justice  of  the  case,  should  be  unwilling  to 
add  one  more  stone  to  the  temple  of  equity.  Its  walls  would  never 
have  towered  above  the  common  law,  if  the  mind  of  every  judge 
had  been  fettered  by  the  opinions  of  his  predecessors. 

The  argument  at  B.  is  baseless,  for  equity  would  not  have 
640 


THE   TRUE    OWNER   OF    A    DEPOSIT    MAY    RECOVER    FROM    BANTK        §  343 

to  try  legal  titles,  but  only  to  send  the  parties  to  law  to  try 
them. 

The  argument  at  C.  is  baseless,  for  it  is  not  the  agent  that 
treats  the  principal  to  a  suit,  but  the  third  party  who  claims 
adversely,  and  if  the  agent  does  not  act  bona  fide  in  the  matter, 
of  course  he  is  answerable,  and  if  the  stranger  does  not  walk  up 
and  take  his  part  when  interpleader  is  decreed,  the  matter  is 
settled  in  favor  of  the  principal. 

It  may  be  that  the  most  just  arrangement  would  be  that  notice 
from  the  adverse  claimant  to  the  bank  should  not  hold  the  property 
any  longer  than  would  be  necessary  for  said  claimant  to  push 
his  rights  directly  against  the  depositor  ;  that  if  he  did  so,  he  should 
have  an  order  (attachment,  garnishee,  or  injunction)  from  the  court 
to  the  bank  to  retain  the  deposit  until  the  question  was  settled, 
unless  bond  of  indemnity  be  given ;  but  that  if  he  did  not  within 
a  reasonable  time  after  notifying  the  bank  proceed  against  the 
depositor  directly,  the  bank  would  be  released  from  any  obligation 
to  him,  and  might  act  as  though  it  had  received  no  notice  of  his 
claim. 

§  3-13.  The  True  Owner  of  a  Deposit  may  recover  from  the 
Bank.  —  The  English  cases  at  law  hold  that  the  true  owner  of  the 
money  cannot  recover  it  in  a  suit  against  the  banker,  even  after 
such  notice.  "  It  is  impossible,"  says  Mr.  Grant,  "  for  the  banker 
to  set  up  a  jus  tertii  against  the  order  of  the  customer,  or  to  refuse 
to  honor  his  draft,  on  any  other  ground  than  some  sufficient  one 
resuhing  from  the  act  of  the  customer  himself."  ^  Though  in 
equity  the  rule  would  appear  to  be  different  even  in  England. ^ 

Even  after  a  Creditor  of  the  Depositor  has  Served  Garnishee  on  the 
Deposit,  Notice  from  the  True  Owner  Holds-  it  for  II im,  if  a  Bond 
is  Given  to  the  Bank 

(a)  In  the  United  States,  the  question  has  been  several  times 
discussed  in  the  courts  of  Pennsylvania,  and  the  position  there 
laid  down  gives  the  true  owner  a  right  to  the  fund,  and  power  to 
maintain  that  right  at  law  as  well  as  in  equity.^     The  best  dis- 

»§  343.  Grant  on  Banking,  ed.  1873,  p.  148 ;  see  Sims  v.  Bond,  5  B.  & 
Ad.  389 ;   Tassell  v.  Cooper,  9  C.  B.  509. 

2  See  PenneU  v.  DeffeU,  4  De  G.,  Mac.  &  G.  372 ;  Bridgman  v.  GiU,  24 
Beav.  302.  .       , 

3Frazier  v.  Erie  Bank,  8  W.  «fc  S.  (Pa.)  18;  Stair  v.  York  \ational 
Bank,  5  P.  F.  Smith  (Pa.)  3G4 ;  Farmers  &  Mechanics'  National  Bank  v. 
VOL.  1-41  641 


§  343  ADVERSE   CLAIM 

cussion  of  this  matter  will  be  found  in  Farmers  and  Mechanics* 
National  Bank  v.  King,  cited  in  the  last  note.  In  that  case,  the 
court  even  went  so  far  as  to  say  that,  when  the  true  owner  notified 
the  bank  of  his  ownership  only  after  the  bank  had  been  served 
with  garnishee  process  in  a  suit  against  the  depositors,  still  the  true 
owner  had  the  superior  title,  and  might  recover  the  money  in  pro- 
ceedings in  equity  against  the  bank;  for  the  attaching  creditor 
of  the  depositor  could  acquire  no  better  title  than  that  of  the  de- 
positor himself,  and  the  depositor's  title  was  liable  at  any  time 
to  be  divested  by  notice  from  the  true  owner  served  on  the  bank. 
The  same  case  gives  the  bank  some  comfort  by  the  statement 
that,  if  either  claimant  sues  the  bank,  the  court  will  have,  and  will 
exert,  as  a  general  rule,  the  power  to  compel  the  plaintiff  to  ex- 
ecute to  the  bank  a  sufficient  bond  of  indemnity  as  a  preliminary 
to  a  judgment  in  his  favor. 

The  Bank  must  not  Take  it  upon  Itself  to  Pay  the  Real  Owner, 
Known  only  after  Service 

(h)  An  earlier  case  in  the  same  State,  commented  upon  and 
explained  in  the  last-named  case,  was  as  follows.  Process  was 
served  upon  the  bank  as  garnishee  of  the  nominal  depositor. 
Judgment  was  rendered  in  favor  of  the  plaintiff.  The  bank, 
after  service  of  the  process,  paid  away  all  the  money  standing  to 
the  defendant's  credit.  Upon  issue  of  scire  facias,  it  sought  to 
avoid  its  responsibility,  on  the  ground  that  the  money  was  not 
really  that  of  this  depositor,  but  that  of  an  undisclosed  principal, 
who  found  no  fault  with  the  subsequent  payments.  It  seemed 
that  this  was  really  the  case.  But  the  bank's  defence  was  not  al- 
lowed to  prevail,  upon  the  ground  that,  at  the  time  of  service  of 
process,  and  the  accruing  of  the  bank's  duty  to  hold  the  money, 
the  bank  did  not  know  that  the  fund  did  not  belong  absolutely 
to  the  depositor.  The  relations  of  all  the  parties  inter  se  at  the 
moment  of  service  became  fastened  definitely,  and  remained 
throughout  all  the  rest  of  the  proceedings  precisely  the  same. 
The  bank  then  knew  only  the  depositor ;  its  duty  then  was  only 
to  pay  to  him  or  his  order ;  the  garnishment  which  found  him  the 

King,  57  Pa.  St.  202;  Harrisburg  Bank  v.  Tyler,  3  W.  &  S.  (Pa.)  373; 
Bank  of  United  States  v.  Maealester,  9  Pa.  St.  475;  Bessemer  Savings 
Bank  v.  Anderson,  134  Ala.  343,  32  So.  716,  92  Am.  St.  Rep.  38  (1901).  See 
an  obiter  remark  in  Miller  v.  Receiver  of  the  Franklin  Bank,  1  Paige  (N.  Y.) 
444. 

642 


A   NEW   YORK    CASE  §  344 

apparent  owner  kept  him  such,  without  regard  to  subsequent 
knowledge  obtained  by  the  bank.  Wherefore,  the  pkaintift'  was 
entitled  to  the  money,  and  must,  under  the  circumstances,  take  it 
from  the  funds  of  the  bank.^ 

(c)  In  Kansas  the  court  held  that,  where  a  person  holding 
money  in  a  fiduciary  capacity  deposited  it  in  his  own  personal 
deposit  account,  the  equitable  owner  could  maintain  his  claim  to  it 
against  a  creditor  of  the  depositor  who  had  garnished  the  de- 
positor's general  account.^ 

The  owner  may  litigate  his  claim  even  after  the  agent  has  se- 
cured judgment  against  the  bank  for  the  payment  of  the  money.® 

The  tendency  of  courts  is  in  favor  of  enforcing  the  contract 
made  by  the  bank  with  the  depositor,  and  where  an  agent  advances 
money  and  deposits  it  in  his  own  name  the  principal  cannot 
recover  the  fund  from  the  bank.^ 

§  344.  A  New  York  Case.  Checks  Drawn.  Injunction.  Pre- 
sentment of  First  Check.  Lunacy.  Payment  to  Committee. 
Presentment  of  Second  Check.  .1  payment  ofhcrici.sc  good  is  not 
invalidated  by  an  adverse  claim  unknown  to  the  bank  at  the  time  of 
payment;  and  a  bank  is  not  obliged  to  look  into  the  erpnties  of  a 
checkholder.  The  suit  should  be  between  the  substantial  parties.  — 
Certain  money  of  B.  wa^  at  his  request  deposited  with  a  bank  by  V., 
icho  however  did  so  in  his  own  name  to  the  credit  of  a  deposit 
account  he  then  had  with  the  bank,  giving  to  B.  two  checks  for 
the  amount,  which  B.,  February  22,  1869,  indorsed  and  delivered 
to  H.  as  part  consideration  for  H.'s  promise  to  marry  him.  In 
a  proceeding  de  lunatico  inquirendo  instituted  next  day,  it  was 
adjudged  that  B.  was  then,  and  for  six  months  had  been,  of  un- 
sound mind.  Pending  the  proceeding,  the  bank  was  enjoined 
from  paying  over  the  money  to  any  one,  and  on  IMarch  31  was 
ordered  to  pay  the  same  to  B.'s  son,  the  committee  appointed, 
and  on  April  15  complied.  On  March  6,  the  larger  check  was 
presented  for  pa^-ment  and  refused.  On  ]\Iarch  S,  B.  married  H. 
On  August  28,  1871,  the  smaller  check  was  presented  and  refused.^ 

*  Jackson  v.  Bank  of  the  United  States,  10  Pa.  St.  61 ;  explained  and 
commented  on  iu  Farmers  &  Mechanics'  National  Bank  r.  King,  57  id.,  202. 

6  Morrill  ;-.  Raymond,  28  Kan.  41');  citing  Central  National  Bank  of 
Baltimore  r.  Connecticut  Mutual  Life  Ins.  Co.,  104  U.  S.  'A.  2G  L.  ed.  G93. 

6  Spaulding  Mfg.  Co.  ;-.  Chaudoin,  87  Ark.  418,  112  S.  W.  1087  (1908). 

7  Nolting  V.  National  Bani<.  99  Va.  54.  37  S.  E.  804  (1901). 

1  §  344.  Viets  v.  Union  National  Bank  of  Troy,  101  N.  Y.  563,  5  N.  E. 
457;    reversing  31  Hun  (N.  Y.)  484,  and  citing  Van  Allen  t-.  American 

643 


§  344  ADVERSE    CLAIM 

The  bank  could  not  pay  the  money  during  the  injunction,  and 
when  the  committee  presented  authority  from  the  court  to  receive 
the  money,  the  bank  acted  properly  in  paying  to  one  who  had 
apparent  authority  to  receive. 

"  It  must  be  conceded  that,  if  the  adjudication  of  lunacy  was 
in  force  at  the  time  the  payment  was  made,  it  was  a  valid  and 
legal  payment,  and  an  effectual  bar  to  any  claim  by  the  plaintiff, 
or  any  other  person  to  recover  the  money  of  the  defendant." 

As  the  money  was  the  property  of  B.  when  deposited,  it  re- 
mained the  property  of  B.  and  the  payment  was  actually  correct 
and  legal.  Even  if  H.  had  an  equitable  claim,  it  was  unknown 
to  the  bank,  and  any  equitable  right  should  be  enforced  against 
the  committee,  not  against  the  bank,  which  could  not  be  expected 
to  look  into  the  equities  between  third  parties  before  paying  upon 
order  of  the  court  .^ 

National  Bank,  52  N.  Y.  1,  and  Bank  of  British  North  America  v.  Mer- 
chants' National  Bank,  91  N.  Y.  106.  The  judges  disagreed  as  to  the 
grounds  of  the  decision. 


644 


CHAPTER   XXIV 

ATTACHMENT   AND    INJUNCTION 

§  346.         A  deposit  is  subject  to  attachment  by  the  creditors  of  the  owner, 
but  a  deposit  is  not  attachable  as  the  property  of  the  nominal 
depositor,  if  it  is  shown  that  he  is  not  the  real  owner. 
After  certification  of  a  check,  the  amount  covered  by  it  is  beyond 

the  reach  of  creditors  of  the  drawer. 
And  where  a  check  is  an  assignment,  a  bank  may,  after  service, 

pay  checks  actually  drawn  before  service. 
Proceeds  of  collection  in  the  hands  of  a  sub-agent  may  be  at- 
tached by  a  creditor  of  the  real  owner. 
§  346  A.     The  attaching  creditor  is  in  no  better  position  than  his  debtor  as 

to  the  deposit. 
§  347.         Injunction  upon  bank. 

§  346.  Attachment.  —  A  creditor  of  him  who  has  title  to  a 
deposit  may  attach  the  same,  and  an  attachment  holds  all  money 
of  the  debtor  in  the  hands  of  the  trustee  or  bank  at  the  time  of 
service,  and  also  what  may  come  to  his  hands  afterward,  at  any 
time  before  judgment ;  and  it  makes  no  difference  that  the  money 
is  deposited  for  the  use  of  C.  unless  there  is  some  privity  of  con- 
tract between  C.  and  the  depositary,  for  a  deposit  does  not  become 
C.'s  property  until  his  assent  or  privity  arises.^ 

Borrowed  money  can  of  course  be  attached  as  well  as  any  other, 
for  it  is  the  property  of  the  borrower .^ 

A  depositor.  A.,  sometimes  places  money  of  B.  in  his  (A.'s) 
name,  with  B.'s  connivance,  to  prevent  the  creditors  of  B.  from 
reaching  it ;  but  a  creditor  of  B.  will  not  be  prevented  from  taking 
the  fund,  if  he  can  show  that  it  is  really  B.'s  property,  though  it 

1  §  346.  Nicholson  v.  Crook,  56  Md.  55.  See  First  National  Bank  v. 
Jaggers,  31  Md.  38 ;  Farmers  &  Merchants'  Bank  r.  Franklin  Bank,  31 
Md.  404 ;  People  v.  Johnson,  14  111.  342 ;  Kelly  v.  Roberts.  40  N.  Y.  432 ; 
Brown  v.  Foster,  4  Cush.  (Alass.)  214;   Baker  v.  Moody,  1  Ala.  315. 

2  Fuller  V.  Randall,  1  Gray  (Mass.)  608. 

645 


§  346  ATTACHMENT   AND   INJUNCTION 

has  been  held  in  New  York  that  a  sheriff  could  not  levy  on  such 
a  deposit  as  though  it  were  B.'s.^ 

From  the  time  of  service  an  attachment  or  garnishment  is  a 
lien  that  no  act  of  the  bank  or  depositor  can  shake  off  without  con- 
sent of  the  creditor.* 

Of  course  the  attachment  can  only  affect  funds  belonging  to 
the  debtor,  and  if  a  check  has  been  certified  before  the  service, 
the  amount  covered  by  the  check  is  not  affected  by  the  garnish- 
ment ;  but  an  acceptance  away  from  the  bank  by  the  cashier 
is  not  good,  nor  a  promise  by  a  bank  clerk  that  a  check  shall  be 
paid,  and  such  acts  do  not  remove  any  portion  of  a  deposit  from 
the  attacks  of  creditors.^ 

Payment  of  Checks  after  Service  of  Attachment 

Where  a  check  is  an  assignment  by  the  law  of  a  State,  an  at- 
tachment does  not  take  precedence  of  checks  drawn  before  service, 
and  the  bank  may  pay  such  checks  though  presented  after  service,® 
but  it  should  be  careful  to  assure  itself  that  the  check  is  not  of  a 
subsequent  drawing  and  merely  antedated. 

In  those  States,  as  Pennsylvania,  where  a  check  is  not  an  as- 
signment, the  bank  cannot  pay  any  checks  after  service.'^ 

Creditor  of  Depositor  may  Attach  Proceeds  of  Collection  in  Hands 

of  Sub-agent 

S.  in  England  drew  on  N.  in  New  York,  and  S.'s  banker,  M., 
sent  it  to  the  F.  Bank  of  New  York  to  collect.  N.  began  a  suit 
against  S.,  and  when  the  draft  became  due  paid  it,  and  at  once 
attached  the  proceeds  in  the  hands  of  F.  F.  claimed  that  the 
money  was  due  from  it  to  M.,  its  principal,  and  could  not  be  at- 
tached in  its  possession  as  the  money  of  S.  The  court  held,  how- 
ever, that  the  attachment  was  good.^ 

3  Greenleaf  v.  Mumford,  50  Barb.  (N.  Y.)  543.  But  see  Mechanics 
&  Traders'  Bank  v.  Dakin,  50  Barb.  (N.  Y.)  593  (1867),  and  cases  cited; 
La^Tence  v.  Bank  of  Republic,  35  N.  Y.  320  (1867) ;  Mechanics  &  Traders' 
Bank  v.  Dakin,  28  How.  Pr.  (N.  Y.)  502  (1864). 

*  National  Commercial  Bank  v.  Miller,  77  Ala.  168. 

5  BuUard  v.  Randall,  1  Gray  (Mass.)  605;  Duncan  v.  Berlin,  60  N.  Y. 
151. 

6  National  Bank  v.  Ind.  Bank  Co.,  114  111.  483,  2  N.  E.  401 ;  Reeve  v. 
Smith,  113  111.  47.  See  BosweU  v.  Citizens'  Sav.  Bank,  123  Ky.  485,  96 
S.  W.  797  (1906). 

7  Harry  v.  Wood,  2  Miles  (Pa.)  .327. 

8  Naser  v.  First  National  Bank,  36  Hun  (N.  Y.)  343. 

646 


INJUNCTION    UPON    BANK  §  347 

§  346  A.  An  attachment  or  judgment  lien  does  not  take  pre- 
cedence of  a  prior  unrecorded  deed  or  mortgage,  whether  the 
creditor  had  or  had  not  notice  of  such  unrecorded  conveyance 
at  the  time  of  levying  his  attachment,  or  docketing  his  judgment.' 
A  creditor  of  a  depositor,  who  attaches  money  to  the  credit  of 
his  debtor  in  bank,  is  in  no  better  condition  than  the  depositor. 
If  an  agent  mingle  his  principal's  money  with  his  own,  so  that  it 
cannot  be  followed,  the  principal  cannot  recover  it  specifically ; 
but  the  agent  does  not  thereby  convert  himself  into  a  mere  debtor  ; 
the  principal  may  claim  from  the  admixture  the  sum  which  be- 
longed to  him.  A  collector  of  rents  deposited  money  of  his  prin- 
cipal in  a  bank  in  his  own  name ;  it  was  attached  by  a  creditor 
of  the  depositor,  and  immediately  afterwards  notice  of  ownership, 
etc.,  was  given  by  the  principal.  Held,  that  the  attaching  creditor 
stood  in  the  position  of  the  depositor,  and  could  recover  only  what 
the  depositor  could  .^ 

A  deposit  by  a  corporation  in  a  bank  is  a  debt  by  the  bank  to 
the  corporation,  and  is  liable  to  attachment  by  a  judgment  creditor 
of  the  corporation.  A  corporation  making  a  deposit  is  on  the  same 
footing  with  the  bank  as  is  an  individual.  Where  it  is  satisfac- 
torily shown  that  money  deposited  in  the  name  of  one  person 
is  the  property  of  another,  it  cannot  be  attached  as  the  property 
of  the  depositor,^ 

A  creditor  who  is  a  party  to  a  trust  for  the  benefit  of  creditors, 
the  trustees  under  which  were  not  to  make  a  payment  until  the 
property  was  sold  and  the  trust  executed,  has  no  legal  right  to  the 
funds  in  the  hands  of  the  trustee,  before  the  disposition  of  the  whole 
trust  property.  A  merely  equitable  right  is  not  attachable  by 
trustee  process.^ 

§  347.  Injunction  upon  Bank.  —  If  enjoined  from  paying,  of 
course  the  bank  must  wait  till  the  question  of  title  is  settled, 
before  paying.^ 

^  §  346  A.  First  National  Bank  v.  Hayzlett,  40  Iowa  659 ;  Lamberton 
V.  Merchants'  National  Bank  of  Winona,  24  Minn.  281. 

2  Farmers  &  Mechanics'  National  Bank  r.  King,  57  Pa.  St.  202. 

3  Farmers  &  Mechanics'  National  Bank  v.  Ryan,  64  Pa.  St.  236. 
*  Massachusetts  National  Bank  v.  Bullock,  120  Mass.  86. 

1  §  347.     Springfield  Marine  &  Fire  Ins.  Co.  v.  Peck,  102  111.  265. 


647 


CHAPTER   XXV 

CLEARING-HOUSE 

§  349.     Daily  Routine. 

Effect  of  Clearing-house  Rules. 
§  350.     (1)  Non-members  not  bound,  unless  by  agreement  with  special 
§  351.  reference  to  the  rules  (as  where  a  non-member  bank  employs 

§  351  d.  a  member  bank  to  make  exchanges  through  the  clearing- 
house for  it),  or  by  a  course  of  dealing.     Nor  can  a  non- 
member  or  any  outside  party  take  advantage  of  the  rules, 
§  351.     and  the  liabilities  or  forfeitures  for  which  they  pro\ide. 

(2)  Members  are  bound  by  the  rules  as  by  contracts.     Unless  they 

§  352.    expressly  declare  that  common  law  rights  for  the  correc- 

§  353.    tion  of  mistakes,  etc.,  are  forfeited  by  breaking  the  rules  of 

the  clearing-house,  such  rights  wiU  still  exist,  but  the  bank  in 

fault  will  have  to  answer  to  any  member  that  is  damaged 

by  reason  of  the  breach  of  clearing  usages  or  regulations. 

For  example,  a  dishonored  check  or  note  may  be  returned  after 

the  hour  set  in  the  clearing-house  rules  (unless  the  rules 

expressly  declare  that  such  right  is  forfeited),  and  if  the 

bank  that  sent  the  paper  through  the  clearing-house  has 

not  altered  its  position  to  its  injury,  in  consequence  of  there 

having  been  no  return  within  the  usual  hour,  no  damage 

is  done,  and  the  rights  of  the  parties  are  the  same  as  if  there 

were  no  such  Umitation  of  time.     But  if  the  hour  set  for 

the  return  of  paper  arrives  without  such  return,  and  the 

sending  bank  credits  or  pays  the  depositor  of  the  paper,  or 

it  has  in  any  way  altered  its  position,  or  may  be  at  any  loss 

which  might  possibly  have  been  avoided  by  a  return  within 

the  hour,  the  defaulting  bank  must  bear  the  loss. 

§  353.     Notes. 

Payment  of,  through  the  clearing-house. 

In  the  absence  of  evidence  of  uniform  usage  to  regard  the  pres- 
entation of  notes  through  the  clearing-house  as  a  demand 
for  immediate  payment,  just  like  checks,  such  presentment 
is  equivalent  to  leaving  the  note  for  collection  at  the  bank 
where  payable.  The  maker  has  all  the  business  hours  in 
which  to  pay,  and  the  bank  is  in  no  fault  if  it  returns  the 
note  as  soon  as  it  is  sure  that  it  will  not  be  paid. 
§  354.  If  there  are  insufficient  funds  to  pay  all  the  demands  at  one 

clearing  against  a  given  deposit,  the  bank  cannot  pay  any 
of  them.     Qurere,  whether  it  would  not  be  better  to  es- 

648 


PAYMENTS    THROUGH    THE    CLEARING-HOUSE  §  349 

tablish  a  power  of  paying  those  of  the  earliest  date  in  their 
order,  as  far  as  possible.     When  the  test  of  prior  present- 
ment fails,  some  other  should  be  provided. 
§  351.     A  Construction  of  Rules. 

§  349.  Payments  through  the  Clearing-house.  —  In  all  large 
cities  where  the  banking  business  is  sufficiently  considerable  to 
demand  such  a  convenience,  "  clearing-houses  "  are  established. 
The  main  purpose  of  these  is  to  render  the  daily  settlements  of 
the  banks  with  each  other  simple  and  expeditious.  The  substan- 
tial characteristics  of  the  plan  are  these.  At  a  certain  hour  every 
morning,  usually  at  ten  o'clock,  the  deputy  of  each  bank  attends 
at  the  room  of  the  clearing-house,  bringing  with  him  all  the  checks 
upon  other  banks  which  have  been  received  by  his  own  bank  since 
the  same  hour  of  the  preceding  day.  Each  bank  has  its  drawer 
or  box  in  the  room,  and  the  messengers  of  all  the  other  banks 
distribute  all  the  checks  which  they  have  in  their  possession, 
placing  each  of  them  in  the  drawer  or  box  of  the  particular  bank 
upon  which  it  is  drawn.  Each  bank  is  then  credited  on  the  books 
of  the  clearing-house  with  the  amount  of  checks  upon  other  banks 
which  it  has  brought  in  for  collection,  and  is  debited  with  the 
amount  of  the  checks  drawn  upon  it  which  all  the  other  banks 
have  brought.  If  the  former  amount  exceeds  the  latter,  the  bank 
is  then  declared  to  have  "  gained  "  the  amount  of  the  excess ; 
but  if  the  latter  amount  exceeds  the  former,  the  bank  is  declared 
to  have  "  lost  "  the  amount  of  the  difference.  It  is  obvious  that 
the  sum  total  of  the  losses  of  the  losing  banks  must  be  precisely 
equal  to  the  sum  total  of  the  gains  of  the  gaining  banks.  At  a 
later  hour  in  the  same  day  the  losing  banks  are  obliged  to  bring 
into  the  clearing-house  the  sums  which  they  have  respectively 
lost ;  and  shortly  afterward  the  gaining  banks  come  and  receive 
from  the  officers  of  the  clearing-house,  out  of  the  funds  thus 
furnished  by  the  losers,  the  amounts  of  their  respective  gains. 
In  this  manner  the  business  of  settling  the  daily  balances  and  ex- 
changes between  the  several  banks  is  accomplished  with  extraor- 
dinary rapidity,  accuracy,  and  cheapness.  The  computation  of 
how  much  each  bank  has  brought  in  against  others,  and  of  how 
much  the  others  have  brought  in  against  it,  is  performed  by  skilful 
clerks  in  a  very  few  minutes.  So  soon  as  it  is  finished,  an  officer 
of  each  bank  takes  from  its  drawer  or  box  all  the  checks  against 
it  which  have  been  placed  therein  by  the  other  banks,  and  carries 
them  back  to  his  own  bank  to  be  examined,  for  the  purpose  of 

649 


§  349  CLEARING-HOUSE 

seeing  whether  or  not  any  of  them  must  be  dishonored  by 
reason  of  want  of  funds  of  the  drawer.  The  casting  of  the  balances 
at  the  clearing-house  is  not  of  course,  as  it  would  be  impossible 
that  it  should  be,  binding  upon  any  bank  as  to  the  genuineness 
or  the  honoring  of  the  checks  which  are  placed  in  its  drawer,  and 
which  purport  to  be  honestly  drawn  upon  it  by  depositors  having 
funds.  A  time  is  therefore  set  within  which  each  bank  is  expected 
to  examine  all  such  checks,  and  to  return  such  as  it  refuses  to  pay. 
The  computation  already  made  at  the  clearing-house  is  not  af- 
fected by  the  repudiation  in  this  manner  of  checks  by  any  bank. 
But  each  check  before  being  placed  in  the  box  of  the  drawee  bank 
is  marked,  for  the  purpose  of  identification,  with  the  name  of  the 
bank  presenting  it  through  clearing ;  therefore  the  bank  on  which 
it  is  drawn  and  which  refuses  to  pay  it  is  able  at  once  to  send  it 
back  to  the  bank  which  brought  it  in,  and  to  demand  a  repayment 
of  its  amount  to  be  made.  If  the  repayment  is  refused  for  any 
reason,  the  question  lies  wholly  between  the  two  banks,  and  the 
one  on  which  the  check  was  drawn  has  no  means  of  satisfaction 
afforded  by  the  clearing-house,  but  must  bring  its  suit  directly 
against  the  other.^ 

If  both  the  bank  collecting  a  check  through  the  clearing-house 
and  the  bank  upon  which  it  was  drawn  understood  that  the  re- 
ceiving of  the  check  through  the  clearing-house  was  not  intended 
to  constitute  payment,  it  cannot  be  claimed  by  a  payee  and  in- 
dorser  of  the  check  that  there  was  payment  .2  Where  the  rules 
of  a  clearing-house  provide  that  checks  and  drafts  payable  through 
any  bank,  a  member  of  that  institution,  must  be  paid  in  accordance 
with  its  rules,  and  that  any  error  or  mistake  must  be  corrected 
by  the  banks  which  were  parties  to  the  transaction,  a  note  on  one 
bank  held  by  another,  both  of  which  dealt  through  the  clearing- 
house through  the  agency  of  members  thereof  which  was  certified 
by  mistake,  its  payment  through  the  clearing-house  was  not  a 
voluntary  payment,  so  as  to  preclude  a  recovery  of  the  money 
paid  from  the  holder  of  the  note.^ 

1  §  349.  Merchants'  National  Bank  v.  National  Bank  of  the  Common- 
wealth, 139  Mass.  513,  2  N.  E.  89. 

2  Columbia-Knickerbocker  Trust  Co.  v.  Miller,  156  App.  Div.  810 
(1913),  142  N.  Y.  S.  440,  affirmed  in  215  N.  Y.  191,  109  N.  E.  179. 

3  Mt.  Morris  Bank  v.  Twenty-third  Ward  Bank,  172  N.  Y.  244,  64 
N.  E.  810  (1902),  affirming  60  App.  Div.  205,  70  N.  Y.  S.  78. 

Payment  through  the  clearing-house  amounts  merely  to  a  system  of 
set-off  and  cancellations  whereby  accounts  are  settled  between  members 

650 


EFFECT   ON    NON-MEMBERS  §  351 

§  350.  Effect  of  Clearing-house  Rules.  —  A  clearing-house  may 
be  legally  incorporated ;  but  more  commonly  it  is  a  mere  private 
association  organized  among  the  banks  to  suit  their  own  require- 
ments and  convenience.  Of  course  the  authority  of  such  an  as- 
sociation must  be  very  limited.^  In  the  absence  of  special  legis- 
lation it  is  impotent  by  its  own  arbitrary  and  original  power  to 
alter  any -obligation  of  the  common  law.  Neither  has  it  any  au- 
thority to  bind  banks  which  are  not  parties  to  the  association  by 
any  by-laws,  rules,  or  usages  which  it  may  see  fit  to  establish. 
Some  of  the  regulations  of  the  clearing-house  are  embodied  in 
by-laws,  others  are  simple  rules  or  usages  which  are  adopted  and 
tacitly  acquiesced  in  by  the  members.  There  is  no  legal  dis- 
tinction between  these  two  classes.  When  once  the  rule  or  usage 
has  been  established  by  satisfactory  proof,  it  is  as  binding  as  the 
formal  by-law.^  The  only  practical  difference  is  in  the  greater 
difficulty  which  must  be  experienced  in  proving  with  accuracy 
the  existence  and  extent  of  the  unexpressed  custom. 

§351.  Effect  on  Non-members. — The  by-laws,  rules,  and 
usages  are  binding  only  upon  members  of  the  association."     No 

without  the  actual  transfer  of  unnecessary  funds.  Crocker-Wool  worth 
National  Bank  v.  Nevada  Bank,  139  Cal.  564,  73  Pac.  456,  96  Am.  St. 
Rep.  109,  03  L.  R.  A.  245  (1903). 

1  §  350.  Rules  as  to  the  effect  of  indorsement  of  negotiable  paper  are 
binding  on  its  members.  Croeker-Woolworth  National  Bank  v.  Nevada 
Bank,  139  Cal.  564,  73  Pac.  456,  96  Am.  St.  Rep.  169,  63  L.  R.  A.  245 
(1903).  In  this  case  the  constitution  and  rules  of  the  clearing-house 
provided  that  negotiable  paper  payable  to  the  order  of  a  bank,  and  de- 
posited for  clearance,  should  be  officially  indorsed  in  writing  by  the  original 
payee,  but  that  negotiable  paper  deposited  for  clearance  by  a  member 
should  bear  the  stamp  of  the  deposit  bank  which  should  be  "For  clearing 
house  purposes  only"  and  should  guarantee  the  validity  and  regularity 
of  indorsements  and  that  the  bank  should  file  with  every  member  a 
certified  impression  of  its  clearing-house  stamp,  and  it  was  held  that  where 
a  "raised"  die;  k  payable  to  an  individual  and  deposited  bj'  a  bank  with 
the  clearing-house  was  stamped  "Pay  tlirough  clearing-house"  there  was 
no  representation  to  the  drawee  that  depositing  bank  claimed  to  be  the 
owner;  and  in  an  action  by  the  drawee  to  recover  from  the  other  bank 
it  could  show  that  it  had  acted  merely  as  a  collecting  agent  for  the  payee. 

2  See  Croeker-Woolworth  National  Bank  v.  Nevada  Bank,  139  Cal. 
564,  73  Pac.  456,  96  Am.  St.  Rep.  169,  63  L.  R.  A.  245  (1903). 

»  §  351.  National  Exchange  Bank  i>.  Ginn  &  Co.,  114  Md.  181,  78  Atl. 
1026,  33  L.  R.  A.  (n.s.)  963,  n.  (1910).  See  Croeker-Woolworth  National 
Bank  v.  Nevada  Bank,  139  Cal.  564,  73  Pac.  456,  96  Am.  St.  Rep.  109, 
63  L.  R.  A.  245  (1903). 

The  rules  are  binding  on  non-members  who  clear  through  banks  that 
are  members.  Mt.  Morris  Bank  v.  Twenty-third  Ward  Bank,  172  N.  Y. 
244,  64  N.  E.  810  (1902). 

651 


I  351  CLEARING-HOUSE 

outside  bank  is  under  any  degree  of  obligation  to  observe  them. 
But,  on  the  other  hand,  no  outside  bank  can  have  any  remedy 
against  any  member  of  the  association  for  a  breach  of  them. 
They  are  in  the  nature  of  a  contract  to  which  the  outsider  is  no 
party.  The  duty  of  adhering  to  them  runs  from  each  of  the 
members  to  each  and  all  the  rest,  but  to  no  other  person  or  cor- 
poration ;  at  least  unless  any  special  and  peculiar  course  of  dealing 
between  any  member  and  any  outside  individual  has  operated 
to  place  that  member  under  an  express  and  exceptional  obligation 
to  the  outsider  to  adhere  in  all  matters  in  which  he  is  interested 
to  the  regulations  of  the  clearing-house.  Generally,  "those 
who  are  not  bound  by  such  usages,  and  have  not  contracted  with 
reference  to  them,  have  no  right  to  avail  themselves  of  them  to 
create  an  obligation  against  those  who  are  parties  to  their  adop- 
tion and  bound  by  them  inter  sese  only."  But  if  any  bank  or  person 
not  a  member  of  the  association  can  show  that,  by  virtue  either 
of  an  express  or  an  implied  understanding,  he  did  contract 
with  a  member  "  in  reference  to  "  such  usages,  he  may  hold  the 
bank  to  the  fulfilment  of  this  special  contract. 

In  general,  if  any  person  or  bank  employs  a  member  of  the 
association  to  transact  any  business,  such  employer  is  neither 
bound  by  the  rules,  nor  entitled  to  take  advantage  of  and  en- 
force them  as  against  other  members,  by  reason  of  the  fact  that 
the  agent  is  a  member.  The  fact  of  the  agency  does  not  "  bring 
the  case  within  the  operation  of  the  rule,  that  the  principal  is 
entitled  to  the  benefit  of  the  contract  of  the  agent,  while  trans- 
acting the  business  of  the  principal.  This  is  undoubtedly  true 
as  to  all  the  legal  rights  acquired  by  the  agent  for  the  benefit  of 
the  principal ;  but  "  the  clearing-house  rules  are  "  a  mere  labor- 
saving  usage,  designed  for  the  exclusive  benefit  of  the  agent,  the 
adoption   of   which   could   not   affect   the   principal  without  his 

assent." 

(a)  The  foregoing  principles  were  laid  down  in  a  very  satis- 
factory opinion  delivered  by  the  Chief  Justice  of  the  Supreme 
Court  of  New  Jersey ;  ^  and  the  facts  of  the  case  in  support  and 
explanation  of  which  they  were  enunciated  are  well  worth  a  brief 
recital.  The  plaintiff  deposited  in  the  Bank  of  Commerce  in  New 
York  City  a  check  drawn  on  the  defendant  bank,  which  was  sit- 
uated in  New  Jersey.  The  defendant  of  course  was  not  itself 
a  member  of  the  New  York  clearing-house  ;  but  it  had  as  its  agent 

1  Overman  v.  Hoboken  City  Bank,  1  Vroom  (N.  J.)  61 ;  2  id.,  563. 
652 


EFFECT    ON    NON-MEMBERS  §  351 

in  New  York  City  the  Ocean  Bank,  and  it  was  wont  to  receive 
and  pay  checks  drawn  upon  it  through  that  bank.  That  bank 
was  a  member  of  the  clearing-house,  and  used  its  facihties  in  trans- 
acting the  business  of  the  defendant  bank.  The  check  in  question 
came  from  the  Bank  of  Commerce  through  the  clearing-house 
to  the  Ocean  Bank.  The  rules  of  the  clearing-house  required 
that  any  check  which  was  not  to  be  honored  must  be  returned 
before  ten  o'clock  a.m.  of  the  day  following  that  on  which  it  was 
received  through  clearing ;  otherwise  the  bank  on  which  it  was 
drawn  would  be  held  to  pay  it.  If,  therefore,  this  check  had  been 
drawn  directly  on  the  Ocean  Bank,  that  bank  must  either  have 
returned  it  before  ten  o'clock  of  the  next  day,  or  it  must,  according 
to  the  rules,  have  paid  it.  It  was  returned  a  whole  day  later 
than  this  limit,  with  the  statement  that  it  could  not  be  paid  since 
the  defendant  had  no  funds  of  the  drawer.  The  jjlaintifi",  who  had 
lost  the  amount  of  the  check  by  the  intermediate  failure  of  the 
drawer,  sought  to  hold  the  defendant,  on  the  ground  that,  since 
its  agent  was  a  member  of  the  clearing-house  and  was  uniformly 
wont  to  adhere  to  its  rules  and  use  its  facilities  in  transacting  the 
defendant's  business,  therefore  the  defendant  was  itself  answerable 
for  the  agent's  breach  of  such  rules,  and  was  itself  liable  to  suffer 
for  such  breach  according  to  the  terms  prescribed  by  those  rules. 
Besides  laying  down  the  doctrine  stated  in  the  three  preceding  para- 
graphs, which  directly  militated  against  any  recovery  by  the  plain- 
tiff, the  court  further  criticised  the  sufficiency  of  the  rule  or  usage 
which  he  set  up,  even  if  it  could  be  applicable  at  all  to  the  defendant 
bank,  to  cover  the  circumstances  of  this  case.  For  the  usage 
appeared  to  be  that,  where  a  check  is  presented  at  the  clearing- 
house "  to  a  bank  against  which  the  said  check  was  drawn",  then 
it  must  be  returned  within  the  prescribed  time,  or  paid  by  such 
bank.  But  the  proof  in  this  case  showed  a  presentation  not  "  to 
the  bank  against  which  the  check  was  drawn",  but  to  an  agent. 
"  This  is  an  essential  difference.  For  such  a  purpose  the  agent 
does  not  represent  the  principal.  The  usage,  if  contemplating  a 
presentation  to  the  principal,  may  be  reasonable,  and  very  un- 
reasonable if  extending  to  the  agent.  The  plaintiff  has  failed  to 
bring  his  case  within  the  usage."  The  soundness  of  these  remarks 
will  be  seen  at  once,  if  we  suppose  the  employing  bank,  the  de- 
fendant in  this  case,  instead  of  being  close  at  hand  in  Xew  Jerse\-, 
to  have  been  situated  in  Boston,  or  Chicago,  or  Philadelphia. 
The  New  York  agent  cannot  possibly  know  the  state  of  the  accounts 

C53 


§  351  CLEARING-HOUSE 

of  the  depositors  in  its  principal's  books.  It  cannot  properly 
agree  or  refuse  to  pay  checks  drawn  upon  the  principal,  and  some 
days  must  be  consumed  in  the  intercommunication;  meantime 
the  twenty-four  hour  rule,  which  appears  to  be  arbitrary,  would 
have  concluded  the  distant  bank  from  refusing  to  pay  the  check 
long  before  that  bank  was  aware  that  such  a  check  had  been 
drawn.     The  practical  redudio  ad  ahsurdum  is  obvious. 

(b)  The  rights  of  a  depositor  in  a  member  bank  are  not  affected 
by  the  clearing  rules.^ 

A  Bank's  Customers  cannot  Take  Advantage  of  the  Clearing-house 

Rules 

(c)  Nor  can  he  take  advantage  of  them.  A  note  made  payable 
at  bank  A.  was  discounted  by  bank  B .  When  it  fell  due,  B .  charged 
the  amount  to  A.,  and  forwarded  the  note,  through  the  clearing- 
house, to  A.  for  payment.  The  teller  of  A.,  under  the  mistaken 
impression  that  the  maker  of  the  note  had  sufficient  funds  on 
deposit  for  its  payment,  stamped  upon  the  face  of  the  note  the 
word  "  Paid."  Later  in  the  day,  discovering  his  error,  he  sent 
word  to  B.,  and  also  to  the  indorser  of  the  note.  The  note  was 
duly  protested.  B.  then  sued  the  indorser,  who,  upon  the  fore- 
going facts,  set  up  payment  by  A.,  and  endeavored  to  take  advan- 
tage of  the  clearing-house  rules.  But  the  court  held  that  there 
was  no  payment,  and  that  the  plaintiff  should  recover.^  The  cus- 
tomers of  a  bank  are  not  parties  to  the  clearing-house  rules,  and 
cannot  avail  themselves  of  any  violation  of  such  regulations. 

A  Member  as  Clearing  Agent  for  Non-member 

(d)  But  when  a  bank  which  is  not  a  member  of  the  clearing- 
house gives  authority  to  one  that  is  a  member  to  act  for  it  in 
making  exchanges  through  the  clearing-house,  the  first  is  bound 
as  to  third  parties  by  the  acts  of  the  agent  bank  under  the  said 
rules,* 

2  Merchants'  National  Bank  v.  National  Bank  of  the  Commonwealth, 
139  Mass.  513,  2  N.  E.  89. 

3  Manufacturers'  National  Bank  v.  Thompson,  129  Mass.  438. 

*  Stuyvesant  Bank  v.  National  Mechanics'  Banking  Association, 
7  Lans.  (N.  Y.)  197.  See  Mt.  Morris  Bank  v.  Twenty-third  Ward  Bank, 
172  N.  Y.  244,  64  N.  E.  810  (1902). 

And  if  the  non-member  contracts  with  the  member  in  such  a  way  as  to 
make  the  rules  of  the  clearing-house  a  part  of  the  contract  the  parties 

654 


CONSTRUCTION    OF   RULES  §  351  A 

§  351  A.  Construction  of  Rules.  —  The  constitution  of  the 
New  York  clearing-house  i)r()vi(k's  that  all  checks,  drafts,  or  items 
in  the  exclianges  reported  not  good  or  missent  shall  be  returned 
the  same  day  to  the  bank  from  which  they  were  received,  and  the 
said  bank  shall  immediately  refund  to  the  bank  returning  the  same 
the  amount  which  it  had  received  through  the  clearing-liouse  for 
said  checks,  drafts,  or  items  so  returned.  A  later  provision  requires, 
in  case  of  failure  of  any  bank,  to  promptly  refund  to  the  bank 
holding  paper  returned  as  not  good,  that  such  bank  report  the  fact 
to  the  manager  of  the  clearing-house,  who  shall  thereafter,  with  tlie 
approval  of  the  clearing-house  committee,  readjust  the  clearing- 
house statement,  and  declare  the  correct  balance  between  such 
banks,  provided  such  report  be  rendered  before  one  o'clock  of  the 
same  day. 

The  court  held  that  the  later  provision  did  not  repeal  the  first 
provision,  so  that  a  bank  charged  by  the  clearing-house  with  the 
amount  of  the  drafts  or  checks  returned  as  not  good  can  allow  such 
charge  to  stand  against  it  in  the  account  of  the  clearing-house, 
and  seek  reclamation  directly  from  the  bank  required  to  refund 
such  amount  under  the  direct  rules  of  the  clearing-house.^  A 
check  is  "  not  good  "  within  the  meaning  of  the  clearing-house 
rules  providing  that  checks  returned  as  not  good  shall  be  retiu-ned 
before  three  o'clock  of  the  same  day  to  the  members  from  whom  it 
is  received,  where  the  drawee  refuses  to  pay  it  and  a  memorandum 
on  a  check  "  assigned  "  together  with  a  notice  of  insolvency  of 
the  drawee  is  a  sufficient  notice  that  the  check  was  retiu-ned  as 
"  not  good."  2 

are  bound  by  the  rules  of  the  clearing-house;  and  the  member  cannot 
refuse  to  clear  for  the  non-member  until  notice  is  given  in  accordance 
with  the  rules  of  the  association,  even  though  the  non-member  has  become 
insolvent  and  has  passed  into  the  hands  of  the  superintendent  of  banks. 
But  for  such  clearances  the  member  is  entitled  to  appropriate  a  sufficient 
amount  of  the  cash  and  securities  of  the  non-member  which  it  has  in  hand 
to  protect  itself,  in  accordance  with  the  terms  of  the  contract  entered  into 
when  the  non-meml)er  was  solvent. 

The  member  is  also  entitled  to  protest  fees  incurred  in  protesting  the 
redeemed  cheeks  when  sucli  protest  is  made  at  the  request  of  the  superin- 
tendent of  banks,  and  is  further  entitled  to  reasonable  charges  for  counsel 
fees  in  collecting  the  bills  receivable.  Davenport  c.  National  Bank,  127 
App.  Div.  391  (1908),  112  N.  Y.  S.  291,  affirmed  in  194  K  Y.  568,  88 
N.  E.  1117. 

1  §  351A.  Mt.  IMorris  Bank  v.  Twenty-third  Ward  Bank,  172  N.  Y. 
244,  64  N.  E.  810  (1902),  affirming  60  App.  Div.  205,  70  N.  Y.  S.  78. 

2  Columbia-Knickerbocker  Trust  Co.  r.  Miller,  I'M  App.  Div.  810, 
142  N.  Y.  S.  440  (1913),  affirmed  in  215  N.  Y.  191,  109  N.  E.  179. 

655 


§  352  CLEARING-HOUSE 

§  352.    Effect  of    Clearing-house    Rules    as    between   Members. 

They  are  in  the  nature  uf  contracts,  and,  unless  they  declare  distinctly 
that  common  law  rights  are  forfeited,  a  hank  violating  a  clearing- 
house rule  loill  still  have  its  common  law  rights,  but  must  answer  for 
any  damage  caused  to  another  member  by  the  violation.  —  In  Mas- 
sachusetts ^  a  case  arose  between  two  banks,  both  members  of  the 
clearing-house.  The  rule  on  which  it  was  based  was  embodied 
in  a  formal  vote  or  article  of  the  association,  in  the  words  following, 
to  wit :  "  Whenever  checks  are  sent  tlirough  the  clearing-house 
which  are  not  good,  they  shall  be  returned  by  the  banks  receiving 
the  same  to  the  banks  from  which  they  were  received,  as  soon  as 
it  shall  be  found  that  said  checks  are  not  good,  and  in  no  case 
shall  they  be  returned  after  one  o'clock."  The  plaintiff  bank 
returned  the  check,  as  dishonored,  to  the  defendant  bank,  which 
had  presented  it  at  clearing ;  but  the  messenger  carrying  the  check 
did  not  arrive  at  the  rooms  of  the  defendant  bank  until  five  or 
seven  minutes  after  one  o'clock.  The  bank  sent  the  messenger 
out  in  time,  but  he  mistook  his  errand  and  went  to  the  wrong 
bank  first.  The  defendant  bank,  on  the  ground  that  the  return 
was  made  too  late,  under  the  rule,  refused  to  take  back  the  check 
or  to  refund  its  amount.  It  did  not  appear,  however,  that  the 
position  or  relations  of  the  defendant  bank  to  the  drawer  had 
undergone  any  change  in  the  few  minutes  that  had  elapsed  since 
one  o'clock.  It  would  have  been  no  worse  off  if  it  had  consented 
to  receive  back  the  check  at  five  minutes  after  one,  than  it  would 
have  been  had  it  been  obliged  under  the  rule  to  receive  it  back  at 
five  minutes  before  one.  The  court  took  the  view  that  the  articles 
of  association  were  in  the  nature  of  a  contract  between  the  mem- 
bers. If  the  plaintiff  had  not  kept  the  check  so  long  that  it  would 
at  common  law  be  held  to  have  adopted  it  and  assumed  to  pay  it, 
the  power  to  refuse  to  pay  it,  and  to  return  it,  still  existed,  and  could 
be  affected  by  the  rule  of  the  clearing-house  association  only  so 
far  as  it  should  appear  that  the  defendant  bank  had  suffered 
actual  injury  by  reason  of  the  delay.  To  the  extent  of  such  actual 
injury  it  seems  that  the  defendant  bank  might  be  entitled  to  a 
set-off  against  the  sum  due  from  it  on  the  check.  Or  it  might 
pay  the  check,  and  then  sue  for  damages  for  the  injury  caused  to 
it  by  the  failure  of  the  returning  bank  to  observe  the  terms  of  the 
agreement  between  them,  and  to  return  before  one  o'clock. 

1  §  352.     Merchants'  National  Bank  v.  Eagle  National  Bank,  101  Mass. 
281. 

656 


EFFECT    OF   CLEARING-HOUSE    RULES    AS    BETWEEN    MEMBERS       §  3o2 

This  case  was  subsequently  discussed  and  affirmed  \)y  tlie  same 
court.  The  check  in  this  hitter  case  was  returned  at  half-past 
one  o'clock,  with  a  statement  that  it  had  been  retained  and  treated 
as  good  under  a  mistake  of  fact,  and  that  it  was  not  good.  The 
bank  which  had  presented  the  check  had  not  changed  its  position 
in  any  respect  during  the  intervening  half-hour,  and  therefore 
really  suffered  nothing  ])y  the  return  of  the  check.  Tlie  court 
said  that  the  limitation  of  time  was  only  for  the  protection  of  the 
presenting  bank;  it  was  the  establisliment  of  a  certain  hour, 
after  which  hour  the  presenting  bank,  in  the  absence  of  notice 
to  the  contrary,  might  assume  the  check  to  be  good,  and  would 
be  protected  in  acting  on  that  assumption.  But  if  it  had  taken 
no  action  on  that  assumption,  then  it  had  no  need  of  protection, 
and  was  not  prejudiced  by  the  return  of  the  check.  For,  said  the 
court,  the  rule  of  the  clearing-house  does  not  say  that  the  paying 
bank  shall  have  no  right  of  reclamation  after  that  hour,  and  shall 
thereafter  forfeit  or  lose  the  rights  which  it  would  otherwise  possess. 
Upon  this  ground,  this  decision  might,  perhaps,  be  distinguished 
from  the  decision  in  Preston  v.  Canadian  Bank  of  Commerce,^ 
which  otherwise  certainly  is  directly  contrary  to  the  Massachu- 
setts doctrine.' 

It  is  also  said  that  the  mere  fact  that  the  presenting  bank  has 
credited  the  amount  of  the  check  to  the  depositor,  upon  its  general 
account  with  him,  does  not  constitute  such  an  act  on  its  part  as 
prevents  the  return  of  the  check  after  one  o'clock.  This  fact 
does  not  make  the  depositor  liable  instead  of  the  bank.     But  ap- 

2  23  Fed.  179.  See  National  Bank  of  Commerce  v.  Mechanics' 
American  National  Bank,  148  Mo.  App.  1,  127  S.  W.  429  (1910),  holding 
that  if  cheeks  are  not  returned  by  the  time  agreed  upon  the  bank  which 
does  not  return  them  in  time  is  chargeable  with  the  consequences  of  a  dis- 
regard of  the  rule  and  cannot  recover  the  amount  paid  thereon  thougli  the 
checks  were  forged  and  no  harm  resulted,  or  though  they  came  in  such 
numbers  that  there  was  not  time  for  examination.  But  in  New  York  it 
is  held  that  a  bank  which  does  not  return  a  cheek  before  three  o'clock 
in  accordance  with  the  rules  of  the  clearing-house  does  not  entitle  a  bank 
which  has  received  payment  on  a  bad  check  to  refuse  to  refund  the  money, 
if  tlie  drawee  promptly  made  an  effort  to  return  the  check  witliin  the  time, 
but  was  unable  to  do  so  because  of  the  distance,  and  the  bank  receiving 
payment  has  not  been  charged  to  its  detriment  because  of  tlie  delay. 
Citizens'  Central  National  Bank  v.  New  Amsterdam  National  Bank, 
128  App.  Div.  554  (1908),  112  N.  Y.  S.  993,  affirmed  in  198  N.  Y.  520, 
92  N.  E.  1080. 

3  ISIerchants'  National  Bank  v.  National  Bank  of  the  Commonwealth, 
139  Mass.  513,  2  N.  E.  89.  See  also  National  Exchange  Bank  v.  National 
Bank  of  North  America,  132  Mass.  147. 

VOL.  1  —  42  657 


§  352  CLEARING-HOUSE 

parently  it  might  be  different  if  the  bank  had  given  any  fresh 
and  original  credit  to  the  depositor  upon  the  strength  of  the 
check.* 

In  Preston  v.  Canadian  Bank,  Judge  Blodgett  said  that  Mas- 
sachusetts overlooked  the  right  of  the  parties  to  agree  on  a  time 
of  return.  Massachusetts  replies  that  she  does  not  overlook 
such  right,  but  interprets  the  agreement  in  the  light  of  its  object 
and  reason ;  viz.  to  protect  the  creditor  bank  in  any  action  it  may 
take  in  treating  the  check  as  paid  after  the  agreed  hour.  As,  for 
example,  by  paying  over  the  money  to  the  depositor  of  the  check ; 
but  as  the  creditor  bank  had  not  in  any  way  substantially  altered 
its  position,  the  money  paid  under  mistake  of  fact  could  be  re- 
covered. 

The  Loss  must  Fall  on  the  Bank  that  has  Failed  to  Comply  with 
the  Rules  to  which  it  has  Agreed 

C,  deposited  collaterals  with  a  banking  firm  which  was  a  member 
of  the  Chicago  clearing-house,  arranging  to  draw  checks  to  within 
ten  per  cent  of  their  value.  On  August  5  he  drew  his  check  for 
S4000,  which  was  deposited  with  the  Canadian  Bank  of  Commerce 
(also  a  member  of  the  clearing-house)  to  his  credit,  and  went  into 
the  exchanges  for  collection  through  the  clearing-house  on  the 
morning  of  August  6.  The  rules  required  each  member  to  pay  its 
balances  by  twelve  o'clock,  and  any  check  found  not  good  when 
returned  to  the  drawee  bank  was  to  be  returned  to  the  bank  which 
collected  it  through  the  clearing-house  by  half-past  one  o'clock 
of  the  same  day.  When  C.'s  check  was  returned  from  the  clearing- 
house to  the  firm,  the  collaterals  were  deemed  sufficient  to  pay 
this  and  other  checks  drawn  by  him  on  the  firm ;  and  they  were 
handed  over  to  the  bookkeeper  to  be  charged  upon  his  account. 
At  forty-two  minutes  past  one,  the  firm  heard  that  C.  had  failed, 
when  a  second  examination  of  his  account  disclosed  a  mistake  in 
the  first,  whereupon  the  check  was  sent  to  the  Canadian  Bank, 
and  payment  demanded  at  fifteen  minutes  before  two,  and  refused. 
Held,  that  the  firm  could  not  recover  of  the  collecting  bank.  The 
!  parties  had  agreed  upon  the  time  within  which  mistakes  could  be 
corrected,  and  the  loss  must  fall  on  the  one  who  had  failed  to  fulfil 
the  contract.^ 

«  Ihid. 

5  Preston  v.  Canadian  Bank  of  Commerce,  23  Fed.  179  (1883). 

658 


EFFECT    OF   CLEARING-HOUSE    RULES    AS    BETWEEN    MEMBERS      §  352 

Payments  by  Mutual  Credits  at  the  Clear uuj-liouse  caunot  he  Ilecohed 
after  Hours  to  the  Detriment  oj  Another  Bank 

The  M.  bank,  at  nine  o'clock  one  morning,  produced  83,700.86 
worth  of  checks  against  the  L.  bank,  and  the  hitter  S4,9()7.57 
worth  against  the  M.  Mutual  credits  were  given.  The  rule  of 
the  clearing-house  of  which  M.  and  L.  were  members  was  that  any 
bank  unable  to  pay  must  notify  the  manager  of  the  clearing-house 
and  the  other  banks  by  ten  o'clock,  and  hold  in  trust  the  checks 
it  had  received  from  other  banks  at  the  morning  exchange.  The 
M.  bank  on  the  morning  mentioned  above  could  not  pay ;  but, 
hoping  to  retrieve  its  fortunes,  neglected  to  give  notice,  and, 
acting  on  its  silence,  the  L.  credited  to  each  depositor  the  checks 
upon  INI.  which  it  had  received  and  exchanged.  The  court  held, 
in  an  action  by  M.'s  receiver,  that  L.  had  a  right  to  act  on  the 
silence  of  M.,  and  that,  independently  of  any  clearing-house  rules, 
the  mutual  payment  of  checks  by  exchange  of  those  on  one  bank 
against  those  on  the  other  could  not  be  revoked  by  either  to  the 
detriment  of  the  other,  or  of  the  depositors  for  whom  that  other 
was  acting,  and  to  whom  it  had  given  credits.^ 

If  the  rule  or  agreement  goes  so  far  as  to  declare  in  terms,  as 
was  the  fact  in  the  New  Jersey  case,  cited  in  §  359,  that,  if  the 
returning  bank  does  not  return  before  the  hour  named,  it  shall 
altogether  forfeit  the  right  to  return  at  all,  and  shall  be  held  to 
pay  the  amount  of  the  check,  the  entirely  different  terms  of  the  con- 
tract will  raise  an  entirely  different  issue.  That  a  usage,  or  even 
a  by-law,  to  this  eflFect  would  be  regarded  as  in  derogation  of  the 
common  law,  in  that  it  would  undertake  to  make  a  bank  pay  the 
check  of  a  drawer  who  had  no  funds  to  his  credit,  and  that  therefore 
the  plaintiff  would  be  held  to  make  out  his  case  with  great  strict- 
ness, may  be  gathered  from  the  language  of  the  New  Jersey  court. 
But  from  the  same  case  it  may  also  be  gathered  that  if  the  plaintiff 
should  succeed  in  sufficiently  proving  his  case,  the  court  would  not 
deprive  him  of  a  favorable  decision.  Certainly  there  would  seem 
to  be  no  ground  on  which  the  courts  could  reasonably  undertake 
to  annul  a  positive  and  definite  agreement  voluntarily  entered 
into  between  parties  of  high  intelligence,  and  believed  to  work  to 
the  common  advantage  of  all  concerned. 

A  usage  among  the  banks  in  the  clearing-house  at  London 
to  return  checks  at  any  time  before   five   o'clock,    p.m.,   even 
6  Blaffer  v.  Louisiana  National  Bank,  35  La.  Ann.  251  (1883). 

659 


§  352  CLEARING-HOUSE 

if  they  have  been  cancelled  for  payment  in  the  usual  manner, 
by  drawing  a  line  through  the  drawer's  signature,  provided  the 
words  "  Cancelled  by  mistake  "  are  noted  upon  them,  has  been 
recognized  by  the  English  courts  as  good  and  binding/ 

§  353.  Payment  of  Notes  through  the  Clearing-house.  A 
note  sent  through  the  clearing-house  may  be  returned  after  the  hour 
set  in  the  rules.  —  The  rules  of  an  association  of  banks  organizing 
a  clearing-house  for  the  purpose  of  effecting  exchanges  between 
themselves  at  one  time  and  place  daily,  and  the  payment  at  the 
same  place  of  the  resulting  balances,  fixed  a  time  before  noon  for 
making  exchanges  at  the  clearing-house,  and  a  time  between  noon 
and  one  o'clock  for  paying  balances  there.  The  practice  under 
the  rules  was  for  the  exchanges  and  payments  to  be  made  ac- 
cording to  tickets  accompanying  vouchers  presented  for  exchange, 
and  not  from  an  examination  of  the  vouchers  themselves  in  detail. 
The  rules  also  provided,  that  errors  in  the  exchanges  should  be 
adjusted  directly  between  the  banks ;  and  that,  whenever  checks 
which  were  not  good  should  be  sent  through  the  clearing-house, 
the  banks  receiving  them  should  return  them  to  the  senders  as 
soon  as  it  should  be  found  that  they  were  not  good,  "  and  in  no 
case  shall  they  be  retained  after  one  o'clock."  Held,  in  the 
absence  of  evidence  of  a  uniform  custom  among  the  banks  which 
were  members  of  the  clearing-house,  to  treat  notes  the  same  as 
checks,  that  the  sending  of  a  note  through  the  clearing-house  to 
a  bank  at  which  it  was  payable  was  not  a  formal  demand  for  im- 
mediate payment  made  during  business  hours,  but  was  equivalent 
to  leaving  the  note  at  the  bank  for  collection  from  the  maker  on 
or  before  the  close  of  banking  hours ;  and  that  the  payment  of 
such  a  note  at  the  clearing-house  was  a  provisional  payment  only, 
which  became  complete  when  the  note  was  paid  in  the  usual  and 
ordinary  course  of  business,  and  if  not  so  paid  the  payment  at  the 
clearing-house  was  to  be  treated  as  a  pajTuent  made  under  a  mis- 
take of  fact,  to  the  same  extent  and  subject  to  the  same  right  of 
reclamation,  although  the  note  was  retained  until  after  one  o'clock, 
as  if  it  had  been  made  without  the  intervention  of  the  clearing- 
house. Held,  also,  that  even  if  the  bank  at  which  the  note  was 
payable  had  funds  of  the  maker  of  the  note  on  deposit,  the  reten- 
tion of  the  note  until  after  one  o'clock  did  not  amount  to  pa>Tnent, 
in  the  absence  of  evidence  that  the  maker  had  authorized  the  bank 
to  pay  his  notes  out  of  his  money  or  deposit. 

^  Fernandez  v.  Glynn,  1  Camp.  426,  n. 
660 


CHECKS    SENT   THROUGH   THE    CLEARIN'G-HOUSE  §  354 

"  The  sending  of  such  a  note  througli  the  clearing-hmiso,  not 
accompanied  by  any  special  demand  of  payment,  can  give  no 
greater  rights  to  the  hank  that  sends  it  than  if  the  note  had  been 
left  at  the  bank  where  payabk',  without  any  (k'mand  for  payment, 
or  any  instructions  in  relation  thereto.  In  such  a  case  the  maker 
would  have,  during  business  hours,  to  pay  the  note,  and  the  bank 
would  be  in  no  default  if  it  returned  the  note  as  soon  as  it 
became  certain  it  would  not  be  paid. 

"  A  messenger  was  sent,  before  two  o'clock,  with  the  notes 
to  each  of  the  defendant  banks,  reached  each  bank  before  it  had 
closed,  and  demanded  in  each  case  the  amount  which  the  plaintiff 
had  paid  through  the  clearing-house,  and  tendered  back  the  note ; 
but  payment  was  refused  by  the  defendant  banks,  on  the  ground 
that  the  notes  were  returned  too  late,  that  they  should  have  been 
returned  before  one  o'clock.  We  fail  to  find  any  laches  on  the 
part  of  the  plaintiff;  and,  on  the  facts  presented,  no  injury  re- 
sulted to  the  defendants  because  the  notes  were  not  returned 
earlier.  Carrick,  Calvert,  &  Co.  had  money  on  deposit  in  the 
plaintiff  bank  that  day,  but  not  enough  to  pay  all  their  notes 
made  payable  that  day  at  its  counter."  ^ 

A  custom  of  banks  sending  notes  through  the  clearing-house  by 
which  the  time  is  fixed  when  the  conditional  payment,  resulting 
from  such  notes  going  through  the  clearing-house,  becomes  abso- 
lute in  case  the  note  sent  is  not  returned  is  valid .^ 

§  354.  Checks  sent  through  the  Clearing-house.  —  Insufficient 
Funds.  —  The  pajTuent  of  checks  may  be  affected  by  the  use  of 
the  clearing-house  in  one  important  particular.  Checks,  as  has 
been  seen,  must  be  paid  in  the  order  of  presentment.  But  when 
the  deputy  of  the  bank  takes  from  its  drawer  in  the  clearing-house 
all  the  checks  which  it  has  to  pay,  he  may  receive  a  considerable 
number  of  checks  of  the  same  depositor.  It  is  clear  that  there 
can  be  no  priority  among  these.  They  are  all  received  at  pre- 
cisely the  same  moment.  For  the  order  in  which  they  are 
placed  in  the  drawer  has  nothing  to  do  w'ith  the  presentment  of 
them  to  or  receipt  of  them  by  the  bank,  indeed  is  in  nearly  all 
cases  unknown  to  the  bank.  The  bank  cannot  look  at  their  dates  ; 
for  priority  of  presentment,  not  of  date,  secures  priority  of  pay- 

*  §  353.  National  Exchange  Bank  v.  National  Bank  of  North  Amer- 
ica, 132  Mass.  147,  151. 

2  Atlas  National  Bank  v.  National  Exchange  Bank,  178  Mass.  531,  60 
N.  E.  121. 

G61 


§  354  CLEARING-HOUSE 

ment.  So  if  the  bank  cannot  pay  all  the  checks  of  any  individual 
depositor  then  coming  through  clearing,  it  must  pay  none  of  them. 
It  has  no  legal  power  or  right  to  select  or  choose  from  among  them 
certain  ones  which  it  will  honor,  or  certain  ones  which  it  will  dis- 
honor. All  or  none  must  be  paid.  Any  other  course  would  render 
the  bank  liable  to  the  holders  of  the  dishonored  paper.  A  check 
presented  at  the  counter  for  payment  must  be  paid  at  once,  if 
there  are  funds  enough  to  the  drawer's  credit  to  pay  it  alone ; 
but  if  it  is  sent  through  clearing  it  must  take  its  chance  that  his 
funds  shall  be  sufficient  to  pay  not  only  it,  but  all  his  other  checks 
which  shall  be  sent  through  clearing  on  the  same  day ;  and  failing 
this,  it  must  be  dishonored. 

It  might  seem  advisable  to  incorporate  in  clearing-house  trans- 
fers a  rule,  that,  if  the  funds  of  a  depositor  are  insufficient  to  pay 
the  whole  of  a  mass  of  checks  coming  against  it  at  one  clearing,  the 
bank  should  pay  those  of  earlier  date  so  far  as  the  funds  will  go. 
Such  a  rule,  though  leaving  some  checks  out  in  the  cold,  would 
seem  better,  as  creating  less  disturbance  of  business  calculations, 
than  to  refuse  payment  of  the  whole  group.  If  a  hundred  or  a  thou- 
sand men  try  to  enter  a  hall  and  get  crowded  in  the  way  so  that 
none  can  enter,  a  benevolent  policeman  would  not  make  this  an 
excuse  for  sending  them  all  away  entirely,  but  would  straighten 
out  the  column,  and  let  them  enter  in  file,  so  far  as  the  hall  would 
hold  them. 

That  the  system  of  presentment  through  the  clearing-house  is 
a  legal  presentment  for  pa^Tiient,  to  the  bank  on  which  the  check 
is  drawn,  —  a  matter  which  it  would  seem  could  never  be  doubted, 
—  has  been  specifically  ruled  in  England. ^ 

When  a  bank  fails  and  the  clearing-house,  having  notice  of  the 
failure,  returns  all  of  the  debit  items  to  the  other  banks  it  cannot 
apply  the  credit  items  to  payment  of  claims  of  other  banks  against 
the  insolvent  bank.  It  is  its  duty  to  pay  those  funds  over  to  the 
trustee  in  bankruptcy  in  order  that  preferences  may  not  be  col- 
lected.^ 

§  355.  Appropriation  of  Payments  made  by  the  Bank. — At  any 
time  it  is  only  the  balance  of  all  the  items  up  to  that  date  that 
the  customer  can  recover  from  the  bank,  or  for  which  he  can  draw 

1  §  354.     Reynolds  v.  Chettle,  2  Camp.  596. 

-  Rector  v.  City  Deposit  Bank,  200  U.  S.  405,  50  L.  ed.  527,  26  Sup.  Ct. 
289  (1906) ;  Rector  v.  Commercial  National  Bank,  200  U.  S.  420,  50  L.  ed. 
533,  26  Sup.  Ct.  294  (1906). 

662 


APPROPRIATION    OF    PAYMENTS    MADE    BY    THE    BANK  §  355 

his  checks  upon  it.  It  is  the  first  item  on  the  debit  side  that  is 
discharged  or  reduced  by  the  first  item  on  the  credit  side,  without 
regard  to  the  identity  or  disparity  of  any  particular  sums.^  Simple 
as  this  principle  appears,  it  is  sometimes  the  only  thread  which 
can  show  the  way  out  of  complicated  labyrinths,  as  is  well  shown 
by  the  cited  case  of  Devaynes  v.  Noble.  There  the  partner  in  a 
large  banking-house  died.  The  business  was  continued  without 
any  real,  or  even  formal  change.  Some  customers  knew  of  the 
death,  some  did  not.  The  daily  course  of  the  business  continued 
in  all  respects  as  before,  till  the  house  failed.  Then  various  cus- 
tomers sought  to  hold  the  estate  of  the  deceased  partner  to  satisfy 
their  deficits.  The  question  was  on  what  principle  the  accounts 
should  be  made  up  ;  for  no  hesitation  was  expressed  as  to  the  neces- 
sity of  subjecting  the  estate  to  meet  the  unsatisfied  claims  of  all 
persons  who  were  customers  at  the  time  of  the  death  of  the  deceased. 
Since  then  some  had  increased,  and  others  had  decreased,  the 
amount  of  their  deposits ;  members  of  each  of  these  classes  had 
received  credits  to  the  amount  of  their  balances  at  the  time  of  the 
death;  other  members  had  not.  The  arguments  of  counsel 
were  very  long  and  ingenious ;  the  court  gave  the  matter  the  most 
serious  consideration,  but  regarded  no  solution  as  possible  save 
that  of  a  simple  running  account.  It  decreed  that  every  paj-ment 
made  to  each  customer  since  the  death  should  be  applied  in  reduc- 
tion of  the  debt  or  balance  owing  to  that  customer  at  the  time  of 
the  death,  and  this  equally  (1)  where  the  customer  had  since 
made  no  deposit,  but  simply  drawn  checks ;  (2)  where  the  cus- 
tomer had  continued  to  deal  with  the  firm  depositing  and  checking, 
but  on  the  whole  increasing  his  balance ;  and  (3)  where,  dealing 
in  like  manner,  he  had  decreased  his  balance.  The  principle  was 
stated  to  be  unalterable,  that  each  payment  to  the  customer 
should  be  referred  back  and  set  against  the  earliest  indebtedness 
to  him ;  that  the  rule  of  law,  sometimes  laid  down,  that,  if  at  the 
time  of  the  pajTnent  the  debtor  neglects  to  appropriate  it,  the 
creditor  may  afterwards  appropriate  it  to  suit  his  own  wishes, 
cannot  be  allowed  to  govern  in  cases  of  banking ;  but  that  in  this 
business,  in  the  absence  of  express  contemporary  arrangement 
or  understanding,  it  will  be  considered  that  the  appropriation  of 

»  §  355.  Devaynes  v.  Noble.  1  Mer.  541 ;  Bodenham  v.  Purchas, 
2  Barn.  &  Aid.  39;  Henniker  r.  Wis?.  4  Q.  B.  792;  Coneord  v.  Concord 
Bank,  IG  N.  H.  26 ;  Commercial  Bank  of  Albany  v.  Hughes,  17  Wend. 
(N.  Y.)  94;   Clayton's  Case,  1  Mer.  608. 

663 


§  355  CLEARING-HOUSE 

each  payment  to  the  discharge  of  the  earhest  then  subsisting  in- 
debtedness is  in  fact  made  by  the  very  act  of  setting  down  the  two 
items  in  their  order  in  the  account.  To  the  same  purport  also 
was  Clayton's  Case,  where,  however,  the  intention  of  the  depositor 
was  considered  to  be  more  clearly  established,  because,  after  the 
death  of  a  partner  in  the  banking  firm,  the  depositor  continued 
to  draw  checks  against  the  sum  to  his  credit  at  the  time  of  the 
death. 

A  lawyer  deposited  on  general  account  in  his  own  name  £5000 
of  his  client's  money ;  after  drawing  more  than  £5000  and  the 
balance  he  had  previous  to  that  deposit,  he  died  leaving  a  deposit 
of  £2700.  This  the  client  claimed  as  a  trust  fund,  but  the  court 
held  that  the  payments  by  the  bank  must  be  appropriated  to 
the  sums  paid  in  by  the  depositor  in  the  order  of  the  latter,  and 
therefore  the  trust  money  had  been  all  drawn  out.^  So  far  as  the 
report  shows,  no  effort  was  made  to  see  if  the  payments  could  be 
accounted  for  without  subtracting  from  the  trust  money ;  the 
accounts  were  lumped  and  the  rule  of  Clayton's  Case  appears  to 
have  been  strictly  applied. 

But  in  Maine  it  has  been  held  that,  if  one  draws  a  check  against 
a  fund  composed  partly  of  his  own  money  and  partly  of  money 
of  another,  the  presumption  is  that  he  is  drawing  his  own  money.* 

And  in  England  it  has  been  held  that,  where  money  is  held  by 
a  person  in  a  fiduciary  capacity,  though  not  strictly  as  a  trustee, 
if  he  mixes  it  with  his  own  in  bank  he  will  be  taken  to  have  drawn 
his  own  in  preference  to  the  trust  money,  and  the  rule  in  Clayton's 
Case  will  not  apply ."* 

2  Brown  v.  Adams,  L.  R.  4  Ch.  App.  764  (1869) ;  Pennell  v.  Deffell, 
4  D.  M.  &  G.  372. 

3  HaU  V.  Otis,  77  Me.  122.     See  Widman  v.  Kellogg,  22  N.  D.  396, 

133  N.  W.  1020,  39  L.  R.  A.  (n.  s.)  563,  n.  (1911);   Emigh  v.  Earling, 

134  Wis.  565,  115  N.  W.  128,  27  L.  R.  A.  (n.  s.)  243,  n.  (1908). 

*  Re  Hallett's  Estate,  Knatchbule  v.  Hallett,  13  Ch.  D.  696  (1879). 


664 


CHAPTER   XXVI 

OVERDRAFTS 

Are  irregular  loans.     Power  to  grant. 
§  357.  Bank  officers  have  no  inherent  power  to  make  such  loans, 

and  even  a  usage  to  the  effect  of  giving  such  power  is  bad. 
§  358.  It  is  part  of  the  management,  and  belongs  only  to  the  directors. 

May  be  a  fraud  upon  the  holder  of  an  overdraft,  if  he  is  not  in- 
formed of  its  character  at  the  time  he  accepts. 
§  359.  But  not  on  the  bank,  for  it  has  means  of  ascertaining  the  fact 

as  to  sufficiency  of  funds  by  ordinary  diligence,  and  if  it 
relies  on  the  representation  of  sufficient  funds  implied  by 
draA\nng  a  check,  it  is  its  own  folly.     This  view,  however, 
seems  not  to  be  without  dissent. 
§  360,  The  bank  may  recover  from  the  drawer  any  over-payment 

made  upon  his  order. 

§  357.  Overdrafts.^  —  It  is  not  an  uncommon  thing  for  a  de- 
positor to  undertake  to  overdraw  his  balance;  and  if  he  be  a 
depositor  in  good  standing  and  repute,  and  a  good  customer  of 
the  bank,  his  overdraft  may  very  probably  be  honored  by  it.  Of 
course  such  a  payment  is  made  by  the  bank  wholly  upon  its  own  risk, 
and  in  sole  reliance  on  the  ability  of  the  drawer  to  make  remunera- 
tion. In  fact,  it  is  nothing  else  but  a  loan,""  and  a  loan  of  a  very 
dangerous  and  irregular  description,  wherein  the  bank  has  no 
security  whatsoever  beyond  the  right  of  action  against  the  drawer. 

"  §  357.  An  overdraft  arises  where  a  customer  of  a  bank  draws  from 
it  more  money  than  is  standing  to  his  credit  in  his  account  with  it.  State 
V.  Jackson,  21  S.  D.  494,  113  N.  W.  S80  (1907). 

<"•  Hennessy  Bros.  v.  Memphis  National  Bank,   129  Fed.  557  (1904). 

An  overdraft  of  a  treasurer  of  a  borough  is  a  loan  to  the  treasurer  and 
not  to  the  borough.  Pittsburg  v.  First  National  Bank,  230  Pa.  St.  170. 
79  Atl.  406  (1911) ;  also  an  overdraft  by  an  agent  not  authorized  to  draw 
is  a  loan  to  the  agent.  Merchants'  National  Bank  v.  Nichols,  223  111.  41, 
79  N.  E.  38,  7  L.  R.  A.  (n.  s.)  752  (1906). 

An  overdraft  may  be  legal  or  it  may  be  criminal,  dependent  upon  the 
intent  of  the  person  committing  it.  United  States  v.  Heinzie,  161  Fed. 
425  (1908). 

A  cashier  who  reports  to  the  state  examiner  an  overdraft  as  a  loan 
makes  a  false  report,  since  his  reports  must  agree  with  the  books  of  the 
bank  in  the  statement  of  assets,  liabilities  and  names  by  which  they  are 

665 


§  357  OVERDRAFTS 

If  a  cashier,  not  authorized,  as  cashiers  seldom  are,  to  loan  the  funds 

of  the  bank,  or  if  the  paying  teller,  who  probably  never  has  such 

authority,  pay  the  overdraft  of  a  customer  without  specific  power 

from  the  government  of  the  bank,  but  simply  of  his  own  individual 

motion,  his  act  is,  in  the  eye  of  the  law,  a  breach  of  his  trust,®^ 

They  have  used  the  funds  and  property  of  the  bank  in  a  manner 

which  the  law  does  not  authorize,  and  in  which  they  have  not 

even  a  color  of  right  to  use  them.     They  have  imperilled  the  safety 

of  corporate  money  by  loaning  it,,  and  the  fact  that  it  is  to  a 

customer  whom  they  believe  to  be  rich  and  honest,  and  a  man 

whom  it  is  desirable  to  favor,  does  not  prevent  the  transaction 

from  being  a  transgression  beyond  the  limits  of  their  power  and 

duties.^     They  probably  would  not  dream  of  discounting  of  their 

own  sole  motion  the  same  customer's  note,  or  making  him  a 

formal  loan,  even  with  security  ;  yet  here  they  in  fact  make  him  a 

very  informal  and  irregular  loan  without  security.     The  fact  that 

in  banking  business  such  things  are  often  done,  and  that  their 

true  character  is  hardly  recognized  or  appreciated  by  the  actors 

in  them,  is  perhaps  a  moral  extenuation,  but  it  is  certainly  no  legal 

excuse.     The  language  of  the  adjudicated  cases  is  not  capable 

of  being  explained  away.    Such  a  course  of  dealing,  long  carried 

on  by  a  cashier  or  teller  with  the  knowledge  and  express  or  tacit 

approval  of  the  bank  directors,  may  possibly  relieve  him  from 

liability  to  them.     This  is  another  and  collateral  question,  by  no 

means  devoid  of  doubt  and  difficulty.     But  however  such  a  usage 

or  course  of  dealing  may  operate  between  the  individual  officer 

and  the  bank  government,  it  is  not  allowed  to  be  introduced  in 

any  other  connection,  for  the  purpose  of  rendering  valid  by  virtue 

of  business  usage  an  act  which  the  law  directly  makes  wrongful. 

Evidence  of  such  a  usage  will  be  ruled  out.     For  however  common 

the  practice  might  be  shown  to  be,  it  is  yet  a  usage  intrinsically 

bad  and  illegal,  and  which  no  court  of  justice  will  recognize. 2 

§  358.  Overdrafts  may  be  arranged  for.  —  Of  course,  however, 
there  is  a  power  in  the  bank  to  allow  overdrafts.  By  negotiating 
called.  State  v.  Jackson,  21  S.  D.  494,  113  N.  W.  880  (1907) ;  State  v. 
Jackson,  221  Mo.  478,  120  S.  W.  66,  133  Am.  St.  Rep.  477  (1909). 

0''  In  such  case  the  bank  may  take  the  note  of  the  cashier  in  payment  of 
the  overdraft.  If  it  does  so  he  is  not  a  volunteer  but  is  paying  his  own 
debt,  the  overdraft  is  paid  and  the  cashier  has  a  right  of  action  against  the 
customer.  Mentz's  Assignee?;.  Mahoney,  150  Ky.  409, 150  S.  W.  503  (1912). 

1  Eichelberger  v.  Finley,  7  Har.  &  J.  (Md.)  381 ;  Bank  of  St.  Mary's  v. 
Calder,  3  Strobh.  (S.  C.)  403  ;  Lancaster  Bank  v.  Woodward,  18  Pa.  St.  357. 

2  Lancaster  Bank  v.  Woodward,  18  Pa.  St.  357. 

666 


OVERDRAFT   MAY    BE    A    FRAUD  §  359 

with  the  authorized  and  proper  officials,^  a  customer  may  make  a 
legal  and  binding  arrangement  by  which  his  overdrafts,  to  a  cer- 
tain amount  named  and  under  the  circumstances  agreed  upon, 
shall  be  honored.  The  dealing  is  in  the  nature  of  a  loan ;  it  is 
placing  money  at  his  disposal  and  control.""  There  may  be  a 
standing  agreement,  ])in(ling  on  the  bank,  for  a  definite  period. 
Or  there  may  be  a  mere  naked  permission,  revocal)le  at  will.''*  In 
the  latter  case  it  is  not  what  is  termed  an  "  authority  "  to  over- 
draw. The  bank  is  under  no  obligation  to  honor  the  drawer's 
check,°'=  but  ma>-at  any  time  refuse  to  do  so.  Neither  is  the  drawer 
warranted  in  stating  absolutely,  solely  on  the  strength  of  such 
an  arrangement,  that  his  check  is  "  good."  ^ 

A  mining  company  may  legally  enter  into  an  arrangement 
with  a  bank  to  pay  its  over-checks,  and  where  such  checks  are 
customarily  signed  by  the  president  and  secretary  without  ob- 
jection, the  bank  may  assume  that  they  are  duly  authorized  .2 

A  depositor  notified  the  bank  not  to  allow  overdraft  beyond  a 
certain  amount.  Checks  however  were  drawn  by  an  authorized 
agent  beyond  the  limit.  Held,  that  such  notice  did  not  defeat 
the  rights  of  the  holders  of  the  checks,  nor  the  right  of  the  bank  to 
pay  and  charge  the  depositor.^ 

§  359.  Overdraft  may  be  a  Fraud.  —  There  has  been  some  in- 
clination to  regard  the  drawing  of  overdrafts  by  depositors,  without 
warning  to  or  understanding  with  the  bank,  as  a  proceeding  im- 
proper, and  even  fraudulent,  on  the  part  of  the  depositor.^     It 

0  §  358.  Cope  V.  Westbay,  188  Mo.  638,  87  S.  W.  504  (1905)  holds 
that  the  cashier  and  president  are  the  proper  officers  to  make  such  loans, 
and  if  they  exercise  a  reasonable  degree  of  care  and  skill  they  are  not  \\ah\e 
for  losses  happening  through  errors  of  judgment.  See  also,  Wynn  i: 
Tallapoosa  County  Bank,  108  Ala.  469,  53  So.  228  (1911). 

"«  People's  National  Bank  v.  Rhoades,  28  Del.  65,  90  Atl.  409  (1913) ; 
Sagerton  Hardware  etc.  Co.  v.  Gamer  Co.,  Tex.  Civ.  App.,  1G6  S.  W.  428 
(1914) ;  Vandagrift  v.  Masonic  Home,  242  Mo.  138,  145  S.  W.  448  (1911). 

«*  Cope  V.  Westbay,  188  Mo.  638,  87  S.  W.  504  (1905). 

<"=  If  it  does  honor  the  check  it  cannot  subsequently  recover  from  him 
who  obtains  tlie  money.  Vandagrift  0.  Masonic  Home,  242  :Mo.  138, 
145  S.  W.  448  (1911). 

1  Ballard  r.  Fuller,  32  Barb.  (X.  Y.)  68 ;  Industrial  Trust,  etc.  Co.  v. 
Weaklov,  103  Ala.  465,  15  So.  854  (1893) ;  Springfield  Marine  Bank  v. 
Mitchell,  48  111.  App.  486. 

2  Mining  Company  v.  Anglo-California  Bank,  104  U.  S.  192,  26  L.  ed. 
707  (November,  1887). 

3  Bremer  County  Bank  v.  Mores,  73  Iowa  289,  34  N.  W.  863. 

1  §  3.59.  Peterson  v.  Union  National  Bank,  52  Pa.  St.  206 ;  True  v. 
Thomas,  16  Me.  36. 

667 


§  359  OVERDRAFTS 

has  been  well  said  that  a  bank  must  often  be  obliged  to  put  some 
reasonable  amount  of  confidence  in  a  depositor.  And  what  con- 
fidence is  more  reasonable  than  that  his  drafts  are  drawn  bona 
fide  against  his  deposits,  unless  the  bank  has  been  notified  in  some 
manner  to  expect  the  contrary.  Such  a  rule  would  probably  be 
regarded  as  severe  by  the  business  community.  But  it  has  been 
said,  obiter,  by  the  Supreme  Court  of  the  United  States,  discusshig 
the  difference  between  a  bill  of  exchange  and  a  check,  that  the 
drawing  of  a  check,  payable  instantly,  by  a  drawer  who  has  no 
funds,  is  a  fraud. ^  This  is  hardly  a  stronger  case  than  the  over- 
drawing by  a  drawer  who  is  known  to  have  funds,  which  the  bank, 
relying  upon  him,  may  suppose  to  be  sufficient,  and  so  be  carelessly 
misled  into  an  erroneous  pajTnent.^ 

It  is  clearly  not  the  drawing,  but  the  issuing,  that  may  be 
fraudulent.  And  it  seems  very  doubtful  whether  the  Supreme 
Court  had  any  thought  of  saying  that  drawing  a  check  with  no 
funds  or  insufficient  funds,  can  be  a  fraud  on  the  bank.  There  are 
in  the  bank  full  means  of  information ;  it  has  no  right  to  rely  on 
the  representation  of  the  drawer  as  to  a  fact  concerning  which  it 
has  even  superior  opportunities  of  knowledge.  The  bank  must 
be  held  to  have  notice  of  what  its  books  show,  and  no  one  has  a 
right  to  rely  on  the  representation  of  another,  the  falsity  of  which 
is  known,  and  if  the  truth  or  falsity  of  the  statements  might  have 
been  tested  by  ordinary  vigilance  and  attention,  it  is  the  bank's 
own  folly  if  it  neglects  to  do  so.* 

But  a  check-holder  has  not  equal  means  of  information ;  he 
has  a  right  to  suppose  that  a  check  is  drawn  against  funds  (for 
that  is  the  presumption  of  law)  unless  otherwise  informed  at  the 
time  he  accepts  it,  and  it  has  therefore  been  held  in  England  that 
if  a  sale  of  goods  be  made  for  ready  money,  and  the  buyer  gives 
his  check  to  the  seller,  knowing  that  he  has  not  funds  in  the  bank 
sufficient  to  meet  it,  he  thereby  does  what  is  equivalent  to  a  false 
representation  of  a  material  fact.  This  will  vitiate  the  sale,  and 
entitle  the  seller  to  rescind  the  contract.  The  rule  is  asserted 
with  considerable  rigor,  for  it  is  declared  to  be  applicable  even 
though  the  drawer,  at  the  time  of  giving  the  check  not  drawn 
against  actual  funds  in  the  bank  to  his  credit,  nevertheless  had 

2  Merchants'  Bank  v.  State  Bank,  10  Wall.  604,  647,  19  L.  ed.  1008. 

3  Peterson  v.  Union  National  Bank,  52  Pa.  St.  206. 

*  Moore  v.  Turbeville,  2  Bibb  (Ky.)  602 ;  Saunders  v.  Hatterman,  2 
Ired.  (N.  C.)  32 ;    Farrar  v.  Alston,  1  Dev.  (N.  C.)  69. 

668 


BANK  MAY  RECOVEU  OVERDRAFT  FROM  THE  DRAWER   §  360 

reasonable  cause  to  suppose  tliat  it  would  he  paid.'^  The  fraudu- 
lent character  of  the  transaction  in  this  case  is  only  in  its  aspect 
towards  the  seller.  Whether  or  not  there  is  any  fraudulent  aspect 
as  towards  the  bank  is  quite  a  different  question. 

There  is  never  fraud  upon  one  merely  by  his  reliance  on  what 
he  had  no  right  to  rely  on.  The  bank  has  even  better  means  of 
information  as  to  the  state  of  the  drawer's  deposit  than  the  drawer 
has  himself,  since  he  may  not  know  what  checks  have  been  pre- 
sented nor  collections  made  for  him.  It  seems  clear,  therefore, 
that  the  bank  has  no  riglit  to  regard  a  check  as  an  affirmation  of 
funds  in  respect  to  itself,  though  it  is  clearly  such  an  affirmation 
as  to  an  innocent  holder.  The  case  of  Peterson  v.  Union  National 
Bank  clearly  decides  that  drawing  a  check  in  the  absence  of  funds 
is  a  fraud  on  the  bank  as  well  as  on  the  holder,  but  it  seems  mani- 
fest that  the  decision  on  the  facts  required  no  such  broad  statement. 
The  drawer  and  holder  both  knew  there  were  no  funds.  The  bank 
did  not  pay  the  check,  but  credited  the  holder  and  charged  the 
drawer.  The  drawer  had  absconded  before  the  check  was  pre- 
sented, and  the  holder  knew  this  fact.  Now,  although  a  check 
does  not  seem  to  us  an  affirmation  to  the  hank  of  funds  in  the  hank 
at  the  time  of  presenting,  it  seems  equally  clear  that  it  is  an  affirma- 
tion to  the  bank  that,  if  there  are  no  funds,  or  insufficient  funds, 
and  the  banker  honors  the  check,  the  drawer  will  reimburse  the 
bank ;  and  if  one  draws  a  check,  or  presents  it,  knowing  that  there 
are  no  funds,  that  the  remedy  over  of  the  bank  against  the  drawer 
is  worthless,  the  fraud  is  very  clear.  Such  was  the  case  some- 
times cited  for  the  very  different  doctrine  that  drawing  a  check 
without  funds  is  a  fraud  on  the  bank. 

The  case  of  True  v.  Thomas  decided  that,  when  the  drawer  has 
no  reasonable  expectation  that  his  check  will  be  honored,  the  draw- 
ing and  issuing  is  so  far  a  fraud  on  the  holder  that  he  is  relieved 
of  the  duty  of  demand  and  notice  so  far  as  the  drawer  himself  is 
concerned,  and  may  bring  suit  against  him  at  once.  The  question 
of  fraud  on  the  bank  was  not  raised  in  that  case. 

§  360.  Bank  may  recover  Overdraft  from  the  Drawer.  —  A 
bank  can  recover  the  amount  of  an  overdraft  from  tlie  drawer,^ 

^  Loughnan  v.  Barry,  6  Ir.  R.  C.  L.  457. 

1  §  3G0.  Franklin  Bank  v.  Bvrara,  39  Me.  489;  Langlois  v.  Gragnon, 
123  La.  453,  49  So.  18  (1909). 

It  is  no  defence  that  the  l)ank  promised  to  hold  the  money  deposited 
by  another  as  a  cash  item  until  it  should  he  determined  to  whom  the  money 
belonged,  since  such  an  agreement  could  not  create  a  lien  on  the  fund  nor 

669 


§  360  OVERDRAFTS 

or  from  one  who  has  received  it  with  knowledge  of  a  fraudulent 
overdrawing  and  without  consideration ;  ^  and  if  money  has  been 
by  overdraft  fraudulently  obtained  and  deposited  elsewhere,  it 
can  be  followed  and  claimed.^ 

The  view  noticed  above  —  that  it  is  wrongful  in  the  depositor 
to  overdraw  —  leads  to  the  conclusion  that  the  bank  may,  if  it 
chooses,  sue  him  in  tort  to  recover  the  amount  which  it  has  paid 
on  his  overdraft.  There  is  no  doubt  that  it  may  sue  him  in  i7i- 
dehitatus  assumpsit  for  money  paid  to  his  use,  the  promise  to  pay 
being  implied.^"  A  suit  brought  in  this  shape,  however,  operates 
as  a  waiver  of  the  tort,  and  in  it  the  depositor  may  avail  himself 
of  all  his  general  rights  of  set-off."* 

It  is  presumed  that  a  deposit  made  subsequent  to  an  overdraft 
is  received  toward  the  payment  of  such  overdraft.^ 

No  interest  is  allowed  on  the  overdraft  except  by  agreement.^ 

In  an  action  on  an  overdraft  the  bank  is  entitled  to  have  the 
whole  account  go  to  the  jury,  together  with  all  vouchers  sustain- 
ing it,  as  checks,  drafts,  and  notes.  The  bank-book  is  also  evi- 
dence as  showing  a  settlement.^ 

deprive  the  depositor  of  his  right  to  withdraw  it.  Jefferson  Savings  Bank 
V.  Irving,  145  Iowa  48,  123  N.  W.  937  (1909). 

When  a  note  was  taken  from  a  customer  in  the  usual  course  of  business  and 
without  knowledge  that  the  overdraft  was  given  for  the  purpose  of  paying  a 
debt  of  the  president  of  the  bank  to  the  customer,  the  debt  is  that  of  the  cus- 
tomer and  it  may  be  collected  from  him  even  though  the  president,  who 
was  ultimately  liable  to  the  bank  for  its  payment,  promised  the  customer  to 
pay  it.    Culpeper  National  Bank  v.  Walter,  1 14  Va.  522,  77  S.  E.  484  (1913). 

There  can  be  no  reeovei'y  from  the  principal  if  the  overdraft  was  by  an 
agent  who  had  no  authority  to  draw.  Merchants'  National  Bank  v. 
Nichols,  223  111.  41,  73  N.  E.  38,  7  L.  R.  A.  (n.  s.)  752  (1906),  affirming 
123  111.  App.  430  (1905). 

2  Mechanics'  Bank  v.  Levy,  3  Paige  (N.  Y.)  606. 

3  Tradesman's  Bank  v.  Merritt,  1  Paige  (N.  Y.)  302. 

^  Thomas  v.  International  Bank,  46  111.  App.  461.  See  Hennessy 
Bros.  V.  Memphis  National  Bank,  129  Fed.  557  (1904) ;  Earle  v.  Munce, 
133  Fed.  1008  (1904). 

4  Bank  of  the  United  States  v.  Macalester,  9  Pa.  St.  475. 

6  Nichols  V.  State,  46  Neb.  715,  65  N.  W.  774  (1894).  See  First  National 
Bank  v.  City  National  Bank,  102  Mo.  App.  357,  76  S.  W.  489  (1903) ; 
Van  Buren  County  Sav.  Bank  v.  Sterling  Woolen  Mills,  125  Iowa  645, 
101  N.  W.  477  (1904). 

«  Owens  V.  Stapp,  32  111.  App.  653 ;  Chicago,  etc.  Ry.  Co.  v.  Ayers, 
39  111.  App.  607. 

7  Jack  V.  Moyer,  187  Pa.  St.  87,  40  Atl.  1013  (1898). 

But  the  books  of  account  containing  certain  symbols  are,  in  the 
absence  of  explanatory  evidence,  insufficient  to  establish  an  overdraft. 
Walker  Bros.  v.  Skliris,  34  Utah  353,  98  Pac.  114  (1908). 

670 


CHAPTER  XXVII 
CHECKS   IN   GENERAL 


Definition,  Nature,  Essentials,  Kinds. 

Definition. 

A  check  is  an  unconditional  order  on  a  bank  or  banker  to  pay 
a  specified  sum  of  money  to  a  person  named,  or  order,  or  to 
bearer  on  demand. 

A  bill  of  exchange  may  be  on  demand  or  not,  on  a  banker  or 
373.  not ;  a  check  is  an  instrument  combining  these  two  attributes, 
from  which  the  law  presumes  that  it  is  drawn  against  funds 
actually  deposited,  it  may  be  more  philosophic  to  treat 
bills  as  the  genus  and  checks  a  species,  but  it  will  conduce  to 
clearness  to  use  the  words  exclusively,  which  we  shall  do. 

Contrast  with  Bills. 


§§  378-380.  Checks 

1.  Never  have  grace. 

2.  Must  be  drawn  upon  a 

bank. 

3.  Holder  may  sue  drawee 

before  accept- 
ance.  (?) 

4.  Drawer  not  discharged 

by  laches  in  present- 
ment, except  so  far 
as  actually  damaged 
thereby. 

5.  Drawer     must     check 

against  funds,  or  he 
is  guilt j^  of  fraud. 

6.  Holder  cannot  demand 

acceptance,  but  only 
payment. 

7.  Paj'ee  of  a  check  does 

not  gain  any  time  by 
giving  it  to  a  bank  to 
collect. 

8.  Death  of  drawer  is  held 

to  revoke.  (?) 


Bills 
May  or  may  not. 
May  or  may  not  be  so  drawn. 

Holder  cannot  sue  drawee  on  a  bill 
before  its  acceptance. 

Drawer   absolutely   discharged   by 
such  laches. 


Drawer    need    not    have  funds    in 
drawee's  hands. 

A  bill  is  of  right  presentable  for 
acceptance. 

Payee  of  a  bill  gains  one  day  by  so 
doing. 


Death  of  drawer  does  not  affect  the 
duties  of  the  other  parties;  the 
drawee   should   accept   just    the 


671 


CHECKS   IN    GENERAL 

An  Instrument  (I.)  drawn  upon  a  Banker,  and  payable  at  a 
§  381.  future  day  certain,  is  the  subject  of  much  conflict.     The 

§§  382-386.     better  opinion  is,  that  it  has  grace.     It  is  certainly  a  very 
different  instrument  from  a  post-dated  check,  which,  after 
the  arrival  of  its  date,  is  the  same  as  an  ordinary  check,  and 
payable  at  any  time  within  reasonable  Umits,  while  I.  is  pay- 
able upon  one  fixed  day.     Whether  I.  should  be  considered 
presentable  for  acceptance  like  a  bill  before  its  maturity,  or 
unpresentable  like  a  post-dated  check,  may  be  open  to  ques- 
tion, though  there  seems  to  be  no  reason  as  yet  given  suffi- 
§  367  b.        cient  for  considering  I.  anything  other  than  a  biU  of  exchange 
upon  a  banker,  except  in  those  cases  where  usage  controls. 
When  the  usages  of  business  men  are  not  sufficiently  clear  to 
gtiide  decision  in  such  matters,  simplicity  and  consistency 
in  the  law  should  be  regarded,  and  in  this  case  they  place 
I.  on  the  list  of  bills,  and  give  it  grace. 
§  363.     Description  and  Elements  of  a  Check. 
(o)   Indorsement. 
(6)   Form  of  check  so  unusual  as  to  be  suspicious,  bank  should 

have  time  for  inquiry. 
(c)    Distinction  between  refusal  to  pay  and  request  for  delay. 
§  364.  Essentials. 

§  365.  Signature.      §§  430,  432  et  seq. 

(a)  Representative  additions,  agent,  etc.,  whose  check. 

(b)  When  the  check  discloses  the  name  of  the  principal. 

(c)  Parol  evidence  admissible  to  show  who  is  bound. 
§  366.  Sum  certain,  "£",  "$",  written  sum  controls,  etc. 
§  367.                  Address 

To  cashier. 

(a)  Must  be  to  a  bank  or  banker  still  doing  business.     See 

§4. 

(b)  Writing  controls. 

(c)  Parol  admissible  to  show  who  is  the  drawee. 
§  368.                  Date. 

§  369.  On  demand. 

§  370.  Payee. 

(a)  Fictitious. 
§  371.  Words  of  Ordering. 

§  372.  Surplusage. 

§  373.  Presumptively  drawn  against  a  deposit. 

§  374.  Negotiability.     Missouri  statute,  etc. 

§  375.  Instrument  drawn  on  bank  in  another  State  still  a  check. 

§  376.  Instruments  in  form  of  checks,  but  not  so  really,  because  the 

bank  was  closed. 
§  377.     Checks  as  Bills  op  Exchange.     Days  of  grace. 
§  378.  United  States  Supreme  Court  summary  of  the  likeness  and 

difference  between  checks  and  bills. 
§  379.  C.  J.  Shaw's  opinion. 

§  380.  Grant's  summary. 

§  381.     Instruments  payable  at  a  Day  Certain. 
§  382  a.        The  best  view  gives  grace,  except  where  usage  is  to  the  contrary. 
§  383.  New  York,  Georgia,  Missouri,  Oregon. 

Ohio  and  CaHfornia  hold  such  usage  bad ;  probably  very  weak 

usage  was  in  evidence. 

672 


CHECKS    IN    GENERAL 

§  381  b.    §  384.     Story,  Sharswood  in  Pennsylvania,  and  thf  Rhode  Island 
§  385.         courts  hold  such  instrument  a  check,  and  payable  with- 
out grace. 
§  386.     Discussion  of  the  question. 

§  387.     Evidence  of  usage  should  be  received  on  this  subject. 
§  388.     Memorandum  Checks. 

As  to  the  bank,  they  are  the  same  as  any  other  check. 

As  to  the  drawer,  they  are  like  promissory  notes,  and  suit  may 

be  brought  against  him  without  previous  presentment. 
Parol  not  admissible  to  show  that  an  ordinary  check  was  really 
a  "mem." 

§  389.     Ante-dated  and  Post-dated  Checks. 

(a)  Bank  pays  before  date  at  its  own  risk. 

(c)  Post-dated  check  cannot  be  presented  for  acceptance  before  its 

date. 

(d)  Authority  to  an  agent  to  draw  "checks"  or  to  draw  "bills  " 

does   not   give  power  to  draw  post-dated   checks  in  his 
principal's  name. 
§  390.     Issue. 

Checks  take  e£fect  from  their  issue,  or,  if  this  is  conditional, 
then  as  to  those  with  notice,  from  the  fulfilment  of  the 
condition. 
A  check  is  issued  when  it  is  in  the  hands  of  one  who  may  de- 
mand payment. 
So  far  as  concerns  the  bank,  it  is  issued  even  in  the  hands  of  a 

thief,  if  the  bank  pays  it  bona  fide  ^vithout  notice. 
Conditional  delivery  may  be  shown  by  parol,  as  between  the 
original  parties  or  those  having  notice. 
Indorsement  of  Checks. 
§  391.  The  effect  of  indorsement  depends  on  the  actual  intent  as  to 

those  having  notice  of  such  intent,  and  on  the  presumptions 
arising  from  the  course  of  business  as  to  others  in  cases  where 
the  actual  intent  differs  from  that  presumed,  as  where  A. 
indorses  in  blank  for  collection  purposes.  As  to  the  bank 
knowing  the  purpose,  A.  is  not  bound  as  an  indorser,  but  as 
to  a  subsequent  holder  for  value  without  notice  A.  is  bound. 
An  indorsement  is  often  a  mere  receipt. 

A  check  payable  to  A.  or  bearer  may  be  indorsed,  and  if  it  is 
done  animo  indorsandi,  A.  will  be  bound. 
§  392.  Indorsement  by  a  lunatic  not  under  guardianship  held  to  pass 

no  rights  to  a  bona  fide  holder  ^\athout  notice.     Quwre  as  to 
the  justice  of  this. 
§  393.     Checks  payable  to  Bearer. 
Pass  by  delivery. 

Prima  facie  the  holder  is  the  owner. 

May  be  indorsed,  but  the  intent  to  become  liable  must  appear 
or  be  shown  ;  usually  such  indorsement  is  only  a  receipt. 
§  394.     Money  given  to  the  Drawer  of  a  Worthless  Check. 
§  395.     Transfer  of  Check  by  Mail. 
§  395  A.     Lost  Checks.     §  633,  C.  6. 

True  owner  may  recover  from  drawer,  unless  the  check  has 
come  to  a  bona  fiide  holder,  and  equity  will  compel  the  drawer 
to  give  a  new  check  on  proper  indemnity  being  given  him. 
vol.  1  —  43  G73 


§  363  CHECKS   IN    GENERAL 

If  a  lost  check  is  paid  on  a  forged  indorsement,  the  true  owner 
may  sue  the  bank  but  not  the  drawer. 
§  395  B.     Conversion  of  Check. 

§  363.  Description  and  Elements  of  a  Check.^  —  A  check  is 
the  instrument  by  which,  customarily,  a  depositor  seeks  to  with- 
draw his  funds,  or  any  part  thereof,  from  the  bank.  It  is  a  draft 
or  order  on  the  bank  requiring  it  to  pay  a  sum  named.  It  may 
be  made  payable  "  to  bearer",  or  "  to  A.  or  bearer",  or  "  to  A.  or 
order",  or  "  to  the  order  of  A."  In  the  two  latter  forms  it  must 
be  paid  to  A.  in  person,  or  to  one  deriving  title  from  him  through 
his  indorsement.  It  is  customary  to  indorse  even  when  the  payee 
makes  the  presentment  and  demand,  the  indorsement  then  having 
the  effect  of  a  receipt. 

Indorsement 

(a)  The  rules  governing  indorsement  in  cases  of  bills  of  ex- 
change, promissory  notes,  and  other  business  paper  made  payable 
to  order,  govern  checks  also.  Thus  a  check  may  be  indorsed 
generally,  or  in  blank,  or  to  the  order  of  B.,  who  again  may  indorse 
generally,  or  in  blank,  or  to  the  order  of  C.  Any  bona  fide  holder 
of  the  check  indorsed  in  blank  may  fill  in  a  special  direction  above 
the  indorsement,  making  it  payable  to  himself  or  order;  and  in 
suing  thereon,  though  he  has  not  written  in  such  direction,  he 
may  declare  upon  it  as  indorsed  to  himself,  and  will  sufficiently 
support  his  declaration  by  showing  that  it  was  indorsed  in  blank, 
and  that  he  is  the  holder  for  value,  and  in  due  course  of  business. 

Essentials  and  Mere  Formalities 

If  a  bank  refuses,  without  sufficient  excuse,  to  pay  a  check 
of  its  depositor,  it  is  liable  to  him  (as  will  be  seen  hereafter)  in 
substantial  damages.  It  is  therefore  of  the  first  importance 
that  it  should  be  clearly  understood  by  the  paying  officers  of  banks 
what  are  essential  requisites  going  to  the  validity  of  a  check,  and 

1  §  363.  In  using  this  chapter  it  should  be  borne  in  mind  that  it  does  not 
profess  to  treat  exhaustively  the  entire  subject  of  cheeks  considered  as  a 
species  of  commercial  paper.  To  do  so  would  be  to  trespass  more  largely 
upon  the  domain  of  works  on  Promissory  Notes,  Bills,  etc.,  than  our  space 
permits.  It  is  of  the  law  of  checks  so  far  as  banks  are  parties  to  them,  and 
owe  duties,  assume  obligations,  or  enjoy  rights  in  respect  to  them  and  to 
transactions  into  which  they  enter,  that  we  design  to  treat.  Beyond  these 
limits  this  chapter  does  not  pretend  to  state  the  law  or  cite  authorities. 

674 


DESCRIPTION    AND    ELEMENTS    OF   A    CHECK  §  3G3 

what  are  merely  customary  formalities  which  may  yet  be  legally 
dispensed  with.  Iu)r  if  the  check  be  lacking  in  any  of  the  former 
class  of  characteristics,  the  bank  is  not  only  justified  in  refusing 
to  pay  it,  but  if  it  does  pay  it  and  there  turns  out  to  ha\e  been 
anything  wrong  about  it,  rendering  the  payment  improper,  the 
bank  must  bear  the  loss,  and  restore  to  the  drawer's  credit  the 
amount  paid.  But,  upon  the  other  hand,  though  some  of  the 
latter  class  of  characteristics  may  be  wanting,  j-et  the  bank  is  not 
thereby  excused  from  its  obligation  to  pay ;  for  the  order  being 
good  at  law,  though  in  an  unusual  form,  is  competent  to  draw 
the  money  of  the  depositor.  If  the  bank  refuses  to  pay  upon  such 
an  order,  it  must  still,  in  strict  law,  be  held  to  answer  in  damages. 
Clearly  this  is  the  logical  sequence  of  the  reasoning,  and  yet, 
though  there  is  now  no  judicial  authority  for  saying  so,  it  seems 
highly  probable  that  in  cases  where  this  rule  would  operate  with 
excessive  and  unreasonable  severity  upon  the  bank  it  may  be  re- 
laxed. There  is  no  question  but  that  a  bank  is  entitled  to  exercise 
great  care  and  caution  to  avoid  being  imposed  upon  and  robbed 
by  fraudulent  and  irregular  orders.  There  is  no  question  that  it 
ought  to  have  the  right  to  demand  of  its  depositors  reasonable 
assistance,  and  a  conformity  to  some  moderate  degree  of  con- 
sistency of  conduct  in  drawing  their  orders,  in  order  to  render 
this  difficult  task  of  the  bank  at  least  a  practicable  possibility. 
It  cannot  be  said,  that,  because  a  depositor  ordinarily  uses  a  cer- 
tain form  of  blank  check,  therefore  the  occasional  use  of  a  check 
of  a  different  form  would  authorize  the  bank  in  rejecting  it,  or 
in  suspending  payment  till  it  could  satisfy  itself  of  the  authen- 
ticity of  the  instrument.  Such  deviations  from  routine  continu- 
ally occur,  and  are  to  be  expected.  But  if  the  order  be  couched 
in  any  very  peculiar  and  unwonted  shape,  and  bear  upon  its  face 
such  marks  of  peculiarity  as  naturally  to  cast  upon  it  a  high  de- 
gree of  suspicion  in  the  minds  of  the  bank  officers,  it  seems  only 
just  that  they  should  have  time  to  assure  themselves  of  its  regu- 
larity. 

//  Suspicious,  Bank  should  Inquire 

(b)  The  depositor,  having  by  his  own  eccentricity  given  suffi- 
cient cause  for  the  suspicion,  should  not  be  suffered  to  avail  him- 
self of  his  own  improper  act  to  recover  damages  from  the  bank, 
or  to  put  it  to  the  vexation  and  ex]5ense  of  a  lawsuit.  This  rule 
certainly  seems  perfectly  accordant  with  equity,  and  not  discordant 

075 


§  363  CHECKS    IN    GENERAL 

with  law.  At  worst,  it  cannot  be  doubted  that  the  law  could  limit 
the  amount  recoverable  to  nominal  damages.  A  very  strong 
case,  however,  ought  to  be  made  out  by  the  bank  in  order  to  give 
it  the  privilege  of  availing  itself  of  such  a  rule  to  its  full  extent. 
For  a  bank  is  held  to  know  its  customer's  handwriting,  and  any 
order  in  his  handwriting,  having  the  legal  requisites,  is  a  defence 
to  the  bank  if  it  pays  thereon.  So  that  the  peculiarity  in  an  in- 
strument of  this  description  ought  to  be  considerable  in  order  to 
make  out  a  satisfactory  case  for  temporary  refusal.  But  any 
noteworthy  peculiarity  might,  perhaps,  be  properly  admitted  in 
evidence  in  a  suit  at  law  by  way  only  of  mitigation  of  damages,  if 
the  bank  should  show,  as  a  fact,  that  it  was  exclusively  by  reason 
of  this  characteristic,  though  the  same  did  not  constitute  a  legal 
defence,  and  not  from  any  other  default  on  its  own  part,  that  it 
refused  to  make  the  payment.  For  clearly  a  bank  has  a  right  to 
demand  some  duties  from  its  customers  in  such  an  important 
matter  as  that  of  protection  from  fraud  in  a  business  where  frauds 
of  a  peculiarly  artful  and  ingenious  nature  are  continually  in  the 
course  of  perpetration. 

Distinction  between  R^usal  and  Delay 

(c)  Further,  distinctions  may  properly  be  drawn  between  an 
absolute  refusal  to  pay,  and  a  demand  for  a  reasonable  delay, 
sufficient  only  to  enable  the  bank  to  satisfy  itself  of  the  correctness 
of  the  instrument  presented.  The  latter  may  often  be  proper 
when  the  former  could  not  be  considered  so. 

§  364.  Essentials.  —  At  common  law  no  precise  form  is  in- 
dispensable to  the  validity  of  a  check,  though  there  are  some  few 
elements  which  are  essential,  and  w^hich  must  be  present  to  secure 
its  legal  sufficiency.  In  England  the  statutes  define  certain  req- 
uisites. In  this  country  no  such  enactments  have  yet  been  passed. 
They  are,  however,  the  less  missed,  because  adjudicated  cases 
have  pretty  thoroughly  covered  the  ground. 

§  365.  Signature.  —  In  the  first  place,  the  signature  of  the 
drawer  is  necessary .^  But  it  is  not  indispensable  that  this  sig- 
nature should  appear  in  the  ordinary  form  at  the  foot  of  the  check. 

1  §  365.  Taylor  v.  Dobbins,  1  Strange  399 ;  Saunderson  v.  Jackson, 
2  B.  &  P.  238 ;   Grant  on  Bankers  and  Banking. 

It  is  not  necessary  that  the  body  of  the  check  be  in  the  handwriting  of 
the  drawer.     First  State  Bank  v.  Vogeli,  78  Kan.  264,  96  Pac.  490,  19 
L.  R.  A.  (n.  s.)  402  (1908). 
G76 


SIGNATURE  §  365 

It  may  be  embodied  in  the  instrument,  as,  for  example,  "  I,  A.  B., 
direct",  or  "  A.  B.  requests."  If  it  be  thus  written  in  an  order, 
otherwise  sufficient  and  in  the  handwriting  of  the  drawer,  it  is 
enough.  But  the  handwriting  of  tlie  drawer  is  the  safeguard  of 
the  bank  in  making  its  payment ;  ^^  so,  though  the  instrument  be 
not  under  seal,  and  the  depositor  may  give  a  simple  parol  authority 
to  another  to  sign  his  name,  which  if  it  could  be  shown  by  the  bank 
would  justify  its  payment  on  the  order  so  signed,  yet  this  signature 
does  not  render  it  incumbent  on  the  bank  to  pay.  The  signature 
in  the  handwriting  of  the  drawer,  or  by  his  attorney,  whose  power 
has  been  duly  notified  to  the  bank,  is  an  element  which  the  bank 
may,  and  for  its  own  safety  ought  to,  insist  upon. 

Representative  Additions.     Whose  Check 

(a)  Annexing  "Agent",  "Trustee",  "Treasurer",  etc.,  to  a 
signature,  does  not  of  itself  notify  parties  that  the  signer  acts 
only  as  a  representative,  when  he  does  not  disclose  his  principal. 
It  is  mere  descriptio  personcB.  But  the  addition  expresses  the  fact, 
and  if  he  has  been  in  the  habit  of  signing  in  that  way  in  dealing  with 
a  particular  party  who  recognizes  him  in  his  representative  char- 
acter, "  it  would  be  contrary  to  justice  and  truth  to  construe  the 
document  thus  made  as  his  personal  obligation,  contrary  to  the 
intent  of  the  parties."  ^ 

In  this  case  a  personal  recovery  was  sought  on  a  check  signed 
"  E.  P.  A.,  Secretary",  and  "  W.  S.  W.,  Vice  Prest."  ;  and  Judge 
Bradley  said  that  such  signatures  were  very  unusual  in  individual 
transactions,  and  pointed  so  clearly  to  an  official  origin  that  it 
might  be  doubted  if  any  holder  could  claim  ignorance  of  the  real 
character  of  the  check ;  but  in  this  case  it  was  unnecessary  to  de- 
cide that  point,  as  the  holder  actually  knew  the  origin  of  the  check, 
and  "  the  plea  that  the  name  of  the  principal  was  not  disclosed 
on  the  face  of  the  paper  cannot  be  made  by  him,  for  he  knew  all 
about  it."  2 

(6)  When  the  check  discloses  the  name  of  the  corporation 
principal,  and  is  signed  with  an  official  addition,  it  is  usually  hold 

1"  It  is  negligence  per  se  for  the  bank  to  pay  an  unsigned  cheek  and  it  is 
liable  to  the  depositor  for  so  doing.  Kenneth  Ins.  Co.  v.  National  Bank, 
96  Mo.  App.  125,  70  S.  W.  173  (1902). 

2  Metcalf  ('.  Williams,  104  U.  S.  93,  26  L.  ed.  665 ;  Shelden  Canal  Co. 
V.  Miller,  40  Tex.  Civ.  App.  460,  90  S.  W.  206  (1905) ;  State  v.  Jahraus, 
117  La.  286,  41  So.  575,  116  Am.  St.  Rep.  208  (1906). 

677 


I  365  CHECKS   IN    GENERAL 

to  be  a  corporate  check,  as  where  "  ^Etna  Mills  "  was  printed  in 
the  margin  and  the  signing  was  "  J.  D.  F.,  Treas."  ^  So  where 
"  Office  of  Portage  Lake  Manftg.  Co."  was  printed  at  the  top 
of  bills,  and  they  were  signed  "  I.  R.  J.,  Agent " ;  *  and  where 
"  Pompton  Iron  Works  "  was  in  the  margin,  and  the  draft  was 
signed  "  W.  B.,  Agt. ;  "  ^  and  where  the  draft  said, "Charge  the 
same  to  Swanzey  Paper  Co.,  J.  H.,  Agt."  ^ 

Where  a  check  was  signed  by  three  directors  individually,  their 
official  character  nowhere  appearing,  and  also  by  the  secretary 
with  his  addition  "  Secretary",  and  the  name  of  the  principal  was 
not  disclosed,  it  was  held  not  to  be  a  corporate  check.'^ 

(c)  Where  it  is  doubtful  on  the  face  of  a  check  whether  it  is 
intended  as  an  individual  obligation  or  not,  parol  evidence  is  ad- 
missible to  show  who  was  intended  to  be  bound  ;  as  where  the  sig- 
nature was  "  J.  K.,  Prest.  Eliztn.  &  S.  R.  R.  Co."  ^  ^ 

§  366.  For  a  Svim  certain.  —  The  sum  to  be  paid  must  be  set 
forth  with  that  degree  of  precision  which  will  enable  the  bank  to 
know  with  certainty  what  it  is.  It  must  be  in  terms  of  the  national 
money  of  account,  and  not  of  foreign  money.  A  check  drawn  on 
one  of  our  banks  by  a  depositor  living  here  and  expressed  in  sover- 
eigns or  in  francs,  would  properly  be  refused  payment.^  But 
familiar  and  unmistakable  abbreviations  may  be  used.  Thus 
in  England  the  marks  "£.  s.  d.",  without  more,  have  been  held 
sufficiently  to  signify  pounds,  shillings,  and  pence.^  In  our  own 
country,  it  has  been  substantially  held  that  the  sign  "  $  "  intends 
"  dollars",  although  the  word  itself  nowhere  appears  in  any  other 
form  throughout  the  instrument  .^  One  case  has  gone  much  farther 
even  than  this,  —  it  may  in  fact  prove  rather  dangerously  far, 
when  it  is  considered  how  easily  a  dot  may  slip  in  where  it  is  not 
intended,  or  where  a  comma,  which  signifies  a  very  different 
matter,  may  have  been  meant  to  be  placed.  An  order  was  drawn 
simply  for  "  37.89",  in  figures,  without  even  the  mark  $,  and  the 
court  said  that  it  would  intend  therefrom  that  these  numbers  were 

3  Carpenter  v.  Farnsworth,  106  Mass.  561. 
^  Slawson  v.  Loring,  5  Allen  (Mass.)  343. 
6  Fuller  V.  Hooper,  3  Gray  (Mass.)  334. 

6  Tripp  V.  Swanzey  Paper  Co.,  13  Pick.  (Mass.)  291.     See  also  Bank 
of  British  North  America  v.  Hooper,  5  Pick.  (Mass.)  567. 

7  Serrel  v.  Derbyshire  R.  R.  Co.,  19  L.  J.  C.  P.  377. 

8  Lazarus  v.  Shearer,  2  Ala.  718 ;   Keen  v.  Davis,  21  N.  J.  L.,  683. 

1  §  366.     Rastell  v.   Draper,   Yelv.  80 ;    Moore,  775 ;    Cro.  Jac.  88 ; 
Grant  on  Bankers  and  Banking,  16,  and  note. 

2  Kearney  v.  King,  2  Barn.  &  Aid.  301.        ^  Corgan  v.  Frew,  39  111.  31. 

678 


ADDRESS  §  367 

used  as  whole  numbers  and  as  decimals,  to  express  United  States 
currency.*  But  though  a  court  may  have  been  willing,  in  a  cer- 
tain case,  to  prefer  this  interpretation  to  the  necessity  of  otherwise 
holding  an  instrument  void  for  intelligibility,  it  hardly  follows  that 
a  bank  might  not  be  held  fully  justified  in  declining  to  pay  a  draft 
so  indistinctly  expressed  on  the  ground  of  an  uncertainty  so  great 
that  it  could  not  surely  know  what  its  customer's  order  really  was. 
This  might  well  be  adduced  as  an  example  of  one  of  those  cases, 
where,  even  if  the  court  should  still  hold  the  instrument  sufficient 
to  have  drawn  pa\Tiient  from  the  bank,  yet  the  customer's  care- 
lessness must  preclude  him  from  recovering  damages  from  the 
bank  for  refusing  to  pay. 

The  written  sum  controls  that  in  figures.^  On  the  margin  of  a 
check  was  "  213G.00  "  while  in  the  body  were  the  words,  "  Twenty- 
one  and  thirty-six  in  exchange  dollars  " ;  held,  that  the  words 
contradicted  and  controlled  the  figures.® 

§  367.  Address.  —  It  has  been  held  in  England,  and  it  is  un- 
doubtedly law  also  in  the  United  States,  that  a  check  must  be 
addressed.  Ordinarily  our  bank  checks,  in  the  common  forms, 
bear  at  the  top  in  large  type  the  name  of  the  bank  on  which  they 
are  drawn,  and  usually,  either  before  this  name  or  in  the  lower 
left-hand  corner,  also  the  words,  "To  the  cashier  of  ",  or  "To  the 
cashier."  \Vhether  or  not  these  words,  "To  the  cashier",  are 
indispensable  to  a  perfect  check,  has  never  been  decided ;  it  may 
be  supposed  that  they  are  not.  No  person  or  institution  not  ad- 
dressed in  a  check  or  order  is  called  upon  to  cash  it,  or  could  be 
protected  in  erroneously  doing  so.  A  pa;^Tnent  so  made  is  simply 
a  gratuitous  payment,  which  the  payer  can  recover  from  no  person.^ 

(a)  A  check  must  be  drawn  upon  a  banker,^  and  on  a  bank  that 
is  not  closed.^ 

(6)  Where  a  printed  form  upon  the  "  First  National  Bank  of 
Milwaukee  "  was  used  by  crossing  the  words  "  First  National  " 
and  writing  "  O.  M.  Tyler  "  over  them  in  pencil,  it  was  held  that 
the  maxim  Falsa  demonstratio  non  nocet  applied,  and  the  drawee's 

*  Northrop  v.  Sanborn,  22  Vt.  433.  «  Smith  v.  Smith,  1  R.  T.  398. 

6  National  Bank  v.  Second  National  Bank  of  Lafayette,  69  Ind.  479 
(1880). 

1  §  367.     Grant  on  Bankers  and  Banking. 

2  Roberts  v.  Austin,  26  Iowa  315;  Planters'  Bank  v.  Keesee,  7  Heisk. 
(Tenn.)  200 ;   Espy  v.  Bank  of  Cincinnati,  18  Wall.  620,  21  L.  ed.  947. 

'  Harmanson  v.  Bain,  1  Hughes  188.  A  draft  on  a  bank  in  liquida- 
tion is  merely  an  assignment  of  a  chose  in  action,  or  evidence  of  it. 

679 


§  367  CHECKS   IN   GENERAL 

name  was  sufficiently  certain,   although  the  words   "  Bank  of 
Milwaukee  "  remained  uncrossed.'' 

That  the  instrument  is  drawn  upon  a  bank  or  banker  is  not  of 
itself  enough  to  distinguish  it,  since  a  bill  of  exchange  may  be 
addressed  to  a  banker.^  If  the  addressee  is  really  a  banker,  this 
is  sufficient  to  make  the  instrument  a  check,  though  his  character 
does  not  appear  in  the  paper,^  except  as  against  a  holder  without 
notice. 

Parol 

(c)  A  check  drawn  on  "  A.  B.,  Bank  of  Milwaukee",  there  being 
no  such  person  or  bank,  was  held  to  be  an  order  on  A.  B.,  and  that 
parol  was  admissible  to  explain  the  matter  and  show  who  was  the 
addressee.' 

A  check  dated  at  "  Lafayette,  Ind.,"  and  drawn  on  the  "  First 
National  Bank",  was  presumed  to  be  a  check  on  the  First  National 
Bank  of  Lafayette,  and  parol  was  admissible  to  show  that  there 
was  such  a  bank.^ 

§  368.  Date.  —  A  check  must  be  dated.  It  may  be  dated 
either  on,  before,  or  after  the  day  it  is  issued.  But  it  would  seem 
that  if  a  check  is  not  dated  at  all,  and  contains  no  statement  of 
a  date  when  it  is  to  be  paid,  it  is  never  payable.  For  a  check  is 
payable  either  on  the  day  of  its  date,  or  else  on  some  other  day 
specifically  designated  in  it.  So,  if  it  is  not  dated  at  all,  and  if  no 
designation  occurs,  expressed  in  the  body,  which  might  perhaps 
operate  to  supply  the  deficiency  of  a  formal  dating,  it  is  reasonable 
to  say  that  it  can  never  become  due,  and  payment  can  never  be 
demanded.  If  this  rule,  which  is  not  directly  asserted  in  any  ad- 
judication, goes  all  too  far,  it  is  nevertheless  utterly  impossible 
to  doubt  that  a  bank  Avould  be  fully  justified  in  refusing  to  pay  a 
check  showing  an  unexplained  deficiency  of  so  important  a  char- 
acter." It  has  been  said  that  a  check  may  be  dated  on  Sunday, 
though  it  cannot  be  payable  on  that  day.^ 

4  Cork  V.  Bacon,  45  Wis.  192. 

6  Georgia  National  Bank  v.  Henderson,  46  Ga.  495. 

6  Planters'  Bank  v.  Keesee,  7  Heisk.  (Tenn.)  200. 

^  Cork  V.  Bacon,  45  Wis.  192. 

8  Culver  V.  Marks,  122  Ind.  554,  23  N.  E.  1086. 

0  §  368.  In  Gordon  v.  Lansing  State  Sav.  Bank,  133  Mich.  143,  94 
N.  W.  741  (1903)  a  judge,  dissenting  upon  another  point,  says  that  the 
weight  of  authority  is  to  the  effect  that  the  omission  of  the  date  does  not 
invalidate  the  check. 

1  Begbie  v.  Levi,  1  C.  &  J.  180.  See  also  Grant  on  Bankers  and  Bank- 
ing.    See  below,  tit.  "Post-dated  Checks." 

680 


PAYEE    MUST    BE    NAMED  §  370 

§  369.  On  Demand.  —  The  essential  characteristic  of  a  check 
is  that  it  shall  be  instantly  payable  on  demand.^ 

A  draft  on  a  bank  payable  at  a  future  time  is  not  a  check,  but 
a  bill.2 

§  370.  Payee  must  be  named.  —  Where  no  payee  is  indicated, 
the  instrument  is  not  a  check. ^ 

Fictitious  Payee 

(a)  It  may  be  that  a  check  is  neither  made  payable  to  bearer 
nor  to  the  order  of  any  person.  That  is,  it  may  be  made  payable 
to  the  order  of  A.  B.,  being,  or  intended  and  supposed  to  be,  a 
fictitious  name.  In  such  case  no  indorsement  is  required,  for  the 
check  is  regarded  as  equivalent  to  a  check  made  payable  to  bearer.^ 
In  fact,  a  check  drawn  to  the  order  of  a  mere  name,  representing 
no  actual  individual,  is  not  drawn  to  the  order  of  any  person,  but 
to  the  order  of  mere  ivords.  It  is,  therefore,  incapable  of  indorse- 
ment by  a  payee,  and  is  of  like  character  with  the  checks  forthwith 
to  be  mentioned  in  this  connection. 

So  checks,  being  filled  in  on  printed  blanks  and  intended  also 
to  serve  as  memoranda  of  the  purpose  for  which  they  are  drawn, 
are  often  made  payable  to  words  in  themselves  meaningless  in  the 
connection  in  which  they  are  used ;  e.g.  "  to  the  order  of  bills 
payable",  or  of  "rent",  or  "of  1685",  or  any  other  words  not 
signifying  either  existing  persons  or  a  corpration.  In  all  such 
cases  the  checks  are  regarded  at  law  as  if  they  had  been  made 
payable  simply  to  bearer,  and  they  have  all  the  legal  character- 
istics of  checks  actually  so  made.' 

1  §  369.  Merchants'  National  Bank  v.  Ritzinger,  118  111.  486,  8  X.  E. 
834. 

But  the  depositor  may  agree  with  the  bank  that  payment  shall  be 
deferred  for  a  reasonal)le  time  to  enable  the  bank  to  ascertain  whether 
it  has  on  hand  sufficient  funds  of  the  drawer  of  the  cheek  with  which  to 
pay  it.  And  if  the  parties  knew  of  a  custom  to  that  effect  they  are  bound 
thereby.  Pollack  v.  National  Bank,  168  Mo.  App.  368,  151  S.  W.  774 
(1912). 

2  Harrison  v.  Nicollet  Bank,  41  Minn.  488,  43  N.  W.  336. 

1  §  370.  Mcintosh  v.  Lytle,  26  Minn.  336,  3  N.  W.  983 ;  Daniel  Neg. 
Inst.  §  1571.  See  Gordon  v.  Lansing  State  Sav.  Bank,  733  Mich.  143, 
94  N.  W.  741  (1903). 

2Coggill  V.  American  Exchange  Bank,  1  Comst.  (N.  Y.)  113;  Plets  v. 
Johnson,  3  Hill  (N.  Y.)  112;  Foster  v.  Shattuck,  2  N.  H.  466;  Vere  v. 
Lewis,  3  Term  182;  Minet  v.  Gibson,  id.,  481,  and  s.  c.  1  H.  Bl.  569; 
CoUis  V.  Emett,  1  H.  Bl.  313. 

3  Story  on  Promissory  Notes,  §  488 ;   Willets  v.  Phoenix  Bank.  2  Duer 

681 


§  370  CHECKS   IN    GENERAL 

But  if  a  line  is  drawn  through  the  space  provided  for  the  name 
of  the  payee,  it  is  not  payable  to  bearer  or  to  an  impersonal  payee, 
and  is  void.^'' 

Equitable  ownership  may  be  shown  to  be  in  a  person  other  than 
the  payee  named  in  the  check.^ 

§  371.  Words  of  Ordering.  —  Finally,  it  seems  almost  super- 
fluous to  remark,  in  closing  the  list  of  indispensable  requisites, 
that  there  must,  of  course,  be  sufficient  words  of  ordering  or 
requesting  to  signify  the  intent  of  the  drawer  that  the  bank 
should  pay  the  sum  named  in  the  manner  named.  This  is 
elementary,  and  has  never  required  the  support  of  a  judicial 
decision. 

§  372.  Surplusage.  —  Provided  the  check  combines  all  these 
characteristics,  it  is  not  the  less  a  check,  nor  is  it  invalidated  as 
an  order  on  the  bank,  because  it  contains  other  immaterial  matter  ; 
such,  for  example,  as  the  statement  that  it  is  given  for  value  re- 
ceived, or  a  mention  of  the  consideration.^ 

Where  a  check  contained  the  words  "  original  "  and  "  second 
unpaid  ",  it  was  urged  that  these  expressions  made  its  payment 
conditional,  and  that  it  was  not  a  check.  But  the  court  said :  ^ 
"  The  practice  of  making  more  than  one  copy  of  an  instrument 
ordering  or  requesting  the  payment  of  money,  we  concede,  is 
generally  confined  to  foreign  bills  of  exchange  ;  but  there  is  nothing, 
in  our  opinion,  in  the  purpose  or  effect  of  that  practice,  which 
should  render  it  inapplicable,  under  all  circumstances,  to  checks. 
The  purpose  is  to  guard  against  loss  or  question  in  case  of  mis- 
carriage, the  chances  of  the  bill  reaching,  in  due  season,  the  party 
to  whom  it  is  transmitted,  being  increased  by  the  number  of  copies. 
But  this  does  not  render  the  instrument  a  condition  alone,  in  any 
sense.  The  whole  of  the  set  constitutes,  in  law,  but  one  bill, 
and  therefore  payment  or  cancelling  of  either  of  the  set  is  a 
discharge." 

An  instrument  is  not  less  a  check  because  it  orders  payment  "on 
account  of  A."  ^ 

(N.  Y.)  121 ;  Mechanics'  Bank  v.  Straiton,  3  Keyes  (N.  Y.)  365;  Vere  v. 
Lewis,  3  Term  182;   Minet  v.  Gibson,  id.,  481 ;    1  H.  Bl.  569. 

3°  Gordon  v.  Lansing  State  Sav.  Bank,  133  Mich.  143,  94  N.  W.  741 
(1903). 

*  Maclv-ey  v.  Craig,  144  Ind.  203,  43  X.  E.  6. 

1  §  372.     Wells  V.  Brigham,  6  Gush.  (Mass.)  6. 

2  Merchants'  National  Bank  v.  Ritzinger,  118  lU.  487,  8  N.  E.  834. 
3 109  111.  479. 

682 


PAYAULE  IX  ANOTHER  STATE  §  375 

§  373.  Presumptively  drawn  against  a  Deposit.  —  A  clieck 
purports  to  be  drawn  against  a  deposit.  It  may  not  really  be 
drawn  against  funds,  but  if  it  purports  to  be  it  is  a  check.' 

A  check  is  presumptivelx'  drawn  on  a  previous  deposit/"  and 
is  an  absolute  appropriation  of  it  to  the  amount  of  the  check.^ 

The  giving  of  a  post-dated  check  is  not  a  representation  that 
the  maker  has  the  funds  then  in  the  bank,  but  it  is  a  representation 
that  it  is  a  solid  order  for  the  amount  named,  and  that  the  existing 
state  of  facts  is  such  that  in  ordinary  course  the  check  will  be  met.^ 

§  374.  Negotiability.  —  In  ^Missouri  by  statute  the  words 
"  for  value  received  "  are  essential  to  negotiability.' 

An  instrument  payable  "  in  bills  bank",  or  "  in  currency",  has 
been  held  not  to  be  negotiable.-  But  the  better  opinion  is  that  the 
words  "payable  in  currency",  or  "in  current  funds",  do  not 
impair  the  negotiability  of  a  bank  check ;  such  terms  mean  money .^ 

An  order  qualified  on  its  face  by  the  words,  "  the  bank-book 
of  the  depositor  must  accompany  this  order",  is  not  negotiable.^ 
And  so  where  in  the  upper  margin  of  the  order  is  printed,  "  Return 
notice  ticket  with  this  order  ",  and  in  the  lower  margin,  "  Deposit 
must  be  at  the  bank  before  money  can  be  paid."  ^ 

The  negotiable  character  of  a  check  raises  a  prima  facie  presump- 
tion that  it  is  founded  on  a  valuable  consideration.^ 

§  375.  Payable  in  another  State.  —  The  fact  that  the  instru- 
ment is  payable  in  another  State  than  the  one  in  which  it  is  drawn, 
does  n"ot  change  its  character  as  a  check.' 

1  §  37.3.  Champion  v.  Gordon,  70  Pa.  St.  476 ;  \^^lite  v.  Ambler,  8 
N.  Y.  170 ;  McKnight  v.  Bank  of  Acadia,  114  La.  289,  38  So.  172  (1905). 

>»  McClain  v.  Lowther,  35  W.  Va.  297,  13  S.  E.  1003  (1891) ;  Industrial 
Trust,  Title,  &  Savings  Co.  v.  Weakley,  103  Ala.  458,  15  So.  854  (1893) ; 
Farmers'  Bank  v.  Johnson,  134  Ga.  486,  68  S.  E.  85,  137  Am.  St.  Rep.  242, 
30  L.  R.  A.  (n.  s.)  697,  n.  (1910). 

2  Stevens  v.  Park,  73  111.  387 ;   Lester  v.  Given,  8  Bush  (Ky.)  357. 

3  Barton  v.  People,  35  111.  App.  573. 

'  §  374.     International  Bank  v.  German  Bank,  3  ]\Io.  App.  362. 

2  Little  V.  PhcBnix  Bank,  2  Hill  (X.  Y.)  425;  Bank  of  Mobile  v.  Brown, 
42  Ala.  108. 

3  Bull  V.  First  National  Bank,  123  U.  S.  105,  31  L.  ed.  97,  8  Sup.  Ct.  62. 

*  White  V.  Gushing,  88  Me.  339,  34  Atl.  164. 

6  Iron  City  National  Bank  v.  McCord,  139  Pa.  St.  52,  21  Atl.  143. 

•  Lamp  Co.  t'.  Mannfaeturing  Co.,  64  Mo.  App.  115. 

1  §  375.  Merchants'  National  Bank  v.  Ritzinger.  118  111.  486,  8  N.  E. 
834;  National  Bank  of  America  v.  Indiana  Banking  Co.,  114  111.  483, 
2  N.  E.  401 ;  Union  National  Bank  v.  Oceana  County  Bank,  80  111.  212  ; 
Planters'  Bank  v.  Keesee,  7  Ileisk.  (Tenn.)  200;  2  Parsons,  B.  &  N.  58, 
59;  Roberts  v.  Austin,  26  Iowa  315;  Bowen  v.  Needles  National  Bank, 
87  Fed.  437  (1898). 

CS3 


§  376  CHECKS   IN    GENERAL 

§  376.  Instruments  having  the  Form  of  Checks.  —  An  instru- 
ment may  have  in  every  respect  the  form  of  a  check,  and  may  yet 
not  have  this  character  as  matter  of  law.  An  instance  of  this, 
and  perhaps  the  only  description  of  such  instances  likely  to  occur, 
is  furnished  by  the  following  case.  A  bank,  after  having  ceased 
to  do  business  for  ten  years,  resumed,  but  only  for  the  purpose  of 
liquidation.  In  this  process  seven  years  more  were  consumed, 
during  which  time  deposits  due  from  the  bank  were  treated,  prac- 
tically, as  commodities,  were  bought  and  sold  in  the  market  like 
bonds  or  stocks,  were  never  redeemed  in  money  by  the  bank,  but 
were  only  sought  by  parties  indebted  to  the  bank  in  order  that  they 
might  be  availed  of  in  set-off.  It  was  held  that  a  draft  drawn 
against  these  deposits,  though  in  form  a  check,  yet  was  not  so  in 
law,  inasmuch  as  it  was  not  in  fact  payable  in  money,  nor  was  it 
drawn  on  a  bank  properly  so  described ;  also  because  it  was  of 
limited  negotiability.  It  was  said  to  be  simply  evidence  of  an 
assignment  of  a  chose  in  action.^ 

§  377.  Checks  as  Bills  of  Exchange :  Days  of  Grace.  —  Checks 
are  constantly  stated  to  be  like  bills  of  exchange,  and  to  be  gov- 
erned by  the  same  rules ;  sometimes  they  have  even  been  said 
actually  to  be  bills  of  exchange.^  Other  authorities  content  them- 
selves with  stating  that  the  analogy  between  these  two  instru- 
ments is  very  close.  Much  laxity  and  diversity  of  language  will 
be  found  in  the  opinions  of  the  courts  in  this  respect.  The  judges 
will  be  found  to  say  that  a  check  is  like  a  bill  of  exchange,  except 
in  certain  characteristics,  and  then  each  judge  w^ill  mention  the 
characteristic  which  happens  at  the  moment  to  occur  to  his  mind 
as  presenting  a  point  of  distinction.  But  the  controversy  seems 
to  be  little  more  than  one  of  language.  It  makes  very  little 
difference  whether  it  be  stated  that  a  bill  of  exchange  and  a  check 
are  substantially  one  and  the  same  instrument,  but  that  they  differ, 
by  reason  of  the  usages  of  business  and  the  manner  of  drawing 
them,  in  some  very  material  points ;  or  whether,  on  the  other 
hand,  it  be  stated  that  they  are  distinct  instruments,  but  that  they 
have  very  many  and  very  strong  points  of  resemblance  and  even 
of  identity.  The  one  statement  is  simply  based  on  a  recognition 
of  the  points  of  resemblance  as  forming  a  bond  of  union  strong 

^  §  376.    Harmanson  v.  Bain,  15Nationa]  Bankr.  Reg.  (E.  Dist.  Va.)  173. 

1  §  377.  Rogers  v.  Durant,  140  U.  S.  298,  35  L.  ed.  481,  11  Sup.  Ct.  754 
(1891);  People  v.  Kemp,  76  Mich.  410,  43  N.  W.  439;  First  National 
Bank  v.  Northwestern  Bank,  152  111.  296,  38  N.  E.  739. 

684 


OPINION    OF    C.    J.    SHAW  §  379 

enough  to  overcome  the  repulsion  of  the  points  of  difference. 
The  other  grows  out  of  the  view  that  the  substantial  differences 
are  more  powerful  to  sunder  the  two  classes  of  instruments  than 
the  points  of  similarity  are  to  unite  them.  It  follows  that  so  long 
as  all  are  agreed  on  what  are  in  fact  the  points  of  resemblance, 
and  what  are  in  fact  the  points  of  difference,  this  is  all  that  is 
really  essential  in  the  matter. 

§  378.  United  States  Sximmary  of  Likeness  and  Difference.  — 
The  Supreme  Court  of  the  United  States,  in  a  leading  case,  say : 
"  Bank  checks  are  not  inland  bills  of  exchange,  but  have  many 
of  the  properties  of  such  commercial  paper;  and  many  of  the 
rules  of  the  law  merchant  are  alike  applicable  to  both.  Each 
is  for  a  specific  sum  payable  in  money.  In  both  cases  there  is  a 
drawer,  a  drawee,  and  a  payee.  Without  acceptance  no  action 
can  be  maintained  by  the  holder  upon  either  against  the  drawee. 
The  chief  points  of  difference  are  that  a  check  is  always  drawn  on  a 
bank  or  banker ;  no  days  of  grace  are  allowed.  The  drawer  is  not 
discharged  by  the  laches  of  the  holder  in  presentment  for  payment, 
unless  he  can  show  that  he  has  sustained  some  injury  by  the  de- 
fault.^  It  is  not  due  until  payment  is  demanded,  and  the  Statute 
of  Limitations  runs  only  from  that  time.  It  is  by  its  face  the  ap- 
propriation of  so  much  money  of  the  drawer  in  the  hands  of  the 
drawee  to  the  payment  of  an  admitted  liability  of  the  drawer.  It 
is  not  necessary  that  the  drawer  of  a  bill  should  have  funds  in  the 
hands  of  the  drawee.  A  check  in  such  a  case  would  be  a  fraud."  - 
Further,  it  is  admitted  without  dispute  that  a  check  is  "  never 
presentable  for  acceptance,  but  only  for  pa^Tiient"  ;  ^  that  is  to  say, 
the  holder  has  no  right  to  demand  anything  save  a  cash  payment ; 
he  has  no  claim  upon  the  bank  to  accept. 

§  379.  Opinion  of  C.  J.  Shaw.  —  A  check  is  an  order  to  pay 
the  holder  a  sum  of  money  at  the  bank  on  presentment  of  the  check 
and  demand  of  the  money ;  no  previous  notice  is  necessary ;  no 
acceptance  is  required  or  expected  ;  it  has  no  days  of  grace.  It 
is  payable  on  presentment,  and  not  before.  Mere  notice  to  the 
bank  that  a  party  holds  a  check  without  presentment  and  demand 
will  not  bind   the   bank,   and    if  there   be  funds  when   notice 

1  §  378.  See  also  Keene  v.  Beard,  8  C.  B.  n.  s.  372;  Laws  i-.  Rand, 
3  id.,  442;   Robinson  v.  Ilawksford,  9  Q.  B.  52. 

2  Merchants'  Bank  v.  State  Bank,  10  Wall.  604,  647,  19  L.  ed.  1008, 
1019.  See  Espy  v.  Bank  of  Cincinnati,  18  Wall.  604,  620,  21  L.  ed.  947, 
951. 

3  Morse  u.  Massachusetts  National  Bank,  1  Holmes  (C.  C.)  209. 

685 


§  379  CHECKS   IN    GENERAL 

is  thus  given,  without  presentment  for  payment  by  the 
holder,  and  in  the  meantime  other  checks  of  the  same  drawer  are 
presented  and  the  fund  paid  out  upon  them,  the  bank  is  not  Uable. 
Checks  are  not  payable  in  the  order  of  the  priority  in  which  they 
are  given,  but  in  that  in  which  they  are  presented."  ^ 

Bank  checks  are  in  form  and  effect  bills  of  exchange,  not  direct 
promises  to  pay,  but  only  in  case  the  drawee  does  not  pay.^ 

§  380.  To  our  mind  the  differential  traits  decidedly  prepon- 
derate ;  and  the  more  correct  method  is  to  treat  the  check  as  an 
altogether  independent  and  distinct  instrument  from  the  bill 
of  exchange,  admitting  at  the  same  time  that  in  some  few  specific 
matters  the  resemblance  between  the  two  instruments  is  sufficiently 
strong  to  cause  one  and  the  same  rule  to  cover  and  include  them 
both.  Mr.  Grant  would  appear,  however,  to  be  of  the  contrary 
mind.  He  says,  "  Checks  are,  by  recent  legislation  imposing  a 
stamp  duty  upon  them,  and  creating  a  class  payable  to  order, 
nearly  on  the  same  footing  as  bills  of  exchange ;  and  the  decisions 
of  the  courts  have  been  of  late  in  favor  of  putting  them  on  the  same 
footing  as  to  their  general  legal  incidents  and  characteristics."  ^ 
Yet  he  follows  this  statement  with  such  a  formidable  array  of  the 
points  of  dissimilarity  as  would  seem  to  show  that  it  is  impossible 
thus  to  unite  the  tv/o  instruments  into  a  single  legal  entity  without 
creating  infinite  confusion,  inconsistency,  and  doubt.  His  list  is, 
briefly,  as  follows :  — 

First.   No  days  of  grace  are  allowed  upon  checks. 

Second.  The  payee  of  a  check  does  not  obtain  any  more  time 
by  employing  a  banker  to  present  it ;  whereas  the  holder  of  a  bill, 
by  the  same  course,  would  obtain  an  extra  day.^ 

Third.  The  death  of  a  drawer  of  a  check  revokes  the  drawee's 
authority  to  pay ;  whereas  the  death  of  the  drawer  of  a  bill  has  no 
effect  upon  the  duties  of  the  other  parties  to  the  instrument.^ 

Fourth.  A  check  must  be  drawn  against  funds  of  the  drawer  in 
the  hands  of  the  drawee ;  whereas  there  need  be  no  funds  of  the 
drawer  in  the  hands  of  the  drawee  of  a  bill.^ 

Fifth.  The  drawer  of  a  bill  is  discharged  by  want  of  due  present- 
ment to  the  drawee ;    whereas  the  drawer  of  a  check  is  not  dis- 

1  §  379.     Shaw,  C.  J.,  in  Bullard  v.  Randall,  1  Gray  (Mass.)  606. 

2  Foster  v.  Paulk,  41  Me.  428. 

1  §  380.     Grant  on  Bankers  and  Banldng,  3d  ed.,  p.  103  et  seq. 

2  Alexander  v.  Burchfield,  7  M.  &  G.  1061. 

3  Billing  V.  Devaux,  3  M.  &  G.  .571. 

«  Keene  v.  Beard,  8  C.  B.  n.  s.  372,  381. 

686 


CONTRAST    WITH    BILLS  §  380 

charged  by  any  length  of  delay  in  presentment,  at  least  unless  he 
can  show  actual  loss  or  injury  to  himself  by  reason  of  such  delay ; 
as,  for  example,  by  the  failure  of  the  drawee  in  the  interval.^ 

Sixth.  Bills  of  exchange,  payable  on  a  fixed  day,  differ  in  this 
respect  from  a  check,  which  is  not  due  before  payment  is  de- 
manded.^ 

The  points  of  resemblance  between  checks  and  bills  of  exchange, 
noted  by  Mr.  Grant  in  the  same  connection,  are  as  follows :  — 

First.  That  notice  of  non-payment  of  the  check  and  non-ac- 
ceptance of  the  bill  may  be  dispensed  with,  if  the  drawer  had  no 
funds  or  no  sufficient  reason  to  expect  the  payment  or  acceptance.^ 

Second.  That  checks  may  be  accepted  (though  infrequently), 
and  may  pass  by  delivery.* 

Third.  That  the  holder  of  a  check  is  affected  by  equities  and 
infirmities,  in  like  manner  as  would  be  the  holder  of  a  bill.^ 

The  main  point  of  dift'erence,  upon  which  there  is  no  diversity 
of  authority,  is  that  a  check  has  no  days  of  grace.  It  is  payable 
immediately  upon  demand,  on,  or  at  any  day  after,  the  day  of  its 
date ;  and  this  equally  though  the  words  "  on  demand  "  are  not 
expressed. ^°  There  can  be  no  question  of  this  rule  ;  the  authorities 
are  overwhelming.  But  it  often  happens  that  instruments  other- 
wise in  the  form  of  checks  are  yet  in  some  way  made  payable  at 
a  day  later  than  that  of  their  issue,  and  sometimes  later  than  that 
of  their  date.  They  may  be  made  payable  at  a  day  later  than  that 
of  their  issue,  but  on  that  of  their  date,  by  being  dated  on  a  day 
subsequent  to  that  of  their  issue,  but  in  no  other  respect  whatso- 
ever differing  from  a  check  payable  immediately.     These  are  called 

6  Keene  v.  Beard,  8  C.  B.  n.  s.  372,  381 ;  and  see  post,  title  "Present- 
ment, the  Time  within  Avhieh  it  shoukl  be  made  and  the  Effect  of  Delay." 

« Boehm  v.  Steriing,  7  T.  R.  430 ;  Alexander  v.  Burchfield,  7  M.  &  G. 
at  p.  1067. 

7  Thomas  v.  Fenton,  5  D.  &  L.  28 ;  Kemble  v.  Mills,  1  M.  &  G.  757 ; 
9  Dowl.  446;  Carew  v.  Duclavorth,  4  L.  R.  Exch.  313;  Robinson  v. 
Hawksford,  9  Q.  B.  52. 

8  Keene  v.  Beard,  8  C.  B.  n.  s.  372,  380. 

9  Whistler  v.  Forster,  14  C.  B.  n.  s.  248. 

1"  Movser  v.  Whitaker,  9  Barn.  &  Cr.  409 ;  Sutton  v.  Toomer,  7  id. 
416;  Down  v.  HaHing,  4  id.  330;  Dixon  v.  Nuttall,  1  C.  M.  &  R.  307; 
Hare  v.  Copland,  13  Irish  C.  L.  426;  Grant  on  Bankers  and  Banking; 
Story  on  Promissory  Notes,  §  489;  Daniel  Neg.  Inst.  §  1572;  Ex  parte 
Brown,  2  Storv  503  ;  Woodruff  v.  IMerchants'  Bank,  25  Wend.  (X.  Y.)  673  ; 
Salter  v.  Burt^  20  Wend.  (N.  Y.)  205;  Morrison  v.  Bailey.  5  Ohio  St.  13; 
Westminster  Bank  v.  Wheaton,  4  R.  I.  30 ;  Chapman  v.  \Mnte,  2  Seld. 
(N.  Y.)  412;  3  Kern  (N.  Y.)  290:  Harrison  v.  Nicollet  Bank,  41  Minn. 
488,  43  N.  W.  336. 

687 


§  380  CHECKS   IN    GENERAL 

post-dated  checks;    they  are  a  famihar  instrument,  and  will  be 
fully  discussed  hereafter.     It  suffices  for  our  present  purpose  to  say, 
that  such  are  always  payable  on,  or  at  any  time  after,  the  day  of 
their  date. 

§381.  Instruments  payable  at  a  Day  certain.  —  But  often  an 
instrument,  in  its  form  substantially  like  a  check,  is  made  payable 
at  a  day  subsequent  to  that  both  of  its  date  and  of  its  issue,  either 
by  naming  such  a  date  in  the  body  of  the  instrument,  or  by  making 
it  payable  so  many  days  after  date.  In  such  cases  it  is  often  a 
question  whether  or  not  grace  is  to  be  allowed.  But  though  this 
is  the  question,  it  does  not  take  the  form  of  whether  or  not  grace 
is  to  be  allowed  on  such  a  check,  but  whether  or  not  such  an  instru- 
ment is  a  check  at  all.  For  if  it  is  a  check,  that  simple  fact  is  con- 
clusive of  the  fact  that  it  is  payable  immediately  on  demand,  on 
the  day  named,  without  grace.  A  check  is  and  must  be  always  so 
payable.  But  if  it  be  not  a  check,  then  it  will  probably  have  the 
customary  grace  of  the  place  where  it  is  made  payable,  and  will 
be  called  a  bill  of  exchange.^  The  various  cases  present  every 
variety  of  instrument,  each  diverging  in  a  greater  or  less  degree, 
and  in  its  own  peculiar  manner,  from  the  ordinary  form  of  a  bank 
check  dated  and  payable  on  the  day  of  its  issue. 

(a)  Treating  generally  of  an  instrument  dated  on  a  certain 
day,  and  by  some  form  of  words  made  payable  at  a  day  certain 
thereafter,  it  is  probable  that  between  the  array  of  opposing  authori- 
ties the  preponderance  will  be  considered  to  lie  in  favor  of  the  doc- 
trine that  such  paper  is  not  to  be  considered  as  a  check,  but  as  an 
inland  bill  of  exchange,  and  therefore  entitled  to  grace.  We  cite 
below  the  cases  which  sustain  this  view,  and  it  will  be  seen  that  they 
are  numerous,  and  that  some  of  them  have  been  rendered  by 
tribunals  entitled  to  command  great  respect.^  Of  the  cases  cited 
the  one  carrying  the  most  weight  certainly  is  the  New  York  case 
of  Bowen  v.  Newell.  This  cause  was  litigated  by  the  parties  with 
great  pertinacity;  it  is  in  the  Reports  four  different  times.  It 
first  appears  in  5  Sanford  326,  where  the  court  held  that  the  instru- 

1  §  381.     Harker  v.  Anderson,  21  Wend.  (N.  Y.)  372. 

2  Morrison  v.  Bailey,  5  Ohio  St.  13;  Andrew  v.  Blachly,  11  id.,S9; 
Bowen  v.  Newell,  4  Seld.  (N.  Y.)  190,  overruling  the  same  ease  in  5  Sandf . 
(N.  Y.)  326  ;  again  affirmed  in  same  case  in  3  Kern.  (N.  Y.)  290 ;  Brown 
V.  Lusk,  4  Yerger  (Tenn.)  210 ;  Daniels  v.  Kyle,  1  Kelly  (Ga.)  304 ;  Wood- 
ruff V.  Merchants'  Bank,  25  Wend.  (N.  Y.)  673 ;  Minturn  v.  Fisher,  4  Cal. 
35 ;  Bradley  v.  Delaplaine,  5  Harr.  (Del.)  305  ;  Georgia  National  Bank  v. 
Henderson,  46  Ga.  487. 

688 


INSTRUMENTS    PAYABLE    AT    A   DAY    CERTAIN  §  381 

ment,  being  an  order  upon  a  bank  to  pay  on  a  future  day  certain, 
was  a  check,  and  not  entitled  to  grace.  The  decision  in  5  Duer 
584  was  to  the  same  effect.  But  in  4  Selden  190,  a  contrary 
opinion  was  rendered.  The  court  said  that  the  decision  of  Judge 
Story  in  the  Matter  of  Brown  (which  will  be  discussed  hereafter) 
was  the  only  authority  for  holding  such  a  document  to  be  a  check, 
and  as  such  not  entitled  to  grace  ;  that  this  doctrine  was  untenable, 
and  that  the  contrary  must  be  pronounced.  The  case  came  up 
once  more  upon  a  side  issue,  reported  in  3  Kernan  290 ;  and  here 
the  court  took  pains  to  say  that  their  decision  in  4  Selden  was  to 
the  effect  that  by  the  principles  of  the  law  merchant  the  instrument 
was  entitled  to  grace,  and  that  they  were  still  of  the  same  mind, 
though  now  they  allowed  local  usage  to  control  the  law  merchant. 
The  instrument  in  question  was  drawn  in  New  York  upon  a  bank 
in  Connecticut,  but  this  fact  of  a  difference  of  States  was  not 
availed  of  as  furnishing  any  additional  reason  for  considering  it 
a  bill  of  exchange.  The  decision  was  based  strictly  upon  the 
wording  of  the  document,  which  called  for  payment  on  a  day 
certain  after  the  date.  In  the  Pennsylvania  case,  Bradley  v. 
Delaplaine,  the  words  "  ninety  days  after  date  "  were  inserted  in 
an  ordinary  bank  check  before  the  words  directing  payment.  The 
court  said  it  was  a  bill  of  exchange. 

(6)  Upon  the  other  side  the  authorities  are  few,  and  derive 
their  weight  chiefly  from  the  influence  which  attaches  itself  to 
the  opinion  of  one  who  has  had  so  much  to  do  with  the  moulding  of 
American  law  as  Mr.  Justice  Story.  His  opinion,  delivered  in  the 
Matter  of  Brown,'  is  an  elaborate  disquisition,  in  which  many 
questions  concerning  the  law  of  checks  are  treated  with  much 
learning  and  clearness.  He  lays  down  very  positively,  in  an 
argument  of  considerable  length,  that  an  instrument  having  the 
general  form  and  characteristics  of  a  check,  save  that,  being  drawn 
and  dated  on  a  certain  day,  it  is  made  payable  on  a  future  da\- 
named,  is  payable  on  and  after  such  day,  immediately  upon 
presentment,  without  grace.  He  well  remarks  that  the  parties, 
by  using  the  common  form  of  a  bank  check,  an  instrument  to 
which  the  peculiarity  of  carrying  no  grace  is  well  known  to  be  in- 
separably attached,  signify  that  they  propose  to  execute  and  issue 
a  bank  check,  and  not  any  other  species  of  business  paper  what- 
soever ;  wherefore  they  impliedly  authorize  and  direct  the  bank  to 
treat  the  document  as  a  check ;  that  is,  to  pay  it  immediately  upon 

« 2  Story  502. 
VOL.  1  —  44  689 


§  381  CHECKS   IN   GENERAL 

presentment  and  demand  on  any  day  on  or  after  that  specially 
named  for  payment.  At  the  time  of  the  rendition  of  this  decision, 
the  only  contrary  authority  was  that  contained  in  the  decision 
in  Brown  v.  Lusk,  4  Yerger  (Tenn.)  210,  which  Judge  Story 
certainly  could  venture  to  overrule,  and  which  he  did  not  hesitate 
thus  to  dispose  of.  In  Harker  v.  Anderson  {supra),  Judge  Cowen 
referred  to  this  opinion  of  Judge  Story  with  respect,  and  evidently 
inclined  to  indorse  it  fully,  though  the  facts  immediately  before 
him  did  not  render  it  wholly  necessary  for  him  to  do  so.  Speaking 
also  of  Brown  v.  Lusk,  cited  above,  he  said  that  the  decision  in 
that  case  was  based  upon  a  citation  from  Chitty,  which  upon  ex- 
amination proved  insufficient  to  support  the  doctrine  so  built 
upon  it.  But  the  judge's  general  line  of  argument  was  chiefly 
applicable  to  post-dated  checks,  about  which,  as  before  stated, 
the  law  is  well  settled. 

§  382.  New  York,  Ohio,  and  California.  —  It  will  be  observed 
that  the  latest  decisions  tend  quite  uniformly  to  the  view  that 
all  such  hybrid  instruments,  which  are  ordinary  checks  in  all 
save  the  naming  of  a  future  day  for  payment,  but  in  that  respect 
are  bills  of  exchange,  take  their  legal  character  from  this  last  im- 
portant feature,  and  bear  grace  accordingly.  The  influence  of 
New  York  decisions  upon  matters  of  financial  law  is,  of  course, 
of  immense  weight ;  and  these,  backed  by  the  troop  of  lesser 
authorities  which  have  already  adopted  the  same  view,  will 
doubtless  finally  suffice  to  settle  the  law  for  the  country.  The 
advantage  of  having  the  question  definitely  settled  would  be  so 
great  that  the  community  will  probably  be  well  satisfied  with  a 
conclusion  in  either  direction.  The  courts  in  New  York  are  always 
anxious  to  carry  out  and  legalize  so  far  as  possible  what  is  known 
to  be  the  common  understanding  of  business  men.  Nowhere 
else  is  evidence  of  usage  and  custom,  in  business  causes,  so  readily 
admitted  or  so  much  deferred  to.  It  is  a  wise  and  wholesome  habit 
of  the  courts.  So  in  this  matter  of  checks  payable  at  a  future  day 
named,  when  the  courts  had  held  that  they  should  bear  grace,  it 
was  at  once  proposed  to  offer  evidence  of  the  usage  and  custom 
among  business  men  not  to  regard  such  paper  as  entitled  to  any 
such  privilege.  So  in  the  case,  above  discussed,  of  Bowen  v. 
Newell,^  evidence  of  the  custom  of  the  banks  of  Connecticut  to 
regard  such  orders  as  payable  instantly  was  offered.  In  the  last 
decision  which  was  rendered  in  the  case  (3  Kernan  (N.  Y.)  290) 
1  §  382.  Ante,  §  381. 
690 


sharswood's  view  §  384 

it  was  said  that  it  appeared  from  the  findings  of  the  lower  ccnirt 
that  the  law  in  Connecticut  gave  no  grace  on  paper  of  this  descrip- 
tion, that  therefore  of  course  there  could  be  none  ;  and  that  these 
findings  of  the  lower  court  were  "  upon  evidence  derixed  from  the 
best  sources,  and  of  the  most  unquestionable  character."  This 
admirable  evidence  was  simply  evidence  of  usage. 

The  3  Kernan  rule  is  both  the  best  in  sense  and  the  latest  in 
time,  and  may  be  regarded  as  conclusive  of  the  views  of  the  New 
York  judiciary.  But  in  Ohio  and  California  an  opposite  rule  has 
been  laid  down,  and  a  local  custom  to  regard  such  orders  as  checks, 
and  so  payable  at  once,  was  held  bad ;  and  evidence  thereof  was 
declared  inadmissible.^ 

§  383.  In  Pennsylvania  and  Rhode  Island,  a  draft  on  a  banker 
payable  so  many  days  after  date,i  or  after  sight,^  has  been  held 
a  check,  and  not  entitled  to  grace.  But  in  Ohio,^  Georgia,*  Cali- 
fornia,^ INIissouri,*'  and  Oregon,^  as  well  as  in  New  York,  a  draft 
on  a  bank  payable  at  a  day  certain  is  held  entitled  to  grace,  at  all 
events  unless  local  usage  varies  the  rule. 

§  384.  Sharswood's  View.^  —  "  The  ordinary  commercial  form 
of  a  bill  of  exchange  payable  at  a  future  day  is  at  so  many  days' 
or  months'  notice  after  date  or  sight.  An  order  so  drawn,  whether 
upon  a  banker  or  any  other  person,  ought  to  be  regarded  as  a  bill, 
with  all  the  privileges  and  liabilities  which  by  the  law  merchant 
are  incident  to  a  bill.  The  drawer,  by  adopting  this  usual  form, 
must  be  held  so  to  intend.  So  if  an  order  be  drawn  on  a  merchant 
or  other  person  not  a  banker,  with  whom  the  drawer  keeps  money 
on  deposit  subject  to  draft,  payable  at  a  future  day  named,  there 
exists  no  reason  why  the  same  rule  should  not  apply.  But  there 
is  a  good  reason  why  there  should  be  a  difference  between  an  ofder 
so  drawn  upon  a  banker,  which  certainly  must  be  presumed  to 
be  by  a  person  who  keeps  money  on  deposit  with  such  banker, 
subject  to  draft,  and  an  order  on  a  merchant  or  other  person. 

"  If  such  an  order  draivn  upon  a  bank  payable  at  a  future  day 

2  Morrison  v.  Bailey,  5  Ohio  St.  13 ;   Minturn  v.  Fisher,  4  Cal.  35. 

1  §  383.     Westminster  Bank,  4  R.  I.  30. 

2  Herrinj?  v.  Kesee,  South.  Law  Rev.  614,  Oct.,  1872. 

*  Morrison  v.  Bailey,  5  Ohio  St.  13. 

*  Georgia  National  Bank  v.  Henderson,  46  Ga.  496. 

6  Minturn  v.  Fisher,  4  Cal.  36. 

« Ivory  V.  Bank  of  the  State,  36  Mo.  475.     See  Bradley  v.  Delaplaine, 
5  Harr.  (Del.)  305;   Work  v.  Tatman,  2  Houst.  (Del.)  304. 

7  Hawley  v.  Jette,  10  Or.  31. 

1  §  384.     Sharswood,  in  Champion  v.  Gordon,  70  Pa.  St.  474. 

691 


§  384  CHECKS   IN    GENEKAL 

named  in  it  must  he  considered  as  an  inland  bill  of  exchange  and 
not  a  check,  then  the  paj^ee  or  holder  has  a  right  to  present  it  at 
once  for  acceptance,  protest  it  at  once  for  non-acceptance,  and  sue 
the  drawer  immediately.  Should  it  be  accepted,  however,  the 
funds  of  the  drawer  in  the  bank  would  necessarily  be  thereby  tied 
up  until  the  day  of  payment.  All  the  objects  of  directing  payment 
at  a  future  day  would  thus  be  frustrated.  What  the  drawer  under- 
takes is  that  on  a  day  named  he  will  have  the  amount  of  the  check 
to  his  credit  in  the  bank.  In  the  mean  time  he  wants  the  full 
and  free  use  of  his  entire  deposit.  It  is  not  denied  that  a  post- 
dated check  cannot  be  presented  for  acceptance.  That  is  by 
implication  payable  on  a  future  day.  Why  then  is  a  check  ex- 
pressly so  made  payable  to  stand  on  different  ground  ?  In  the  case 
before  us,  an  ordinarily  printed  form  of  a  bank  check  was  evidently 
used,  and  the  day  of  presentment  written  in  one  of  the  blanks. 
This  is  the  most  convenient  form,  for  it  calls  the  attention  of  the 
cashier  or  paying  teller  to  the  fact  which  he  would  be  likely  to  over- 
look if  it  were  expressed  only  by  the  date.  ...  If  we  determine 
that  an  order  like  that  before  us  is  not  presentable  for  acceptance 
before  maturity,  we  settle  the  question.  It  is  a  check,  and  not  a 
bill  of  exchange." 

§  385.    Rhode  Island.  —  "  Ninety  days  after  date,  pay  to  the 

order  of  James  Wheaton,  four  hundred  and  fifty  dollars cents. 

$450.  Sinope  Mills."  Indorsed  in  blank,  "  James  Wheaton, 
per  B.  Cozzens,  Agent."  The  court  held  this  a  check,  saying: 
"  A  check  is  an  order  drawn  upon  a  banker,  or  a  person  acting  as  a 
banker  in  England,  or  in  this  country  upon  such  a  person  or  upon 
a  bank.  It  was  originally  part  of  the  definition  of  a  check  that  it 
was  payable  on  demand.  It  was  afterwards  held  that  it  might  be 
post-dated  and  still  be  a  check.  In  such  case  it  was  payable  im- 
mediately after  date,  though  days  had  elapsed  since  it  came  to 
the  payee's  hands.  Still  later,  it  was  held  to  be  a  check,  though 
payable  on  a  day  certain  after  date,  if  drawn  upon  a  bank  or  banker. 
The  instrument  in  suit  differs  from  the  last  in  this  only,  that 
the  day  when  it  is  payable  is  not  named,  but  it  is  payable  a  cer- 
tain number  of  days  after  date,  and  that  the  precise  day  of  pay- 
ment is  to  be  ascertained  by  calculation  ;  all  the  elements  of  such 
calculation  being  contained  in  the  paper  itself.  Substantially 
and  for  all  practical  purposes  it  is  the  same,  since  the  day  may 
be  made  certain  from  the  paper  itself.  At  this  day  the  only  dis- 
tinguishing difference  between  a  general  bill  of  exchange  and  a  check 
692 


DISCUSSION    OF   THE    GRACE    QUESTION  §  386 

is  that  a  check  imtd  be  drawn  upon  a  bank,  or  upon  a  banker  or  one 
acting  as  a  banker. ^^  ^ 

§  386.  Discussion  of  the  Grace  Question.  —  Story's  argument 
seems  to  us  \tTy  weak :  the  rule  tliat  a  check  has  no  grace  is  a 
result  of  the  fact  of  its  being  payable  on  demand.  It  is  a  general 
principle  of  commercial  law  that  demand  paper  shall  not  have 
grace,  and  it  is  not  a  peculiarity  of  a  check,  but  belongs  to  all  paper 
possessing  the  attribute  from  which  this  sub-attribute  flows.  It 
is  not  proper,  then,  to  argue  that  a  merchant  drawing  an  instru- 
ment payable  at  a  day  certain  must  be  presumed  to  contemplate 
that  it  will  have  no  grace  because  it  is  on  check  paper.  That  is 
to  argue  that  we  must  decide  contrary  to  the  recognized  principles 
of  law,  because  it  is  likely  that  the  parties  misconceived  those 
principles.  Since  the  law  presumes  knowledge  of  itself,  it  would 
seem  more  proper  to  say,  that  as  it  is  a  well-settled  principle  that 
all  paper  on  demand  has  no  grace,  and  that  all  paper  payable  at 
a  day  certain  has  grace,  the  parties  must  be  presumed  to  have 
contracted  in  reference  to  that  principle  and  have  intended  the 
instrument  to  have  grace.  Such  would  seem  to  us  the  proper 
reasoning  as  to  the  intent  of  the  parties,  looking  at  the  question 
as  though  it  had  arisen  for  the  first  time. 

When  \ve  turn  to  the  broader  aspect  of  the  question,  and  ask 
what  rule  it  is  best  to  establish  to  secure  in  the  greatest  degree  the 
benefits  at  which  the  law  aims,  we  note  that,  other  things  equal, 
simplicity  is  valuable  in  legislation,  as  rendering  conformity  to 
law  easier,  favoring  prevision,  and  lessening  litigation;  without 
some  good  reason,  then,  outweighing  this,  the  rule  of  the  law 
merchant  previously  established  should  be  applied,  and  an  instru- 
ment payable  at  a  day  certain  should  have  grace,  whatever  color 
the  paper  may  be  on  which  it  is  written. 

Nothing  can  be  gained  by  an  opposite  rule  but  a  senseless  in- 
consistency in  the  law.  If  the  drawer  wishes  the  instrument 
to  be  payable  without  grace,  he  can  accomplish  the  object  by  post- 
dating it.  It  is  perfectly  clear  that  every  instrument  drawn  on  a 
banker  is  not  a  check.  Authority  is  clear  that  a  bill  may  be  drawn 
on  a  banker,  and  the  character  of  the  paper  on  which  an  instru- 
ment is  drawn  surely  cannot  determine  its  character  in  opposition 
to  its  words  and  their  legal  effect,  and  it  is  perfectly  clear  that  if 
the  instruments  in  the  above  cases  had  been  drawn  on  ordinary 
white  paper  they  would  never  have  been  considered  checks. 
1  §  385.     Westminster  Bank,  4  R.  I.  30. 

693 


§  386  CHECKS    IN    GENERAL 

But,  on  the  other  hand,  because  such  drafts  are  clearly  within 
the  principle  allowing  grace,  and  are  not  checks  (if  we  keep  that 
word  to  designate  a  class  of  instruments  payable  on  demand,  and 
it  does  seem  a  pity  to  pour  confusion  into  the  law  by  loosely  ap- 
plying terms  to  new  varieties,  and  then  arguing  that  they  must 
possess  all  the  attributes  connoted  by  those  terms),  it  does  not 
follow  that  they  must  necessarily  possess  all  the  other  character- 
istics of  ordinary  bills  of  exchange.  There  is  nothing  to  prevent 
the  discovery  of  new  species  of  commercial  paper,  any  more  than 
the  discovery  of  new  forms  of  animal  life ;  and  it  would  be  just 
as  reasonable  for  naturalists  in  case  of  a  new  species,  B.,  interme- 
diate in  its  characteristics  between  A.  and  C,  to  say  that  it  must 
belong  to  A.  because  it  is  most  like  A.,  and  therefore  it  must  be 
deemed  to  have  all  the  attributes  of  the  members  of  A.  already 
known,  or  for  other  naturalists  to  class  it  in  the  same  way  with 
B.,  as  for  lawyers  and  judges  to  declare  that  an  instrument  in  some 
respects  like  an  ordinary  bill  of  exchange  and  in  other  respects 
like  a  check  is  to  be  considered  either  one  or  the  other. 

There  is  a  reason  for  each  attribute  that  has  been  adjudged  to 
belong  to  a  bill  or  a  check :  if  the  reason  exists  in  the  new  instru- 
ment, let  the  attribute  be  attached,  otherwise  not.  So  while  the 
paper  under  discussion  has  grace,  it  may  very  properly  be  held 
to  be  unlike  an  ordinary  bill  in  that  it  is  not  presentable  until  the 
day  named.  This  would  satisfy  all  that  is  of  force  in  Sharswood's 
opinion  above,  though  whether  it  is  best  to  introduce  this  addition 
to  the  law  merchant  when  the  purpose  can  so  easily  and  clearly 
be  attained  by  the  words  "  without  acceptance  ",  or  by  post- 
dating, may  perhaps  be  open  to  argument. 

After  all,  the  really  important  matter  is  to  secure  a  uniform, 
well-settled  rule,  and  this  seems  not  likely  soon  to  be  obtained, 
though  ultimately,  no  doubt,  usage  and  legislation  will  bring  the 
music  of  the  States  into  harmony. 

§  387.  Evidence  of  Usage  as  to  the  question  of  grace  has  been 
offered  in  several  cases.  The  difficulty  in  admitting  such  testi- 
mony has  been  considered  to  lie  in  the  fact,  that  it  is  the  proper 
province  of  the  court  to  declare  what  is  the  legal  character  of  such 
documents,  whether  they  are  checks  or  bills  of  exchange.  The 
law,  it  is  considered,  must  make  them  imperatively  either  the  one 
or  the  other,  and  according  to  the  decision  must  be  the  equally  im- 
perative assertion  as  to  whether  or  not  they  shall  bear  grace.  Usage 
therefore  has  been  deemed  inadmissible,  because  its  only  effect, 
694 


EVIDEXCE    OF   USAGE  §  387 

if  it  should  have  any  at  all,  must  be  to  control  a  rule  (jf  law.  A  few 
authorities  sustain  this  view.^  It  was  certainly  the  view  which 
the  court  of  New  York  were  inclined  to  take  at  the  time  of  the 
earlier  decision  in  Bowen  v.  Xewcll.  Xo  one  who  reads  that  opin- 
ion can  fail  to  .leather  this  conclusion  from  it ;  and  it  was  upon  the 
strengtli  of  this  that  the  Ohio  case  was  decided.  But  the  latest 
authority  in  New  York  is  the  decision  in  the  case  of  Bowen  v. 
Newell  as  last  rendered  and  revised,  published  in  3  Kernan,  290. 
Here  the  court  say  that  the  lower  court  have  found  that  the  law 
in  Connecticut,  where  the  paper  was  payable,  gives  no  days  of 
grace  upon  it ;  that  this  finding  of  the  law  was  "  upon  evidence 
derived  from  the  best  sources,  and  of  the  most  unquestionable 
character."  By  turning  to  the  report  of  the  cause  in  the  lower 
court,-  we  find  that  tliis  so  emphatically  excellent  evidence,  which 
was  allowed  so  thoroughly  to  settle  the  law,  was  simply  evidence  of 
the  usage  of  banks  and  of  persons  dealing  with  banks  in  Connecti- 
cut. The  court  escape  the  trouble  of  reconciling  this  view  with 
their  former  contrary  one  by  the  arbitrary  assertion  that  in  4 
Selden  they  only  held  that,  by  the  law  merchant,  the  instrument 
was  not  entitled  to  grace.  This  assertion  will  satisfy  nobody ; 
for  it  is  not  true.  But  its  degree  of  accuracy  is  a  matter  of  little 
moment,  since  the  last  ruling,  in  3  Kernan,  is  too  clear  and  posi- 
tive to  leave  any  doubt  as  to  the  law  in  New  York. 

The  doubt  is,  simply,  whether  or  not  the  allowance  or  disallow- 
ance of  grace  upon  a  certain  anomalous  description  of  paper  is  a 
proper  subject  of  usage.  Why  it  should  not  be  so,  it  is  difficult 
to  say.  It  is  clear  that  such  paper,  whether  it  be  called  a  check 
or  a  bill  of  exchange,  is  a  materially  modified  form  of  either.  It 
is,  in  fact,  an  independent  and  anomalous  species  of  paper.  When, 
therefore,  it  is  considered  that  the  entire  principle  which  gives 
days  of  grace  upon  particular  species  of  commercial  paper  was, 
in  its  origin,  wholly  a  matter  of  the  usaj^e  of  bankers,  there  seems 
no  reason  why  the  same  usage,  if  actually  shown  to  exist,  should 
not  be  properly  extended  to  still  another  species  of  paper,  of 
comparatively  modern  origin.  Even  if  the  instrument  is  a  check, 
it  is  a  peculiar  alteration  of  the  common  form  of  checks.  It  is 
clear  that  the  allowance  of  grace  on  business  paper  is  a  proper 
subject  of  usage,  since  it  owes  its  verj'  existence  to  usage.     Why, 

1  §  387.  Morrison  v.  Bailcv,  5  Ohio  St.  13 ;  Minturn  v.  Fisher,  4  Cal. 
35.  See  also  Woodruff  v.  Merchants'  Bank,  25  Wend.  (N.  Y.)  673; 
Bowen  v.  NeweU,  4  Seld.  (N.  Y.)  190 ;   3  Kern.  (X.  Y.)  290. 

•  695 


§  387  CHECKS   IN   GENEEAL 

then,  are  not  checks  equally  a  proper  subject  for  usage,  and,  if 
so,  why  may  not  usage  draw  distinctions  in  this  respect  between 
two  different  descriptions  or  classes  of  checks  which  vary  from 
each  other  in  so  important  a  trait  that  very  many  courts  are  un- 
willing to  apply  the  common  name  of  check  to  each  of  them,  but 
reserve  it  for  the  more  usual  kind,  and  prefer  to  describe  the  others 
as  bills  of  exchange? 

§  388.  Memorandum  Checks.  —  "  Memorandum  checks",  so 
called,  are  instruments  of  quite  common  use  in  business  circles. 
Their  character  and  legal  effect  depend  somewhat  upon  the  parties 
between  whom  the  questions  concerning  them  arise.  As  between 
the  drawer  and  the  payee  they  are  a  species  of  evidence  of  in- 
debtedness. They  are  practically  intended  as  such,  and  the  courts 
recognize  them  as  such.  They  are  usually  given  either  for  money 
borrowed,  or  for  a  debt  contracted  in  the  course  of  dealings.  They 
are,  in  fact  and  in  law,  equivalent  to  the  drawer's  promise  to  pay, 
for  value  received.  The  holder  may  sue  upon  them  as  upon  a 
promissory  note,"  and  by  reason  of  their  peculiar  character  he  is  not 
held  to  present  them  at  the  bank  for  payment  prior  to  bringing 
his  suit  against  the  maker. ^     Presentment  and  notice  are  waived. 

(a)  But  as  between  the  drawer  and  a  person  other  than  the 
payee  receiving  the  check,  though  bona  fide  and  for  value,  the  facts 
that  the  abbreviation  "  mem."  is  written  on  its  face,  and  that  it 
is  two  and  one  half  years  old,  have  been  declared  sufficient  to  put 
such  taker  upon  his  inquiry,  and  to  entitle  the  drawer  to  set  up 
as  against  such  taker  all  equities  and  defences  which  he  could  have 
set  up  as  against  the  original  payee. ^ 

(6)  But  though  they  are  thus  a  complete  and  perfect  evidence 
of  indebtedness  as  between  these  parties,  as  between  the  bank 
and  the  payee  they  are  still  ordinary  checks,  nothing  less  or  more. 
The  fact  that  the  word  "  memorandum  "  or  the  abbreviation 
"mem."  is  written  on  a* check  is  sufficient  in  law  to  render  it  a 

°  §  388.  Camas  Prairie  State  Bank  v.  Newraan,  1.5  Idaho  719,  99 
Pae.  833, 128  Am.  St.  Rep.  81,  n.,  21  L.  R.  A.  (n.  s.)  703,  n.  (1909).  If  the 
drawee  is  a  party  to  an  unlawful  transaction  for  which  the  cheek  was  given 
he  cannot  recover.     Ibid. 

1  Franklin  Bank  v.  Freeman,  16  Pick.  (Mass.)  535;  Gushing  v.  Gore, 
15  Mass.  69.  In  Kelley  v.  Brown,  5  Gray  (Mass.)  108,  the  court  simply 
say  that  the  pleadings  are  so  imperfectly  drawn  that  the  questions  which 
the  plaintiff  wished  to  have  decided  in  his  favor  could  not  arise  upon  them 
at  all.  The  decision  is  not  in  any  respect  at  variance  with  the  foregoing 
authorities. 

2  Skillman  v.  Titus,  3  Vroom  (N.  J.)  96. 

696  * 


ANTE-DATED    AND    POST-DATED    CHECKS  §  3S9 

memorandum  check.  But  tlie  hank  is  not  hound  to  pay  any 
attention  to  these  words,  or  to  recognize  any  contract  as  implied 
by  them  hetween  the  maker  and  payee  which  gives  to  the  check 
any  pecuhar  character.  If  such  a  check  is  presented  for  payment, 
and  the  drawer  has  to  his  credit  funds  sufficient  to  meet  it,  the 
bank  must  honor  it  precisely  like  any  ordinary  check.  If  the 
agreement  or  understanding  between  the  drawer  and  the  payee 
is  that  it  shall  not  be  presented  for  payment,  any  remedy  of  the 
drawer  for  the  breach  is  solely  against  the  payee.  If  the  check 
is  once  drawn  and  delivered,  the  drawer's  reliance  that  it  will  not 
be  presented  at  the  bank  can  rest  only  upon  the  good  faith  of  the 
holder.  He  cannot  drag  in  the  bank  as  a  partner  in  the  arrange- 
ment, nor  alter  the  duty  of  the  bank  to  pay  his  drafts  out  of 
his  deposit.  This  is  a  rule  of  law.  Usage,  or  the  customary 
understanding  of  business  men  to  the  contrary,  cannot  operate  to 
change  it.^ 

(c)  An  ordinary  check  cannot  be  shown  by  parol  to  be  a  "mem."  * 
The  practice  of  banks  not  to  regard  the  word  "  mem."  or  memo- 
randum "  on  checks  has  the  sanction  of  law.^ 

§  389.  Ante-dated  and  Post-dated  Checks.  —  A  check  may  be 
either  ante-dated  or  post-dated.  An  ante-dated  check  is  payable 
immediately.^  A  post-dated  check  is  payable  on,  or  at  any  time 
after,  the  day  of  date.^"  There  is  no  question  but  that  a  post- 
dated check  is  in  the  United  States  a  perfectly  legal  and  proper 
instrument.2     j^  England  a  statute  used  to  require  that  a  post- 

3  Dykers  r.  Leather  Manufacturing  Co.,  11  Paige  (N.  Y.  )  612;  Story 
on  Promissory  Notes,  §  499;  Byles  on  Bills,  p.  *21,  Sharswood's  note; 
Daniel,  Neg.  Inst.  §  1584. 

*  Kelley  v.  Brown,  4  Gray  (Mass.)  108. 

6  State  National  Bank  v.  ReiUy,  124  111.  464,  14  N.  E.  657 ;  Brown  v. 
Cow  Creek  Sheep  Co.,  21  Wyo.  1,  126  Pac.  886  (1912). 

1  §  389.     Story  on  Promissory  Notes,  §  490  ;   Daniel,  Neg.  Inst.  §  1578. 
i«  Smith  V.  Maddox-Rucker  Banking  Co.,  8  Ga.  App.  288,  68  S.  E.  1092. 

affirmed  in  135  Ga.  151,  68  S.  E.  1031  (1910). 

It  cannot  be  paid  before  its  date  nor  can  money  be  retained,  as  against 
other  cheeks,  \Y\i\\  which  to  pay  it.  But  it  is  a  negotiable  instrument  and 
the  drawer  cannot  be  charged  bv  garnishee  proceedings  as  the  debtor  of 
the  payee.     Wilson  r.  McEachern,  9  Ga.  App.  5S4.  71  S.  E.  946  (1911). 

If  a'post-dated  check  is,  before  the  day  of  its  date,  di'livered  to  the  bank 
on  which  it  is  drawn  and  tliere  is  no  money  of  the  maker  of  the  chock  on 
deposit  in  the  bank  at  the  time,  the  president  of  the  bank  has  no  authority, 
by  virtue  of  his  office,  to  bind  the  bank  to  pay  to  the  payee  the  amount 
of  the  check  on  the  day  of  its  date.  Swenson  Bros.  Co.  v.  Commercial 
State  Bank,  98  Neb.  702,  154  N.  W.  233  (1915). 

2  Story  on   Promissory  Notes,  §  490;    Harker  v.   Anderson.  21  Wend. 

G97 


§  389  CHECKS   IN   GENERAL 

dated  check  should  be  stamped  Hke  a  bill  of  exchange,  and  other- 
wise declared  it  in  valid. ^  But  no  such  rule  has  ever  obtained  in 
our  own  country.  A  post-dated  check  on  its  date,  or  after  it,  is 
payable  immediately,  just  like  any  other  check.  We  are  now 
speaking  of  post-dated  checks  strictly,  and  not  of  instruments 
having  the  general  form  of  checks  but  naming  a  day  certain,  or  a 
certain  number  of  days  after  date,  for  their  payment.  The  con- 
struction and  legal  qualities  of  these  instruments  have  been  already 
discussed.  But  the  simple  post-dated  check  proper  has  none  of 
their  traits ;  neither  is  it  subject  to  any  of  the  questions  which 
have  been  mooted  concerning  such  other  nondescript  or  mongrel 
documents.  There  is  no  possible  pretence  for  claiming  days  of 
grace  upon  it.  It  is  simply  and  unquestionably  payable  on  demand, 
so  soon  as  the  day  of  the  date  comes  around." 

Payment  before  Date  is  at  Bank's  Risk 

(a)  But  it  is  the  bank's  own  risk  if  it  pay  before  that  day."" 
Such  a  payment  is  irregular,  and  circumstances  may  easily  super- 
vene under  which  the  bank  will  be  held  to  pay  the  amount  again, 
or  to  restore  it  to  the  credit  of  the  drawer,  if  it  has  debited  him 
with  it ;  which,  however,  it  has  no  right  to  do.  For  it  is  unques- 
tionable that  in  the  interval  between  such  irregular  payment  and 
the  day  of  the  date  when  the  payment  could  be  properly  made, 
the  amount  ought  still  to  be  left  standing  to  the  credit  of  the  drawer. 
The  bank  has  no  right  to  charge  him  with  the  disbursement  till 
the  time  comes  when  the  disbursement  could  be  properly  made 
on  his  account.  His  check  is  no  order  till  it  has  matured.  So  if 
in  the  interval  he  continues  to  draw  checks,  the  bank  must  continue 
to  honor  them  upon  presentment,  so  long  as  his  account,  without 
decrease  by  the  debit  to  this  item,  is  sufficient  to  meet  them,  until 
the  day  of  the  date  arrives.     When  that  day  does  arrive,  the  bank 

(N.  Y.)  372 ;  Mohawk  Bank  v.  Broderick,  10  id.,  304 ;  13  id.,  133 ;  Salter 
V  Burt,  20  id.,  205  ;  In  the  Matter  of  Brown,  2  Story  502  ;  Smith  v.  Field, 
19  Idaho  558,  114  Pac.  668,  1912C  Ann.  Cas.  354,  n. 

3  Grant  on  Bankers  and  Banking ;  Watson  v.  Poulson,  7  Eng.  L.  &  Eq. 
585;  15  Jur.  1111;  Allen  v.  Reeves,  1  East  435;  Martin  v.  Morgan,  3 
Moore  (Eng.),  635  ;  Byles  on  Bills,  p.*17,  text  and  note  (Sharswood's  ed.). 

4  Mohawk  Bank  v.  Broderick,  10  Wend.  (N.  Y.)  .304;  13  id.,  133; 
Harker  v.  Anderson,  21  id.,  212;  Story  on  Promissory  Notes,  §490; 
Daniel,  Neg.  Inst.  §  1578.     In  the  Matter  of  Brown,  2  Story  502. 

^"-  Smith  V.  Maddox-Rucker  Banking  Co.,  8  Ga.  App.  288,  68  S.  E. 
1092,  affirmed  in  135  Ga.  151,  68  S.  E.  1031  (1910). 

698 


ANTE-DATED    AND    POST-DATED    CHECKS  §  389 

may  of  course  appropriate  the  sum  it  has  paid  out.  But  if  then 
the  intervening  drafts  have  so  diminished  the  depositor's  bahmce 
that  the  remainder  is  not  enough  to  meet  the  amount  of  the  post- 
dated check,  the  deficiency  must  be  the  loss  of  the  bank.^  Its 
only  source  of  restitution  is  from  the  depositor.  Even  the  right 
to  demand  reimbursement  from  him  may  be  taken  away  by  his 
revocation  in  the  interval  before  the  maturity.  If  after  the  bank 
has  paid,  but  before  the  date  of  the  instrument  gave  it  tlie  riglit 
to  pay,  the  drawer  countermands  his  immature  order  and  forbids 
payment,  it  is  certain  that  the  anticipatory  action  of  the  bank 
cannot  operate  to  deprive  him  of  this  right. 

(6)  If  a  post-dated  check  falls  due  on  a  Sunday  or  on  a  legal 
holiday,  presentment  for  payment  cannot  be  made  until  the  day 
following.  Presentment  on  the  day  preceding  is  irregular.  The 
bank  is  not  bound  to  pay  on  that  day.  Accordingly  a  demand 
then  made  is  so  far  erroneous  that  it  will  operate  to  discharge  an 
indorser,  unless  it  should  be  cured  by  a  second  demand  properly 
made  on  the  correct  day  subsequent.^ 

(c)  A  bona  fide  transferee  of  a  post-dated  check  taking  before 
date  for  an  existing  debt  takes  free  of  equities,  and  can  recover  of 
the  maker  though  the  check  was  without  consideration.'' 

A  post-dated  check  cannot  be  presented  for  acceptance  before 
its  date.^  This  fact  that  the  payee  or  holder  cannot  go  at  once 
to  the  bank  and  have  the  check  certified,  illustrates  the  only  dif- 
ference between  ordinary  checks  and  those  which  are  post-dated. 
The  latter  are  not  difTerent  in  any  respect  after  the  day  of  their 
date  arrives,  but  before  that  the  depositor  has  a  right  to  draw 
against  his  deposit  freely,  without  regard  to  the  outstanding  check, 
and  the  bank  cannot  by  certification  before  date  withdraw  funds 
from  his  control. 

6  Grant  on  Bankers  and  Banking;  Da  Silva  v.  Fuller,  Chitty  on  Bills, 
180  (10th  Engl  ed.),  cited  in  Morley  v.  Culverwell,  7  U.  &  W.  ITS;  C.odin 
V.  Bank  of  the  Commonwealth,  G  Duer  (N.  Y.)  76;  Byles  on  Bills,  p.  *14 
(Sharswood's  ed.). 

6  Salter  v.  Burt.  20  Wend.  (N.  Y.)  205. 

7  Maver  v.  Mode,  14  Ilun  (N.  Y.)  155;  Schepp  v.  Carpenter,  51  X.  \  . 
602. 

8  See  Sharswood's  opinion  in  Champion  v.  Gordon,  70  Pa.  St.  4/4. 
above  quoted,  §  3S4 ;  Smith  v.  Maddox-Rucker  Banking  Co.,  8  Ga.  App. 
288,  68  S.  E.  1092,  affirmed  in  135  Ga.  151,  68  S.  E.  1031  (1910). 


699 


§  389  CHECKS   IN    GENERAL 

Authority  of  Agent  to  Draw  Post-dated  Checks 

{d)  Authority  to  an  agent  to  draw  checks  does  not  confer 
power  to  draw  post-dated  checks.  Even  authority  to  make  time 
paper  will  not  cover  post-dated  paper.  When  authority  to  make 
one  kind  of  instruments  is  given,  in  order  that  another  shall  be 
within  the  power,  not  only  must  the  legal  effect  be  the  same,  but 
all  their  incidents  so  far  identical  that  both  may  fairly  be  supposed 
to  have  been  in  the  mind  when  the  authority  was  given.  The 
fact  that  a  post-dated  check  or  bill  would  not  be  forwarded  at  once 
for  acceptance,  like  an  ordinary  check  or  bill,  was  taken  advantage 
of  by  the  agent  to  hide  for  a  time  his  breach  of  trust  in  drawing 
a  check  for  his  own  benefit.^ 

Authority  to  draw  "  bills  "  does  not  give  a  right  to  draw  post- 
dated checks ;  the  legal  effect  is  not  identical ;  bills  of  exchange 
have  grace,  post-dated  checks  no  grace.i"  Post-dating  does  not 
interfere  with  the  validity  or  negotiability  of  checks." 

§  390.  Issuing.  Delivery  on  Condition.  Parol.  —  As  promissory 
notes  and  deeds  require  delivery  to  complete  their  validity  as 
between  the  immediate  parties  to  them,  so  also  does  a  check  require 
delivery,  or,  as  it  is  more  commonly  called,  "issuing."  °  It  is  said 
that  a  check  is  "  issued  "  when  it  is  in  the  hands  of  any  person 
entitled  to  demand  cash  for  it.i  Thus,  if  it  be  stolen,  or  if  after 
being  lost  by  the  drawer  it  is  found  by  some  other  person,  it  is  not, 
in  the  hands  of  the  thief  or  of  the  finder,  "issued  "  as  against  the 
drawer.  But  so  far  as  concerns  the  bank  it  would  be  considered  as 
issued,  and  the  bank  would  be  protected  in  paying  it,  provided  it 
did  so  bona  fide,  and  with  no  knowledge  of  the  precedent  circum- 
stances. The  law  presumes  that  a  check  operates  from  its  delivery, 
but  it  may  be  shown  by  parol  that  the  delivery  was  not  intended 
to  put  the  check  in  operation  until  a  certain  event  should  transpire. 
As  between  the  original  parties,  or  those  having  notice,  it  is 
competent  to  show  that  the  delivery  was  conditional.^ 

9  New  York  Iron  Mine  v.  Citizens'  Bank,  44  Mich.  344,  6  N.  W.  823 
(1880).     See  Forster  v.  Maelo-eth,  L.  R.  2  Exch.  163. 

"  Salter  v.  Burt,  20  Wend.  (N.  Y.)  205  ;   Tavlor  v.  Sip,  .30  N.  J.  L.  284. 
11  Burns  v.  Kahn,  47  Mo.  App.  214. 

0  §  390.     Hoit  V.  Mclntire,  50  Minn.  466,  52  N.  W.  918. 

1  Grant  on  Bankers  and  Banking,  citing  Ex  parte  Bignold,  1  Deac.  735  : 
2  Mont.  &  A.  633. 

2  Sweet  V.  Stevens,  7  R.  I.  375 ;  Wallis  v.  Littell,  5  Law  T.  Rep.  n.  s. 
489 ;  Murray  v.  Earl  of  Stair,  2  Bam.  &  Cr.  82 ;  Pym  v.  CampbeU,  25 
L.  J.  Q.  B.  N.  s.  277. 

700 


OF  THE  INDORSEMENT  OF  CHECKS  §  391 

§391.  Of  the  Indorsement  of  Checks.  Intent  Governs  as  to 
Any  One  Having  Notice  of  It.  —  A  check  may  be  indorsed  with 
various  effects,  according  to  the  intention  of  the  indorser.  If 
the  indorsement  be  made  animo  itidorsandi,  with  the  intention 
of  guaranteeing,  it  will  bind  the  indorser  as  a  guarantor  sui)stan- 
tially  in  like  manner  as  the  indorser  of  a  promissory  note  is  bound. 
The  case  has  arisen  where  a  check  payable  to  "A.  or  bearer  "  was 
by  A.  indorsed  and  delivered  to  B.,  and  by  B.  transferred  tothe  plain- 
tiff. Upon  presentment  for  payment  it  was  dishonored,  and  plain- 
tiff sued  A.  as  an  indorser.  An  elaborate  argument  was  made 
to  show  that  A.  could  not  be  held  as  the  indorser  of  a  negotiable 
instrument,  but  the  court  held  the  contrary.  It  was  admitted  that 
the  inilorsement  had  been  made  animo  indorsandi.  The  case 
was  decided  upon  the  analogy  of  bills  of  exchange.'  It  is  probable 
that  this  decision  covers  not  only  the  indorsement  made  by  the 
'payee  of  the  check,  but  by  another  person  who  should  indorse, 
with  the  intention  of  becoming  an  indorser ;  for  the  check,  in  this 
instance,  being  payable  to  A.  or  hearer,  did  not  require  the  in- 
dorsement of  A.  as  a  receipt  or  preliminary  to  payment,  which 
would  have  been  the  case,  at  least  by  custom,  had  it  been  payable 
to  A.  or  order. 

The  payee  is  liable  on  his  indorsement  although  the  holder 
before  accepting  the  check  obtains  the  assurance  from  the  drawee 
that  the  check  is  good  and  will  be  paid.^" 

When  Indorsement  is  a  Mere  Receipt 

But  an  indorsement  not  made  animo  indorsandi,  but  for  some 
other  special  purpose,  will  not  bind  the  party  to  the  liability  of  a 
guaranteeing  indorser,  at  least  as  towards  any  person  chargeable 
with  notice  of  such  special  intention.  Thus,  if  a  check  be  made 
payable  to  "  A.  B.  or  order,"  and  A.  B.  himself  presents  it  at  the 
bank  for  pa^-ment,  the  strict  construction  of  the  phraseology  of 
the  check  would  entitle  him  to  receive  his  money  without  in- 
dorsing. Yet  it  is  customary  to  request  A.  B.  to  indorse.  It  is 
usually  understood  that  this  indorsement  is  intended  to  operate 
as  A.  B.'s  receipt  or  acknowledgment  that  he  has  received  the 
money,  and  if  such  be  the  intent  the  indorsement  will  have  no  other 

>  §  391.     Keene  v.  Beard,  8  C.  B.  n.  s.  372 ;  Bank  of  State  of  New  York 
V.  Musldngum  Branch  of  Bank  of  State  of  Ohio,  20  X.  Y.  032. 
!<•  Bank  v.  Carter,  88  Tenn.  289,  12  S.  W.  545  (1889). 

701 


§  391  CHECKS   IN    GENERAL 

effect.2  If  it  be  intended  as  a  guaranty  of  the  genuineness  of  the 
check,  it  may  be  operative  as  such.  Or  if  it  be  put  on  for  any  other 
specific  purpose,  its  scope  and  consequences  will  be  limited  to  such 
purpose,  at  least  in  the  hands  of  any  person  having  knowledge 
of  the  purpose.  For  example,  where  A.  indorsed  a  check  in  the 
jQrm  style  of  "  B.  &  C."  "  per  A.,"  and  the  cashier  of  the  drawee 
bank  required  A,  to  identify  himself,  A.  went  out  with  the  check, 
and  returned  with  it  bearing  the  indorsement  of  D.,  and  presented 
it  in  this  shape  as  furnishing  a  sufficient  identification  of  himself 
by  D.  Thereupon  the  check  was  paid.  A.  had  in  fact  no  author- 
ity to  indorse  the  name  of  "  B.  &  C."  The  court  held  that  D., 
by  his  indorsement,  had  undertaken  only  for  the  identity  of  A., 
not  for  A.'s  authority  to  indorse,  present,  and  collect  the  check.* 
Neither  possession  nor  authority  to  accept  constitutes  authority 
to  indorse  a  check.^" 

But  when  a  check  was  drawn  payable  to  the  order  of  A.,  and, 
in  consequence  of  its  dishonor  by  the  bank,  A.  was  sued  by  a 
subsequent  holder,  no  defence  was  suggested,  either  by  counsel 
or  by  the  court,  on  the  ground  that  A.  might  not  have  written  his 
name  on  the  back  animo  indorsandi.  Nothing  was  said  about 
this,  but  he  was  treated  as  an  indorser  guaranteeing  payment. 
He  was,  however,  allowed  to  escape  on  the  ground  that  the  check 
had  not  been  presented  with  sufficient  promptness  after  his  in- 
dorsement had  been  placed  upon  it.*  Also  it  was  held  that  the 
burden  of  showing  such  due  presentment  was  on  the  plaintiff. 
From  this  case  it  may  be  inferred  that  the  presumption  is  that 
the  indorser  of  a  check  intended  to  guarantee  unless  some  other 
intent  be  affirmatively  shown. 

Wliere  a  collecting  agent  indorses  simply  his  name  without 
adding  the  word  "  agent,"  he  is  not  chargeable  as  an  indorser 
if  it  appears  by  a  restrictive  indorsement  already  upon  the 
check  that  the  agent  has  taken  no  title  and  is  simply  acting  as 
agent.  ^ 

The  transfer  of  a  bank  check  payable  to  a  married  woman  or 

2  Aubert  v.  Walsh,  4  Taunt.  293  ;  Lloyd  v.  Sandilands,  Gow  13  ;  Keene 
V.  Beard,  8  C.  B.  n.  s.  372 ;  Grant  on  Bankers  and  Banking ;  Byles  on 
Bills,  p.  *24  ;  Daniel,  Neg.  Inst.  §  1648.  See  Hart  v.  Northwestern  Trust 
etc.  Bank,  191  111.  App.  396  (1915). 

3  Commercial  Press  v.  Crescent  City  National  Bank,  26  La.  Ann.  744. 
3"  Commercial  National  Bank  v.  Lincoln  Co.,  67  111.  App.  166. 

^  Veazie  Bank  v.  Winn,  40  Me.  62  ;  but  see  Emery  v.  Hobson,  62  id.  578. 
5  National  City  Bank  v.  Weseott,  118  N.  Y.  468,  23  N.  E.  900. 

702 


EFFECT    OF   IxNDORSEMENT    BY    A    LUNATIC  §  392 

bearer  does  not  pass  her  title  to  it  in  Alabama,  unless  it  is  trans- 
ferred with  the  consent  of  both  husband  and  wife  by  indorsement.*' 

§  392.  Effect  of  Indorsement  by  a  Lunatic.  —  B.  was  a  lunatic 
not  under  guardiansliip.  1).  ohtained  by  fraud  his  indorsement 
of  a  certificate  of  deposit.  The  bank  that  purchased  the  certif- 
icate was  a  bona  fide  holder  for  value.  But  the  court  held  that 
no  holder  could  be  protected  in  such  case  any  more  than  in  a  case 
of  forgery,  as  the  essential  element  of  contract,  viz.  assent,  was 
wanting,  and  as  for  negligence  there  could  be  none,  "  for  one  who 
is  incapable  of  prudence  ciinnot  be  gulity  of  negligence."  ^ 

This  we  think  an  error.  We  might  with  equal  force  say  that 
one  is  incapable  of  goodness  who  cannot  be  bad,  or  one  is  incapable 
of  lying  who  cannot  tell  the  truth ;  on  the  contrary,  that  is  just 
what  they  are  capable  of.  The  aim  of  the  law  is  to  favor  virtue, 
prudence,  and  foresight,  and  throw  their  natural  consequences 
upon  imprudence  and  imbecility ;  and  only  where  an  arm  of  pro- 
tection must  be  thrown  about  one  as  yet  undeveloped,  not  because 
he  is  weak  alone  (that  of  itself  is  no  good  reason),  but  because 
he  is  weak  now  and  promises  strength  ami  value  if  cared  for,  just  as 
a  florist  cares  for  his  budding  plants,  is  there  a  just  exception. 
Applying  this  basic  principle  to  the  case  of  lunacy,  if  we  consider 
only  the  lunatic  and  the  bona  fide  holder,  there  is  certainly  no 
reason  to  throw  loss  upon  a  bona  fide  holder  in  case  it  must  be 
borne  by  such  holder  or  the  lunatic ;  let  the  latter  recover  from 
the  wrongdoer  if  he  can.  Virtue  and  sanity  should  not  be  bur- 
dened that  lunacy  may  lie  upon  the  lap  of  luxury,  but  the  natural 
consequences  of  lunacy  should  be  visited  upon  it.  If  B.  was  only 
a  little  below  par,  the  law  would  make  him  bear  the  consequences 
of  his  own  short-comings  and  so  help  nature  to  exterminate  human 
inferiority ;  but  if  he  is  entirely  gone,  the  law,  according  to  the 
above  decision,  will  nurse  him  and  pet  him,  as  it  does  a  rosy  boy 
who  bears  in  his  breast  a  future  noble  manhood.  This  is  much 
like  saying,  Let  us  throw  away  an  apple  if  it  has  a  speck  in  it,  but 
if  it  is  rotten  to  the  core  let  us  eat  it. 

Moreover,  the  real  parties  benefited  by  such  decisions  are  the 
relatives  of  the  lunatic,  and  they  are  surely  guilty  of  negligence 
in    not  taking  better  care  of  him ;   while  the  bank  had  no  actual 

«  First  National  Bank  v.  Nelson,  105  Ala.  199.  10  So.  707  (1894).  citing 
Seharf  v.  Moore,  102  Ala.  468 ;   Steiner  r.  Tranum,  98  Ala.  315.  13  So.  365. 

1  §  392.  Anglo-California  Bank  v.  Ames,  27  Fed.  727.  See  Wirel)aeh 
V.  First  National  Bank,  97  Pa.  St.  543. 

703 


§  392  CHECKS   IN   GENERAL 

notice,  nor,  as  the  indorser  was  not  under  guardianship,  not  even 
the  remotest  constructive  notice.  Negotiable  paper  obtained 
by  fraud  or  theft  is  good  in  the  hands  of  a  bona  fide  holder.  Why 
does  such  a  case  as  this  call  for  more  protection  ? 

But  although  the  reasons  assigned  for  the  decision  above  will 
not  bear  inspection,  it  is  nevertheless  true  that,  when  we  consider 
the  necessity  of  repressing  the  fraudulent  conduct  of  those  who 
take  advantage  of  lunacy,  the  case  wears  a  different  aspect.  In 
ordinary  cases  of  fraud,  commerce  may  be  left  free  without  the 
hampering  requirement  that  each  new  .taker  of  negotiable  paper 
shall  examine  the  circumstances  under  which  previous  titles  were 
acquired ;  the  interest  and  intelligence  of  the  person  defrauded 
may  well  be  relied  on  as  a  security  against  such  conduct ;  but 
w^hen  these  barriers  are  burned  away  by  the  fires  of  lunacy,  it 
becomes  necessary  to  oppose  the  tendency  to  fraud  with  the  interest 
and  intelligence  of  the  taker  of  the  paper.  It  is  better  that  com- 
merce should  be  a  little  burdened,  than  that  the  door  of  fraud 
should  be  left  wide  open  with  no  sentinel  on  guard.  The  same 
considerations  apply  to  the  case  of  forgery  of  the  drawer's  or 
maker's  name. 

§  393.  Checks  payable  to  Bearer.  —  Checks  written  payable 
to  bearer  pass  by  mere  delivery.  Prima  facie,  the  holder  is  the 
owner.  They  are  commercial  paper,  and,  as  such,  a  valuable 
consideration  is  presumed  until  proof  of  suspicious  circumstances 
is  introduced.  Also  it  is  presumed  that  they  were  issued  by  the 
maker.  Possession  is  prima  facie  proof  of  title  ;  but  the  plaintiff 
in  a  suit  upon  the  check  must  show  that  he  received  it  for  value, 
and  in  due  course  of  business.^  Even  where  a  check  was  not 
addressed  to  any  particular  bank,  it  was  yet  ruled  that  a  holder 
for  value  might  recover  against  the  drawer  on  a  count  for  money 
had  and  received. ^ 

A  check  payable  to  bearer  does  not  require  indorsement.  Never- 
theless it  may  be  indorsed,  and  the  indorsee  may  be  held  by  a 

1  §  393.  Byles  on  Bills,  p.  *18;  Daniel,  Neg.  Inst.,  §  1648;  Keene  v. 
Beard,  8  C.  B.  n.  s.  372 ;  Woods  v.  Schroeder,  4  Harr.  &  J.  (Md.)  276 ; 
Cruger  v.  Armstrong,  3  .Johns.  Cas.  (N.  Y.)  5  ;  Conroy  v.  Warren,  id.  259  ; 
Merchants'  Bank  v.  Spicer,  6  Wend.  (N.  Y.)  445;  Sutcliffe  v.  McDowell, 
2  Nott  &  Mc.  C.  (S.  C.)  251 ;  Murray  v.  Judah,  6  Cow.  (N.  Y.)  484  ;  Glenn 
V.  Noble,  1  Blackf.  (Md.)  104;  Humphries  v.  Bicknell,  2  Litt.  (Ky.)  299; 
Shrieve  v.  Duekham,  1  id.  194;  Mouran  v.  Lamb,  7  Cow.  (N.  Y.)  174; 
Hoyt  V.  Seeley,  18  Conn.  353  ;  Unaka  National  Bank  v.  Butler,  113  Tenn. 
574,  83  S.  W.  655  (1904). 

2  Ellis  V.  Wheeler,  3  Pick.  (Mass.)  18. 

704 


CHECKS  PAYABLE  TO  BEARER  §  393 

subsequent  holder,  as  may  also  the  indorsee  of  a  check  payable 
to  order.  To  this  end,  however,  the  animm  indorsando,  the  in- 
dorser's  intent  to  render  liimself  liable  as  a  guarantor,  must  appear 
to  be  shown.  This  is  by  no  means  a  necessary  inference  from  the 
mere  writin<^  of  the  name  across  the  back  of  the  instrument, 
which  may  often  be  done  for  other  purposes.  Thus  in  England 
it  is  customary  for  the  holder  of  a  check,  upon  receiving  payment 
of  the  same  from  the  banker,  to  write  his  name  iijion  the  back, 
and  the  usage  of  business  gives  to  this  simply  the  signification  of 
his  receipt  for  the  money.  Such  an  indorsement  of  course  creates 
no  liability  of  any  description  further  than  that,  if  any,  which  could, 
under  the  peculiar  circumstances  of  any  indixidual  case,  grow  out 
of  a  receipt  expressed  in  full,  in  ordinary  form.^ 

It  seems  that,  as  between  the  holder  and  indorser  of  a  check, 
diligence  in  presentment  must  be  used  to  ena})le  the  former  to  hold 
the  indorser  in  the  event  of  dishonor.^  But  notice  of  nonpayment 
apparently  need  not  l)e  given  to  the  indorser  with  any  especial 
promptitude,  provided  actual  loss  is  not  caused  to  him  by  the  delay. ^ 

Checks  are  commercial  paper,  and  are  generally  affected  by  the 
rules  which  affect  commercial  j)apcr.  Thus  the  holder  of  a  check 
payable  to  bearer,  or  indorsed  in  blank,  is  presumed  to  be  the 
owner,  bona  fide,  and  for  value.  It  is  only  after  ])roof  tliat  the 
original  issue  of  the  check  was  a  fraud,  or  that  it  was  lost  by  the 
drawer  before  issue,  that  such  a  holder  will  be  required  to  show 
his  bona  fides,  to  prove  that  he  has  given  value  for  the  check,  and 
that  he  has  come  into  possession  of  it  in  the  usual  course  of  busi- 
ness. If,  being  obliged  to  show  these  facts,  he  does  so  success- 
fully, it  then  makes  no  difference  under  what  circumstances  of 
fraud  or  loss  the  check  originally  left  the  drawer's  hands ;  the 
holder  shall  retain  and  shall  recover  upon  it,  at  least  as  much  as 
he  has  paid  for  it.  Even  where  in  the  chain  of  title  there  is  a 
gift,  known  to  the  holder,  who  nevertheless  had  no  reason  to  sus- 
pect any  irregularity  for  this  reason,  and  who  i)aid  \alue  in  the  due 
course  of  business,  he  shall  still  hold  and  recover.^     These  prin- 

3  Aubert  v.  Walsh,  4  Taunt.  293  ;  Lloyd  v.  Sandilands,  Gow  13  ;  Keene 
V.  Beard,  8  C.  B.  n.  s.  372 ;  Grant  on  Bankers  and  Banldng ;  Bvlos  on 
Bills,  p.  *24 ;   Daniel,  Neg.  Inst.,  §  1653. 

^  Little  V.  PhcBnix  Bank,  2  Hill  (N.  Y.)  425;  3  Kent's  Comm.  *105, 
note  c. 

^  Small  V.  Franklin  Mining  Co.,  99  Mass.  277.  It  must  be  acknowledged 
that  this  is  not  a  very  satisfactory  case,  either  in  the  decision  or  in  the 
opinion. 

«  Fuller  V.  Hutchings,  10  Cal.  523 ;  Case  v.  Mechanics'  Banking  Asso- 
VOL.  1  —  45  -  705 


§  393  CHECKS   IN   GENERAL 

ciples  of  law  will  be  found  fully  elucidated  and  carried  out  in  all 
their  details  in  works  on  bills  and  notes.  They  are  usually  dis- 
cussed in  considering  questions  which  arise  between  the  maker 
or  drawer  of  the  paper  and  a  subsequent  holder  thereof.  The 
general  principles  are  broadly  stated  here,  simply  because  from 
them  follows  as  an  unavoidable  corollary,  the  rule  that  if  a  bank 
pays  a  check  payable  to  bearer  or  indorsed  in  blank,  upon  present- 
ment, to  the  holder  thereof,  having  at  the  time  no  reasonable 
cause  for  suspecting  any  irregularity  or  any  cause  for  refusing 
such  payment,  it  will  be  protected  in  doing  so,  no  matter  what 
facts  unknown  to  it  may  have  occurred  prior  to  the  presentment. 
Even  if  the  party  presenting  be  the  very  individual  who  stole  the 
check,  before  issue,  from  the  drawer,  or  who  found  it  after  the 
drawer  had  lost  it,  still,  since  the  bank  has  no  possible  opportunity 
of  learning  these  facts,  the  drawer  shall  suffer  the  loss.  A  check 
payable  to  bearer  or  payable  to  order,  and  indorsed  by  the  payee 
in  blank,  passes  by  delivery,  just  as  fully  and  as  freely  as  a  bank 
note.'^  Neither  does  the  rule  of  law,  that  an  order  or  bill  drawn 
on  a  particular  fund  is  not  negotiable,  cover  the  case  of  a  check ; 
for  this  is  drawn  not  against  a  particular  fund,  but  against  a  gen- 
eral credit  or  account.^  It  might  be  added,  too,  that  the  custom 
of  the  banking  business,  which  has  been  sometimes  held  even  to 
give  the  holder  of  a  check  a  right  of  action  thereon  against  the  bank, 
authorizes  the  negotiability,  and  renders  it  part  of  the  contract 
between  the  bank  and  the  depositor  that  his  checks  shall  be  paid 
when  presented,  no  matter  through  how  many  hands  they  may 
have  passed  in  the  course  of  business  negotiation. 

§  394.  Money  given  to  Drawer  of  Worthless  Check.  —  Where 
money  is  paid  to  a  person  in  exchange  for  his  own  check  which 
is  worthless,  and  is  known  to  him  at  the  time  of  the  transaction 
to  be  worthless,  the  title  to  the  money  nevertheless  passes  to  him. 
This  rule  was  laid  down  in  bankruptcy  proceedings ;  the  person 
who  gave  the  check  upon  his  bankers  (who  had  for  some  time  re- 
fused to  honor  his  checks)  went  into  bankruptcy,  and  the  party 
to  whom  he  gave  it,  and  who  gave  him  cash  for  it,  filed  a  petition 

ciation,  4  Const.  (N.  Y.)  166 ;  Ross  v.  Bedell,  5  Duer  (N.  Y.)  462 ;  Good- 
man V.  Simonds,  20  How.  343,  15  L.  ed.  934  (case  of  a  bill  of  exchange) ; 
Gray's  Administrator  v.  Bank  of  Kentucky,  29  Pa.  St.  365  (do.) ;  Fulweiler 
V.  Hughes,  17  id.,  440  ;  Stephens  ;;.  McNeiU,  26  Barb.  (N.  Y.)  651 ;  Towns- 
end  V.  BiUinge,  1  Hilt.  (N.  Y.)  353. 

^  Munn  V.  Bureh,  25  111.  .35. 

8  Keene  v.  Beard,  8  C.  B.  n.  s.  372. 

706 


TRANSFER   OF   CUECK    SENT    BY    MAIL  §  395 

for  reimbursement  in  full,  on  the  ground  that  the  title  to  the  money 
did  not  pass.  But  the  court  held  that  the  title  did  pass  in  spite 
of  the  known  worthlessness  of  the  check,  that  the  money  was  part 
of  the  general  assets  of  the  bankrupt,  and  that  the  check-holder 
could  only  come  in  as  an  ordinary  creditor  and  take  his  dividend.' 

§  ,395.  Transfer  of  Check  sent  by  Mail.  —  The  title  is  in  the 
sender  until  the  check  comes  t(j  the  hands  of  the  drawee,  unless 
the  latter  has  requested  the  sender  to  forward  money  to  him  by 
mailed  check ;  in  that  case,  the  title  vests  in  the  drawee  when  the 
check  is  placed  in  the  mail  according  to  his  instructions.' 

If  a  depositor  requests  the  bank  to  remit  by  draft,  and  the  bank 
addresses  the  remittance  according  to  the  address  contained  in 
the  letter  of  the  depositor,  it  is  not  liable.  The  risk  of  transmission 
is  upon  the  depositor.^ 

If  A.  directs  B.  to  send  money  by  check,  and  B.  puts  a  letter 
containing  the  check  in  the  post,  properly  directed,  it  becomes 
at  once  the  property  of  A.^ 

Where  A.  in  London  wrote  to  B.  in  Suffolk,  asking  "to  be 
favored  with  a  check  in  the  course  of  a  week  ",  and  the  check  was 
stolen  in  transit  and  paid  on  a  forged  indorsement,  it  was  held 
that,  as  the  distance  was  too  great  to  send  a  special  messenger 
with  the  check,  the  debtor  was  entitled  to  regard  the  request  as  an 
order  to  send  by  mail,  and,  having  conformed  to  this  implied  com- 
mand, the  post-office  was  the  agent  of  both  parties,  and  judgment 

1  §  394.     In  re  King,  8  National  Bankr.  Reg.  285  (Ga.). 

The  passing  of  a  fictitious  check  with  intent  to  defraud  is  a  criminal 
offence.  People  v.  Walker,  15  Cal.  App.  400,  114  Pac.  1009  (1911).  Also 
the  drawing  a  check  on  a  bank  and  delivering  the  same  for  the  payment  of 
money  \\ith  intent  to  defraud,  as  wliere  the  drawer  has  not  sufficient  funds 
on  deposit  with  which  to  pay  the  check,  or  has  no  reasonable  grounds  to 
believe  that  it  vrill  be  paid,  is  a  criminal  offence  in  many  states.  See 
People  V.  Mohr,  157  Cal.  732,  109  Pac.  476  (1910);  State  v.  Pilhng,  53 
Wash.  464,  102  Pac.  230,  132  Am.  St.  Rep.  1080  (1909) ;  Ryan  v.  State, 
60  Fla.  25,  53  So.  448  (1910) ;  State  v.  Winter,  98  S.  C.  294,  82  S.  E.  419 
(1914) ;  People  v.  Frev,  165  Cal.  140,  131  Pac.  127  (1913) ;  People  v. 
Bercovitz,  163  Cal.  636,  126  Pac.  479,  43  L.  R.  A.  (n.  s.)  667  (1912); 
Whitney  v.  State,  63  Fla.  53,  58  So.  230  (1912) ;  Denton  v.  State,  66  Fla.  Si, 
62  So.  914  (1913). 

>  §  395.  Talbot  v.  Bank  of  Rochester,  1  Hill  (N.  Y.)  295;  Graves  r. 
American  E.xchange  Bank,  17  N.  Y.  208;  Watt-Harley  etc.  Co.  r.  Day, 
1  Ga.  App.  646,  .57  S.  E.  1033  (1907). 

2  Jung  V.  Second  Ward  Savings  Bank,  55  Wis.  364,  13  N.  W.  23o  (188'-). 
See  First  National  Bank  v.  McManigle,  69  Cal.  156 ;  Gurney  v.  Howe.  9 
Gray  (Mass.)  404;  Warwicke  v.  Noakes,  Peake  N.  P.  98;  Burr  v.  Sickles, 
17  Ark.  428. 

3  Indiana  National  Bank  v.  Holtschaw,  98  Ind.  87. 

707 


§  394  CHECKS   IN   GENERAL 

must  be  entered  for  the  debtor  in  a  suit  by  A.  to  recover  the  money.'* 
The  loss  as  between  A.  and  B.  very  properly  fell  upon  A.,  as  it 
was  a  loss  without  B.'s  fault,  and  falling  upon  the  property  of  A. 
Res  per  it  domino. 

A.  sent  a  check  on  the  B,  bank  to  the  said  bank,  saying, "  Please 
send  me  a  check  on  some  Boston  bank  for  the  enclosed  check," 
B.  sent  by  mail  a  check  drawn  by  C.  on  a  Boston  bank,  and  the 
balance  in  currency.  It  was  lost,  and  C.  would  not  give  a  dupli- 
cate. Held,  that  the  bank  should  have  sent  its  own  check  for  the 
whole,  A  check  was  less  liable  to  be  stolen  than  bills,  and  if  its 
check  had  been  lost  it  could  have  been  duplicated  without  depend- 
ing on  the  will  of  a  third  person.  A,  recovered  in  a  suit  for  money 
had  and  received.^ 

§  395  A.  Lost  Checks.  —  If  a  check  be  lost  by  the  lawful  owner 
thereof,  and  subsequently  come  into  the  hands  of  a  bona  fide 
holder  for  value  and  without  notice,  he  will  be  entitled  to  receive 
the  amount  from  the  bankers.  If  they  refuse  to  pay  him,  by 
reason  of  instructions  to  this  effect  given  them  by  the  drawer,  the 
holder  may  recover  the  amount  from  the  drawer.^ 

The  fact  that  a  check  has  not  been  presented  or  paid,  and 
has  been  presumably  lost  after  delivery  by  the  drawer  to  the 
payee,  and  after  it  had  been  sent  by  the  payee  to  a  third  party, 
does  not  constitute  a  sufficient  consideration  for  the  drawer's 
promise  to  such  third  person  to  give  him  a  new  check  for  the  like 
amount.2  But  it  seems  that,  under  strong  circumstances  of  equity 
and  necessity,  the  drawer  might  be  compelled  to  give  a  new  check 
in  place  of  a  lost  one,  upon  receiving  a  proper  indemnity  from  the 
third  party  from  whose  possession  the  check  was  lost.^ 

So  where  the  lost  or  destroyed  check  was  one  issued  by  the 
accountant-general  in  chancery,  and  had  been  so  long  outstanding 
that  it  would  not  be  paid  upon  presentment,  the  Court  of  Chancery 
ordered  a  new  check  to  be  issued.^ 

*  Norman  v.  Ricketts,  46  Lond.  Bk.  Mag.  (June,  1886)  497. 
5  Ames  V.  York  National  Bank,  103  Mass.  326. 

1  §  395  A.     Grant  v.  Vaughan,  3  Burr.  1525,  1526 ;  3  T.  R.  177,  182. 
If  the  bank  pays  the  check  to  the  bona  fide  holder  after  being  notified 

by  the  drawer  not  to  do  so  the  loser  of  the  check  has  lost  his  title  thereto 
and  cannot  recover  from  the  bank.  Unaka  National  Bank  v.  Butler,  113 
Tenn.  574,  83  S.  W.  655  (1904). 

2  Johns  V.  Mason,  9  Hare  29. 

3  Rhodes  v.  Morse,  14  Jur.  800.  See  First  National  Bank  v.  MeConnell, 
103  Minn.  340,  114  N.  W.  1129,  123  Am.  St.  Rep.  336,  14  L.  R.  A.  (n.  s.) 
616,  n.  (1908).  ^  Taylor  v.  Scrivens,  1  Beav.  571. 

708 


STOLEN   CHECKS  §  395  C 

If  a  check  given  in  absolute  payment  by  clear  agreement  is  lost, 
and  paid  on  a  forged  indorsement,  the  true  owner  can  recover  of 
the  bank,  but  not  of  the  drawer.  In  case  the  check  was  taken 
without  special  agreement,  and  was  therefore  only  conditional 
payment,  we  think  the  same  rule  should  hold.  The  drawer  has 
done  his  duty ;  it  is  through  no  fault  of  his  that  the  payee  does 
not  get  his  money  ;  the  very  payment  of  the  check  proves  that  the 
drawer  was  faultless  in  his  undertaking ;  the  check  was  good  for 
the  money,  and,  if  accident  or  fraud  deprive  the  holder  of  it,  surely 
the  loss  should  remain  upon  him,  rather  than  on  the  drawer.  Only 
by  leaving  losses  where  they  fall  as  to  innocent  parties  can  care 
be  encouraged ;  but  in  most  cases  the  payee  could  recover  from  the 
bank. 

However,  in  New  York  it  is  thought  that  the  holder  should 
recover  of  the  drawer,  except  where  the  check  was  taken  in  abso- 
lute extinguishment  of  the  debt.^ 

§  395  B.  Conversion  of  Checks.  —  A  judgment  for  the  con- 
version of  a  check  indorsed  in  blank  may  be  given  for  its  face 
value  in  the  absence  of  evidence  showing  its  collection  or  real 
value.* 

§  395  C.  Stolen  Checks.  —  If  a  stolen  check  is  deposited  by 
the  thief  in  the  bank  of  a  third  person,  who  does  not  know  thereof, 
as  the  easiest  way  of  cashing  the  check  and  not  with  the  intention 
to  make  the  proceeds  the  property  of  the  third  person,  and  there- 
after, before  the  owner  of  the  bank  account  knows  of  the  deposit, 
the  thief  draws  out  the  entire  sum  so  deposited,  the  owner  of  the 
bank  account  is  under  no  liability  to  the  person  from  whom  the 
thief  stole  the  money.* 

6  Thomson  v.  Bank,  82  N.  Y.  8.  See  the  account  of  Norman  v.  Ricketts 
under  "Title  to  Check  sent  by  Mail." 

1  §  395  B.     Lowell  v.  Hammond  Co.,  60  Conn.  500  (1895). 

I  §  395  C.  Newell  v.  Hadley,  206  Mass.  335,  92  N.  E.  507,  29  L.  R.  A. 
(n.  s.)  908  (1910). 


709 


CHAPTER  XXVIII 
REVOCATION   OF   CHECKS 

(1)  By  Countermand. 

§  397.  Good  against  a  donee  or  mala  fide  holder,  or  when  the  con- 

§  398.  dition  of  delivery  is  not  fulfilled. 

Otherwise,  the  drawer  has  no  right  to  revoke  as  against  a 
bona  fide  holder ;  but  if  he  does,  the  best  opinion  is  that 
it  is  a  question  between  himself  and  the  holder,  with 
which  the  bank  has  nothing  to  do,  and  that  it  should 
maintain  strict  neutraHty,  as  in  the  case  of  any  other 
adverse  claim,  paying  neither  party  till  it  is  secured  or 
the  question  settled. 
§  398.  Authority,  however,  is  in  conflict. 

Illinois  holds  that  a  countermand  is  no  excuse  to  a 

bank  for  refusal  to  pay. 
Most  courts  hold  that  the  bank  must  obey  the  counter- 
mand if  received  before  payment  or  acceptance,  and 
that  the  funds  remain  under  the  entire  control  of 
the  depositor. 
§  399.  Power  to  revoke  ceases  with  certification,  but  the  certifica- 

tion must  be  complete.  If  the  check  is  only  marked,  and 
not  yet  delivered  when  the  notice  of  revocation  is  re- 
ceived by  the  bank,  no  liability  has  been  incurred  by  the 
bank,  and  the  revocation  takes  effect. 

(2)  By  Death.     See  §§  549-551. 

§  400.  The  death  of  the  drawer  is  usually  held  a  revocation  of  the 

bank's  authority  to  pay  his  uncertified  checks,  but  the 
reason  of  the  case  is  all  the  other  way,  and  it  is  to  be 
hoped  the  law  will  soon  be  cured  by  legislative  medicine. 
One  who  takes  a  check  from  a  man  doing  business  alone 
may  have  to  wait  two  or  three  years  to  get  his  money, 
till  the  estate  of  the  drawer  can  be  settled  up,  if  the  drawer 
dies,  and  the  drawee  knows  it  before  presentment. 

(3)  By  Insolvency  op  Drawer. 

§  400  A.  Bank's  authority  to  pay  on  the  depositor's  uncertified  order 

ceases  upon  notice  of  his  insolvency. 

§  397.    Revocation  of  a  Check.  —  By  Countermand.  —  By  Death. 

—  This  is  a  subject  upon  which  authorities  conflict.     The  IlHnois 
doctrine  is,  that  the  order  of  a  drawer  to  the  bank  not  to  honor  a 
710 


CASES    ON    COUNTERMAND  §  398 

certain  check  (A.)  is  no  sufiicient  excuse  to  the  bank  for  refusal  to 
pay  the  same  when  subsequently  presented.  The  ^^eneral  cur- 
rent of  authority  is  very  strong  to  the  effect  that  the  drawer  may 
countermand.  And  much  as  we  hesitate  to  differ  with  the  Illinois 
courts,  which  seem  perhaps  the  least  hampered  with  mere  teclmi- 
calities  and  the  most  open  to  the  light  of  reason  and  modern  life 
of  any  of  the  State  judiciaries,  yet  we  think  in  this  matter  the 
pendulum  has  swung  too  far.  The  drawer  can  make  a  subsequent 
check,  B.,  and,  by  presenting  it  before  the  check  A.,  cut  of!"  the 
latter ;  or  he  can  order  the  bank  to  transfer  his  deposit  to  the 
account  of  another  depositor,  or  to  hold  it  as  a  special  or  specific 
deposit,  as  for  the  payment  of  a  note,  or  to  transmit  it  at  once  to 
some  point,  and  when  A.  is  presented  after  such  order  has  come 
to  the  bank,  the  check  will  not  be  paid  because  of  insufficient 
unincumbered  funds.  And  not  only  can  the  drawer  in  other  ways 
accomplish  the  purpose  of  a  direct  countermand,  but  even  if  he 
could  not,  the  question  is  properly  one  that  lies  entirely  between 
the  depositor  and  the  check-holder,  and  with  which  the  bank 
should  not  be  called  upon  to  interfere. 

A  countermand  may  be  upon  good  cause,  as  when  a  check  is  a 
gift,  or  was  not  to  take  effect  except  on  some  condition  that  has 
failed.  Is  the  bank  to  be  required  at  its  peril  to  look  into  such 
questions?  Must  it  pay  at  peril  of  accounting  to  the  drawer  if 
his  order  was  proper,  or  refuse  to  pay  in  peril  of  accounting  to  the 
holder  if  the  order  was  improper?  We  think  it  is  clear  that  the 
business  of  the  bank  should  not  be  hampered  in  such  manner,  and 
that  the  only  safe  course  is  to  hold  in  all  cases  of  adverse  claims 
that  the  bank  may  keep  the  fund  until  the  parties  settle  the  ques- 
tion between  themselves,  or  one  of  them  gives  the  bank  a  satisfac- 
tory bond  of  indemnity. 

Perhaps  a  good  plan  would  be  to  allow  the  depositor  a  certain 
number  of  days  to  desposit  a  bond  in  some  court,  with  the  provision 
that  on  order  from  the  court  the  bank  should  hold  the  deposit  free 
from  the  claim  of  the  check,  and  if  the  depositor  did  not  avail  him- 
self of  the  privilege,  then  the  holder  might  do  the  same  ;  but  in  no 
case  ought  the  bank  to  be  subject  to  suit  except  for  improperly 
paying  the  fund  with  notice  of  an  adverse  claim. 

§  398.  Cases  on  Countermand.  —  A  check  is  simply  a  written 
order  of  a  depositor  to  his  bank  to  make  a  certain  payment.  It  is 
executory,  and  as  such  it  is  of  course  revocable  at  any  time  before 
the  bank  has  paid  or  committed  itself  to  pay  it.     But  after  the 

711 


§  398  REVOCATION   OF   CHECKS 

bank  has  paid,  or  has  placed  itself  under  an  obligation,  or  has 
incurred  a  liability  to  comply  with  the  order,  the  drawer's  power  to 
revoke  is  at  an  end.  Thus,  after  the  bank  has,  by  acceptance  of 
the  check,  directly  undertaken  and  promised  the  holder  to  honor 
it,  the  drawer  is  as  much  deprived  of  his  right  to  countermand  it 
as  if  actual  payment  had  been  made.  The  remark  once  fell  from 
Judge  Story,  in  the  oft-cited  Matter  of  Brown,  that  the  drawer  of 
a  check  had  no  right  to  countermand  payment  at  the  bank.  It 
was  obvious  from  the  context,  that  the  judge  referred  rather  to 
moral  right  than  to  legal  right.  He  meant,  simply,  that  a  debtor 
who  had  given  to  his  creditor  a  check  in  payment  of  the  debt  had 
no  right  as  towards  that  creditor,  "  right  "  being  considered  as  a 
matter  of  honesty,  to  order  nonpayment  of  the  check.  The 
language  of  the  judge,  taken  in  isolation  from  the  circumstances 
of  the  case,  and  from  the  remainder  of  the  opinion,  seems  to  admit 
a  different  meaning,  and  is  therefore  capable  of  a  misinterpretation 
and  misuse,  which  have  sometimes  been  feebly  attempted.  But 
if  such  a  misunderstanding  is  possible,  still  the  authorities  to  the 
contrary  effect  are  numerous,  and  leave  no  shadow  of  doubt  upon 
the  point.  The  bank  is  the  drawer's  agent.  Its  primary  duty  is 
to  hold  or  to  pay  his  money  as  he  directs.  Primarily  it  owes 
no  duty  to  the  holder,  except  under  and  by  virtue  of  directions 
from  the  drawer.  Until,  by  reason  of  these  directions,  it  has  as- 
sumed voluntarily,  or  by  action  of  law  has  involuntarily  come 
under,  secondary  and  superseding  obligations  to  the  holder,  the 
latest  orders  from  the  drawer  govern  its  right  to  act  on  his  behalf.^ 

1  §  398.  Gibson  v.  Minet,  2  Bing.  7;  1  Car.  &  P.  247;  R.  &  M.  68, 
9  Moore,  31 ;'  Dykers  v.  Leather  Manufacturers'  Bank,  11  Paige  (N.  Y.) 
612;  Scott  V.  Porcher,  3  Meriv.  652;  Lilly  v.  Hayes,  5  Ad.  &  E.  548 
Walker  v.  Rostron,  9  M.  &  W.  411 ;  Malcolm  v.  Scott,  5  Excli.  601 ;  Wil 
Hams  V.  Everett,  14  East  582 ;  Fruhling  v.  Sehroeder,  2  Bing.  N.  C.  77 
Morrell  v.  Wootten,  16  Beav.  197,  which  holds  even  that  the  rule  is  not  af- 
fected by  the  fact  that  the  person  in  whose  favor  the  order  was  drawn  had 
no  knowledge  of  it,  and  no  power  to  take  advantage  of  it  at  any  time  prior 
to  the  revocation.  Brind  v.  Hampshire,  1  M.  &  W.  372 ;  also  to  the  same 
effect,  Grant  on  Bankers  and  Banking;  Story  on  Promissory  Notes, 
§  498;  citing  Purchase  v.  Mattison,  6  Duer  (N.  Y.)  587;  Lovett  v.  Corn- 
well,  6  Wend.  (N.  Y.)  369;  1  Hall  (N.  Y.)  56;  Jacks  v.  Darrin,  3  E.  D. 
Smith  (N.  Y.)  557;  First  National  Bank  v.  School  District,  31  Okla. 
139,  120  Pac.  614,  39  L.  R.  A.  (n.  s.)  655,  n.  (1912) ;  Usher  v.  Tucker  Co., 
217  Mass,  441,  105  N.  E.  360  (1913);  Brown  v.  Cow  Creek  Sheep  Co., 
21  Wyo.  1,  126  Pac.  886  (1912);  Taylor  v.  First  National  Bank,  119 
Minn.  525,  138  N.  W.  783,  1914A  Ann.  Cas.  1.302,  n. ;  Weiand's  Adm.  v. 
State  National  Bank,  112  Ky.  310,  65  S.  W.  617,  56  L.  R.  A.  178  (1901) ; 
Pease  v.  State  National  Bank,  114  Tenn.  693,  88  S.  W.  1040  (1905); 
712 


CASES    ON    COUNTERMAND  §  398 

It  may  often  be  not  only  the  lawful  right  of  the  drawer  of  the 
check,  as  towards  the  bank,  to  revoke  the  bank's  authority  to  pay 
before  presentment  of  the  check ;  but  it  may  be  also  his  moral, 
as  well  as  his  lawful  right.  An  instance  of  this  kind  occurred  where 
a  dispute  arose  between  a  creditor  and  an  agent  of  a  foreign  debtor 
as  to  interest.  At  last  the  creditor  agreed  to  accept  the  principal 
and  give  a  receipt  in  full.  No  sooner  however  had  he,  upon  these 
terms,  received  the  agent's  check  for  the  principal,  than  he  de- 
clared his  intention  to  sue  the  debtor  abroad,  in  the  debtor's  own 
country,  for  the  interest.  The  debtor's  agent  at  once  stopped 
payment  upon  the  check,  and  Lord  Ellenborough  upheld  him  in  so 
doing,  saying  that  the  delivery  of  the  check  was  made  upon  a 
condition  which  it  at  once  appeared  that  the  payee  intended  to 
elude.  The  delivery  was  conditional,  and  "  all  still  remained  m 
fieri.''  The  stoppage  of  payment  was  justifiable,  and  rendered  the 
draft  "  a  piece  of  waste  paper  "  in  the  payee's  hands.^ 

The  case  cited  of  Gibson  v.  Minet  affords  a  very  strong  illustra- 
tion of  the  drawer's  power  of  revocation.  An  order  was  given  by 
the  customer  to  his  banker  in  the  following  terms  :  — 

"  Waterford,  July,  1822. 

"  I  request  you  to  hold  over  400/.  from  my  private  account 
to  the  disposal  of  J.  Mintern  &  Co.  Wm.  Gibson. 

"  Messrs.  Minet  &  Stride." 

Kellogg  V.  Citizens'  Bank,  176  Mo.  App.  288,  162  S.  W.  643  (1914) ; 
State  Sav.  Bank  v.  Buhl,  129  Mich.  193,  88  N.  W.  471,  56  L.  R.  A.  944 
(1901);  Brinton  v.  Lewiston  National  Bank,  11  Idaho  92,  81  Pac.  112 
(1905);  Western  Union  Tel.  Co.  v.  Louissell,  11  Ala.  App.  563,  66  So. 
839  (1914);  Glennan  v.  Rochester  Trust  etc.  Co.,  209  N.  Y.  12,  102 
N.  E.  537,  1915A  Ann.  Cas.  441,  52  L.  R.  A.  (x.  s.)  302,  affirming  152 
App.  Div.  316,  136  N.  Y.  S.  747 ;  Drinkall  v.  Movius  State  Bank,  11  N.  D. 
10,  88  N.  W.  724,  95  Am.  St.  Rep.  693,  57  L.  R.  A.  341  (1901).  See 
also  Taylor  v.  First  National  Bank,  119  Minn.  525,  138  N.  W.  783, 
1914A  Ann.  Cas.  1302,  n. 

In  South  Carolina  the  drawer  of  a  check  cannot  countermand  its  pay- 
ment if  it  has  passed  into  the  possession  of  a  bona  fide  holder.  Loan  & 
Savings  Bank  v.  Farmers'  etc.  Bank,  74  S.  C.  210,  54  S.  E.  364.  114  Am. 
St.  Rep.  991  (1906).  See  also  Raesser  v.  National  Exchange  Bank, 
112  Wis.  591,  88  N.  W.  618,  88  Am.  St.  Rep.  979,  m  L.  R.  A.  174  (1902). 

Countermand  is  not  effective  until  it  reaches  the  bank  even  tliough 
it  was  not  received  because  of  the  negligence  of  the  agent  of  the  bank. 
Curtice  v.  London  City  etc.  Bank,  (1908)  I  K.  B.  293. 

^Wienholt  v.  Spitta,  3  Camp.  376.  But  see  Watson  v.  Russell.  3  B. 
&  S.  34 ;   31  L.  J.  Q.  B.  304. 

713 


§  398  REVOCATION    OF   CHECKS 

This  order  was  delivered  to  a  partner  in  the  house  of  Mintern 
&  Co.  on  July  8,  and  to  Messrs.  Minet  &  Stride  on  July  13.  The 
drawer  had  funds  to  his  credit  to  the  amount  called  for.  Upon 
the  receipt  of  it,  one  of  the  bankers  wrote  upon  the  debit  side  of 
Gibson's  account:  "  N.  B.  By  Mr.  Gibson's  letter  of  the  8th 
July,  1822,400/.  is  to  be  held  at  the  disposal  of  Messrs.  J.  Mintern 
&  Co."  Mintern  &  Co.  were  customers  with  the  same  banker. 
On  ^Nlarch  19,  1823,  Gibson  notified  the  bankers  that  he  counter- 
manded the  order.  The  bankers  immediately  notified  Mintern  & 
Co.,  and  desired  instructions.  Mintern  &  Co.  replied,  requiring 
the  amount  to  be  carried  to  their  credit,  and  the  bankers  complied, 
and  notified  Gibson.  The  jury  found  that  the  order  to  the  bankers 
was  executory,  and  had  not  been  acted  upon  at  the  time  of  the 
countermand,  and  the  court  held  that  the  countermand  was  there- 
fore in  season,  and  good. 

Another  recent  English  case,  also,  well  illustrates  the  operation 
of  the  doctrines  of  this  section.  A  debtor  gave  a  check  in  payment 
of  his  indebtedness.  Before  presentment  of  the  check,  garnishee 
process  was  served  on  him  in  a  suit  against  the  payee.  The  drawer 
at  once  countermanded  his  check,  and  directed  that  it  should 
not  be  paid.  The  court  held  that  by  this  stopping  payment  on 
the  check  the  original  debt  from  the  drawer  to  the  payee  was 
revived,  and  was  held  by  the  garnishee  process.^ 

Of  course,  so  long  as  the  drawer  retains  the  right  to  countermand 
payment  upon  a  check,  he  also  retains  the  right  himself  to  draw 
out  any  and  all  funds  to  his  credit  upon  which  the  bank  has  no 
lien,  or  which  have  not  been  attached  or  sequestered  by  legal  pro- 
cess. The  question  in  each  case  alike  is  merely  of  his  right  to 
control  the  deposit.  This  right  he  possesses  until  the  bank  has 
paid  it  out,  or  promised  or  become  bound  to  pay  it  out,  upon  some 
order  emanating  from  him  and  presented  for  payment  or  acceptance 
at  the  bank  counter,  or  until  the  operation  of  law  intervenes  by 
reason  of  some  process.  It  is  a  matter  of  no  consequence  how 
many  checks  are,  with  the  knowledge  of  the  bank,  outstanding  in 
the  hands  of  his  creditors  at  the  time  of  his  counter  direction  or 
demand  of  payment  of  the  whole  fund  to  himself.  The  bank  is  not, 
and  has  no  right  to  constitute  itself,  the  agent  of  these  parties, 

3  Cohen  v.  Hale,  3  Q.  B.  371.  Where  payment  has  been  stopped  the 
relation  between  the  drawer  and  the  payee  become  the  same  as  if  the  check 
had  been  dishonored  and  notice  thereof  given  to  the  drawer,  Usher  v. 
Tucker  Co.,  217  Mass.  441,  105  N.  E.  360  (1913) ;  or  as  though  it  had 
never  been  given.     Elliott  v.  Crutehley,  (1903)  2  K.  B.  476. 

714 


CERTIFICATIOX    V.    REVOCATION  §  399 

however  honest  may  be  their  claims  or  hard  their  case.  It  not 
only  owes  them  no  duty,  but  it  has  not  even  any  legal  power  to 
act  in  their  behalf. 

The  drawer  can  countermand  an  uncertified  check  before  it  is 
paid,  and  take  on  himself  tlie  consequences.^  But  after  it  is  paid 
to  a  bona  fide  holder  for  value,  neither  drawer  nor  bank  can  recall.^ 

But  if  the  check  is  once  certified,  the  drawer's  power  of  revoca- 
tion ceases,  just  as  if  payment  had  been  made,  for  the  bank  is  now 
the  debtor.-^  Of  course,  this  would  not  apply  where  the  drawer 
had  a  check  certified  before  delivery,  until  he  should  issue  the 
paper. 

In  Illinois  it  is  no  defence  for  a  bank  that  the  drawer  has  coun- 
termanded ;  ^  it  must  pay  a  bona  fide  holder  for  value,  in  spite  of 
the  drawer's  order,  for  it  is  fraud  in  the  drawer  to  revoke  just  as 
much  as  to  withdraw,  and  a  fraudulent  command  can  be  no  excuse 
for  the  bank's  failure  of  duty.  The  trouble  is,  the  bank  ought  not 
to  be  called  on  to  judge  whetlier  the  order  is  a  fraud  or  not. 

§  399.  Certification  v.  Revocation.  —  While  the  check  is  ordi- 
narily executory,  and  revocable,  and  the  drawer  may  countermand 
its  payment,  when  the  bank  has  certified  the  check,  and  thereby 
comes  under  obligation  to  the  holder  to  pay  it  on  presentment,  the 
power  to  revoke  ceases  as  effectually  as  if  actual  payment  had 
been  made.  The  drawer's  authority  over  the  funds  on  which  it  is 
drawn  terminates  jjw  tanto.  The  same  effect  is  produced  when  the 
law,  by  proper  legal  process,  intervenes,  and  attaches  or  sequesters 
the  fund.^  The  notices  by  which  the  drawer  forbade  the  garnishees 
to  collect  the  check,  and  the  defendant  revoked  their  authority 
to  present  it  for  payment,  having  been  given  after  the  certification 
of  the  check,  and  after  the  service  of  the  garnishment,  were  inelVec- 
tual  to  change  the  rights  of  the  plaintiff',  or  to  displace  any  lien 
acquired  by  tlie  legal  process.^ 

*  Albers  v.  Commercial  Bank,  85  No.  173  (1884) ;  Saylor  v.  Bushong, 
100  Pa.  St.  23. 

6  Ibid. ;  National  Commercial  Bank  v.  Miller,  77  Ala.  168. 

«  Union  National  Bank  v.  Oceana  County  Bank,  80  111.  212. 

In  South  Carolina  it  is  no  defence  for  a  bank  that  the  drawer  has 
countermanded  even  though  the  cause  of  the  countermand  was  fraud  or 
lack  of  consideration.  Loan  &  Savings  Bank  v.  Farmers'  etc.  Bank.  74 
S.  C.  210,  54  S.  E.  304.  114  Am.  St.  Rep.  991  (1900). 

1  §  399.  National  Commercial  Bank  ;■.  Miller.  77  Ala.  168  ;  Merchants' 
etc.  Bank  v.  First  National  Bank,  110  Ark.  1.  170  S.  W.  852  (1914) ;  Blake 
V.  Hamilton  Dime  Sav.  Bank  Co.,  79  Ohio  St.  189,  87  N.  E.  73,  128  Am. 
St.  Rep.  684,  n.,  20  L.  R.  A.  (x.  s.)  290,  u.  (1908).     See  Pease  etc.  Co.  v. 

715 


§  399  REVOCATION   OF   CHECKS 

Delivery  is   Necessary  to  Make  the  Bank  Liable,  and  Revocation 
before  that  is  Binding 

Where  a  bank  had  marked  a  check  "  good",  but  while  still  in 
the  bank's  possession,  and  before  it  had  delivered  the  certified 
check  to  the  holder,  an  order  was  received  from  the  drawer  revoking 
the  check,  it  was  held  that  the  bank  must  obey  the  order.  It  had 
incurred  no  liability,  for  delivery  of  the  check  after  certification 
was  necessary  to  raise  the  obligations  unported  by  a  certified  check, 
in  the  hands  of  a  holder.  And  having  incurred  no  liability,  it  was 
not  free  to  create  one  by  delivery  in  violation  of  the  drawer's 
orders,  and  then  expect  him  to  bear  the  consequence.^ 

§  400.  Revocation  by  Death.  —  It  is  perfectly  clear,  that,  where 
a  check  operates  as  an  assignment,  the  death  of  the  drawer  will 
not  revoke  it.  "  Whether  it  be  with  or  without  consideration,  a 
right  once  vested  cannot  be  divested  by  the  death  of  the  party 
from  whom  it  was  acquired."  ^ 

It  is  also  clear,  that  if  a  bank  pays  a  check  after  the  death  of  the 
drawer,  being  in  ignorance  of  that  event,  the  payment  is  good, 
and  the  bank  not  liable,^  upon  the  general  principle,  that  revoca- 
tion of  an  agent's  authority  by  death  of  a  principal  takes  effect 
as  to  the  agent  only  from  the  time  the  agent  has  notice  of  it. 

But  if  the  bank  knows  of  the  death  of  the  drawer,  its  right  to 
pay  his  checks  has  vanished ;  so  say  the  authorities  that  do  not 
regard  a  check  as  an  assignment.^     The  title  to  the  deposit  passes 

State  National  Bank,  114  Tenn.  693,  88  S.  W.  172  (1905);  Drinkall  v. 
Movius  State  Bank,  11  N.  D.  10,  88  N.  W.  724,  95  Am.  St.  Rep.  693, 
57  L.  R.  A.  341  (1901). 

The  same  is  true  in  regard  to  a  cashier's  check.  Drinkall  v.  Movius 
State  Bank,  supra. 

2  Freund  v.  Importers  &  Traders'  National  Bank,  3  Hun  (N.  Y.) 
689;   see  12  Hun  (N.  Y.)  537. 

1  §  400.  In  substance  taken  from  Lewis  v.  International  Bank,  13 
Mo.  App.  207  ;  HiU  v.  Escort,  38  Tex.  Civ.  App.  487,  86  S.  W.  367  (1905) ; 
Philpot  V.  Temple  Banking  Co.,  2  Ga.  App.  742,  60  S.  E.  480  (1907). 
See  Raesser  v.  National  Exchange  Bank,  112  Wis.  591,  88  N.  W.  618,  88 
Am.  St.  Rep.  979,  56  L.  R.  A.  174  (1902) ;  Elgin  v.  Gross-KeUy,  20  N.  M. 
450,  150  Pac.  922  (1915). 

2  2  Parsons  on  Notes  and  Bills,  82.  See  next  note.  Weiand's  Adm.  v. 
State  National  Bank,  112  Ky.  310,  65  S.  E.  617,  56  L.  R.  A.  178  (1901) ; 
Glennan  v.  Rochester  Tr.  etc.  Co.,  209  N.  Y.  12,  102  N.  E.  537,  1915A 
Ann.  Cas.  441,  n.,  52  L.  R.  A.  (n.  s.)  302,  affirming  152  App.  Div.  316 
(1912),  136  N.  Y.  S.  747  ;   Raesser  v.  National  Exchange  Bank,  supra. 

3  Tate  V.  Hilbert,  2  Ves.  Jr.  118.  In  this  case  the  check  was  a  gift. 
See  dictum  in  Burke  v.  Bishop,  27  La.  Ann.  465 ;  Cook  v.  Lewis,  172  111. 
App.  518  (1912) ;   Weiand's  Adm.  v.  State  National  Bank,  112  Ky.  310, 

716 


REVOCATION    BY    DEATH  §  400 

to  the  representatives,^"  and  can  he  drawn  only  on  their  order. 
And  it  is  further  said,  that  the  bank's  authority  as  agent  is  ter- 
minated by  the  drawer's  death. 

This  we  consider  to  be  a  perversion  of  reason,  whatever  may  be 
the  view  taken  of  tlie  question  of  assignment,  — 

(1)  It  is  inconsistent  to  hold  that  a  general  deposit  is  a  debt, 
and  that  the  bank  is  not  an  agent  or  trustee  or  bailee  in  respect 
to  it,  and  then,  just  to  bolster  up  this  error,  turn  completely  about 
and  say  the  bank  is  an  agent,  and  must  be  governed  by  the  rules  of 
agency. 

(2)  Even  admitting  the  claim  that  the  rules  of  agency  are  to 
control,  it  may  be  answered  that  any  agency  clearly  intended  to  be 
good  after  death  is  so  held  ;  as  where  goods  are  delivered  to  B.  to 
be  given  to  C.  on  the  death  of  the  donor. 

(3)  The  death  of  the  drawer  of  a  bill  of  exchange  works  no 
revocation  :   why  should  a  different  rule  obtain  as  to  checks  ?  '^ 

(4)  The  personal  representatives  take  the  property  of  the  de- 
ceased, subject  to  all  proper  claims  against  it.  It  is  a  fraud  in  the 
drawer  to  withdraw  his  funds  during  life,  so  as  to  prevent  pay- 
ment of  the  check.  Is  it  any  less  a  fraud  for  the  representative 
to  do  the  same,  or  for  the  law  to  do  it  in  the  name  of  technical 
fallacy? 

(5)  It  places  the  obligation  of  a  check  outside  the  general  rules 
and  reasons  of  the  law.     The  holder  may  sue  the  drawer  on  a 

65  S.  E.  617,  56  L.  R.  A.  178  (1901).  See  Pullen  v.  Placer  County  Bank, 
138  Cal.  169,  66  Pac.  740,  71  Pac.  83,  94  Am.  St.  Rep.  19  (1901) ;  Fisher 
V.  Ludwig,  6  Cal.  App.  144,  91  Pac.  658  (1907) ;  Pennell  v.  Ennis,  126 
Mo.  App.  355,  103  S.  W.  147  (1907). 

The  death  of  the  drawer  before  presentment  of  the  check  operates  as 
an  absolute  revocation  of  the  power  of  the  bank  to  pay  upon  his  check. 
At  the  instant  of  his  death  the  title  to  his  balance  vests  in  his  lopal  repre- 
sentatives, and  his  own  order  is  no  longer  competent  to  withdraw  any 
part  of  that  which  is  no  longer  his  own  property.  (Tate  v.  Hilbert, 
2  Ves.  Jr.  111.)  It  has  been  laid  down  in  the  text-books,  quite  generally, 
that,  if  the  payment  be  made  by  the  bank  in  ignorance  of  the  death  of 
the  drawer,  the  bank  will  be  protected.  (Grant  on  Bankers  and  Banking, 
Byles  on  Bills,  Sharswood's  ed.,  p.  24;  Story  on  l^omissory  Notes, 
§  498  o,  ed.  1868,  p.  695.)  Doubtless  this  would  be  so  held.'  But  it 
must  be  acknowledged  that  the  cited  case  of  Tate  v.  Ililbert,  which  the 
text-books  all  rely  upon  as  their  sole  direct  authority  for  the  statement, 
does  not  touch  upon  the  point,  and  furnishes  no  basis  for  considering  that 
the  rule  has  the  support  of  so  much  as  a  single  adjudicated  cause.  See, 
Daniel,  Neg.  Inst.,  §  1618  6. 

^  Cook  v.  Lewis,  172  111.  App.  518  (1912). 

•'  Cutts  r.  Perkins,  12  Mass.  206;  2  Parsons  on  Notes  and  Bills.  287; 
Edwards  on  Bills,  454. 

717 


§  400  REVOCATION   OF   CHECKS 

check ;  it  is  a  binding  contract.  Why  should  this  contract  obHga- 
tion  be  lessened  by  death  more  than  others,  or  the  right  of  the 
holder  to  demand  payment  of  the  bank,  or  of  the  bank  to  pay  in 
precise  accord  with  the  contract  evidenced  by  the  check,  be  affected  ? 

(6)  ]Men  who  do  business  alone  are  put  at  great  disadvantage 
in  comparison  with  partnerships,  by  holding  death  a  revocation. 
A  firm  check  is  good  though  a  member  die,  for  the  firm  lives ;  but 
a  single  business  man  works  under  the  inconvenience  of  having 
his  paper  held  less  secure  by  the  law. 

(7)  The  only  thing  that  reason  and  common  sense  demand  in 
regard  to  checks  after  the  death  of  the  drawer  is  that  they  should 
be  presented  within  such  a  reasonable  time  thereafter  as  not  to 
embarrass  or  delay  settlement  of  the  estate ;  and  it  would  seem 
well  that  by  statute  laAV  provision  should  be  made  that  in  case  of 
death  of  a  depositor  the  bank  should  retain  the  fund  for  a  certain 
time,  say  a  month,  for  the  payment  of  checks  outstanding,  allow- 
ing the  representative  to  withdraw  the  fund  before  such  period 
expires  only  on  bond  of  indemnity. 

Some  rule,  at  any  rate,  sustaining  the  post  mortem  rights  of 
check-holders  is  required  by  those  considerations  of  security  and 
good  faith  that  underlie  the  whole  mercantile  law. 

§  400  A.  Revocation  by  Insolvency  of  Drawer.  —  It  has  been 
carelessly  laid  down  also  in  American  text-books,  that  the  com- 
mission by  the  depositor  of  an  act  of  bankruptcy  revokes  the  power 
of  the  bank  thereafter  to  pay  his  checks.  Readers  consulting  the 
works  which  make  this  statement  will  observe  that  they  cite  for 
it  only  English  authorities.  In  fact,  it  is  statutory  law  in  England, 
and  as  such  is  peculiar  to  that  country.  It  is  not  law  in  the  United 
States.  Indeed,  there  is  no  possibility  of  saying  precisely  at  what 
stage  of  bankruptcy,  in  our  country,  the  bank  ceases  to  be  justified 
in  paying  the  bankrupt's  checks.  Certainly  it  is  not  when  it  first 
learns  that  he  has  committed  an  act  of  bankruptcy.  Even  the 
adjudication  of  bankruptcy,  made  upon  the  petition  of  the  bank- 
rupt himself  or  of  his  creditors,  is  an  act  so  quietly  done  in  the 
clerk's  office  that  the  bank  can  have  no  knowledge  of  it  save  by 
accident.  Whether  it  would  be  obliged  to  take  notice  of  it,  if  it 
heard  it  by  rumor  or  report,  is  doubtful.  Such  authority  is  often 
untrustworthy.  But  the  United  States  marshal  is  directed  to 
take  possession  of  all  the  effects  of  the  bankrupt  at  an  early  stage 
in  the  proceedings.  This  is  the  first  provision  which  the  act 
affords  for  any  authoritative  notice  to  the  bankers  of  the  cessation 
718 


REVOCATIOxN    BY   INSOLVENCY   OF   DRAWER  §  400  A 

of  the  right  of  the  bankrupt  depositor  to  withdraw  his  balance. 
It  is  succeeded  by  publication  in  the  papers,  which  doubtless  must 
also  be  taken  as  notice,  if  none  prior  has  been  had.  But  it  cer- 
tainly seems  that  if,  in  the  interval  before  such  actual  notice  from 
the  marshal  or  constructive  notice  by  publication,  the  bank  had 
continued  to  pay  checks  in  good  faith,  and  in  ignorance,  or  perhaps 
even  in  an  honest  disbelief,  of  the  pendency  of  bankruptcy  pro- 
ceedings, the  bank  can  have  done  no  wrong,  and  cannot  be  held 
to  refund  to  the  assignees  the  sum  so  paid  away.  If  the  bank  pays 
on  the  bankrupt's  check,  when  the  law  does  not  sanction  the  pay- 
ment as  a  discharge  pro  tanto  of  the  bank's  debt,  the  right  of  ac- 
tion to  recover  the  amount  lies  only  in  favor  of  the  assignees  in 
bankruptcy. 

The  English  bankruptcy  statutes  save  the  foregoing  question 
by  forbidding  payment  only  after  "  7iotice  of  an  act  of  bankruptcy."  ' 
And  this  notice  is  required  to  be  very  certain,  definite,  and  trust- 
worthy.^ 

In  England  it  has  been  laid  down  that,  in  the  event  of  a  cus- 
tomer committing  an  act  of  bankruptcy,  the  bank,  immediately 
upon  having  knowledge  thereof,  must  discontinue  the  payment  of 
his  checks.  If  any  check  be  paid  under  such  circumstances  that 
an  individual  debtor  could  not  discharge  himself  by  a  payment  to 
the  bankrupt,  then  the  bank  will,  like  such  an  individual  debtor, 
be  liable  to  refund  the  amount  to  the  assignees  in  bankruptcy.^ 
Nor  can  the  banker  defend,  in  such  an  action  by  the  assignees,  by 
showing  that  the  person  to  whom  the  check  was  paid  had  had  no 
notice  of  the  drawer's  bankruptcy,  and  might  lawfully  have  re- 
ceived payment  from  him.^ 

1  §  400  A.     12  &  13  Vict.  c.  100,  §  133. 

2  Evans  v.  Hallam,  G  L.  R.  Q.  B.  713. 

3  Grant  on  Bankers  and  Banking ;  iVlathew  v.  Sherwell,  2  Taunt.  439 ; 
1  Rose  118;   Vernon  v.  Hanson,  2  T.  R.  287. 

*  Ibid. 


'19 


CHAPTER  XXIX 

STATUTE    OF   LIMITATIONS 

See  §§  301,  321. 

§  402.         A  check  being  payable  on  demand,  the  statute  does  not  run 

until  a  demand  (or  some  circumstance  rendering  a  demand 

useless,  §  322)  has  given  rise  to  a  right  of  action. 
§  402  a.     New  York,  however,  holds  that  the  demand  must  be  within  a 

reasonable  time  (six  years  at  the  limit),  in  order  to  save  the 

statute  from  running. 

§  402.  The  Statute  of  Limitations.  —  The  same  reasons  which 
are  used  to  prove  that  the  statute  does  not  run  between  the  bank 
and  a  depositor  apply  to  the  case  of  a  check,  as  to  the  right  of  the 
holder  to  sue  the  drawer. 

The  statute  does  not  begin  to  run  until  a  right  of  action  accrues, 
and  demand  is  a  necessary  preliminary  to  action ;  therefore  the 
statute  does  not  run  between  holder  and  drawer  until  demand. 

And  in  the  United  States  Supreme  Court  it  is  held  that  a  check 
is  not  due  until  demand,  and  therefore  the  Statute  of  Limitations 
does  not  begin  to  run  until  that  time,  as  a  general  rule ;  ^  but  if 
the  check  is  not  drawn  against  funds,  it  is  due  at  once,  an  action 
lies  against  the  drawer  immediately,  without  presentment,  and 
therefore  the  statute  begins  to  run  at  once,  from  the  time  the 
check  is  payable.^ 

(a)  And  in  this  case,  beside  announcing  this  reasonable  prin- 
ciple, the  court  held  that  a  bank  check  drawn  in  1865,  mislaid  by 
the  indorsee,  and  not  presented  till  1875,  was  barred  by  the  six 
years'  limitation,  irrespective  of  the  question  whether  the  drawer 
had  funds  or  not  in  the  bank  within  six  years  after  date.     The 

1  §  402.  Merchants'  Bank  v.  State  Bank,  10  Wall.  607,  19  L.  ed.  1008. 
A  check  is  not  due  tiU  demanded.  Cruger  v.  Armstrong,  3  Johns.  Cas. 
(N.  Y.)  5;  Rothschild  v.  Corney,  9  Barn.  &  Cr.  389;  Story  on  Notes, 
§§  678,  679. 

2  Brush  V.  Barrett,  82  N.  Y.  400. 

720 


TUE    STATUTE   OF    LIMITATIONS  §  402 

court  said  that  the  holder  cannot  suspend  the  statute  indefinitely 
by  neglecting  to  make  presentment,  and  a  demand  after  six  years 
will  not  be  good  unless  the  bank  is  under  an  (obligation  to  pay, 
notwithstanding  an  unexplained  delay.  The  rule  requiring  a 
demand  is  for  the  protection  of  tlie  dei^ositor,  and  cannot  be  used 
for  his  annoyance,  and  the  holders'  omitting  to  make  a  demand  that 
he  might  make  at  any  time  will  not  keep  the  statute  from  running.' 
It  is  argued  contra,  that  the  delay  in  making  demand  benefits  the 
drawer,  as  he  has  the  money  that  much  longer.     (§  ;>22.) 

This  would  seem  to  point  to  the  conclusion  that  demand  must 
be  made  within  reasonalole  time  in  order  to  be  the  beginning  of  the 
statute,  otherwise  it  will  run  from  the  date  of  delivery,  or  date  of 
the  paper,  whichever  is  latest.  Or  perhaps  the  idea  of  the  court  is, 
that  if  no  demand  be  made  within  six  years,  the  action  is  barred ; 
if  a  demand  is  made  within  six  years,  then  the  right  of  action  against 
the  drawer  on  account  of  nonpayment  would  run  six  years  from  the 
demand. 

3  Brush  V.  Barrett,  16  Hun  (N.  Y.)  409.  See  Wrigley  v.  Farmers' 
etc.  Bank,  76  Neb.  862,  108  N.  W.  132  (1906). 


VOL.  1  —  46  721 


CHAPTER  XXX 

ACCEPTANCE   AND   CERTIFICATION 

Object,  Nature,  Form,  Authority,  Effect,  Statute  of  Limitations, 
Mistake. 
§  404.        Acceptance  not  required,  nor  can  it  be  demanded  as  a  right. 
§  414.     Objects. 

To  enable  holder  to  use  the  check  as  money,  and  so  render  it 
possible  for  persons  little  acquainted  with  each  other  to  deal 
safely  and  readily. 
§  405.     Form. 

§  406.        Usually  the  word  "good"  is  written  on  the  check. 
§  406.        Any  mark  sanctioned  by  custom  has  the  same  effect  and  force. 
§§  406,  406  A.     Verbal  acceptance  is  good,  if  there  are  funds. 

If  no  funds,  it  is  a  promise  to  pay  the  debt  of  another, 
and  must  be  in  writing,  unless  a  consideration  moves 
from  the  party  to  whom  the  promise  is  made ;  or 
perhaps  if  the  holder  does  not  know  of  the  lack  of 
funds  ;  and  some  go  so  far  as  to  hold  that  the  Statute 
of  Frauds  does  not  apply  to  any  commercial  securities. 
§  407.  Statutes  in  some  States  require  it  to  be  in  writing. 
§  407  a.     A  promise  to  pay,  communicated  to  the  holder  as  inducement  to 

take  the  check,  is  an  acceptance  by  estoppel. 
§  408  b.     Conditional  acceptance  may  be  made,  as  when  there  are  no 
funds  at  the  time  of  presentment. 
(c)  Acceptance  to  pay  at  a  future  day. 
§  409.        Unreasonable  retention  may  perhaps  be  an  acceptance,  though 
the  weight  of  authority  is,  that  retention  alone  will  not  amount 
to  an  acceptance,  for  the  bank  is  under  no  obligation  to  send 
an  answer  to  the  holder ;    it  is  the  duty  of  the  latter  to  call 
on  the  bank  to  know  its  decision,  allowing  the  bank  twenty- 
four  hours  to  examine  its  accounts. 
§  410.         Charging  the  check  to  the  drawer  on  the  bank-books,  or  in  a 
§  513.  settlement  with  him,  or  paying  474  the  check  on  a  forged  in- 

dorsement, is  held  to  be  an  acceptance,  and  the  true  owner 
can  sue  the  bank;   but  U.  S.  S.  C.  contra,  as  to  the  effect  of 
payment.      §  474  b  and  /. 
Mistake  in  putting  the  check  on  the  cancelling  fork  is  not  an 
acceptance. 
§  411.        Delivery  is  essential  to  complete  the  certification,  and  raise 

liability  of  the  bank. 
§  412.     Place. 

Acceptance  away  from  bank  does  not  bind  bank.     §  168  d. 

722 


ACCEPTANCE   AND    CERTIFICATION 

§  413.     Authority  to  Certify.     §  155  d. 

Cashier,  president,  and  teller  have  inherent  power. 
Assistant  cashier  or  other  subordinate  has  no  inherent  power. 
The  check  must  be  regular  in  form,  and  not  post-dated,  or  the 

officer  cannot  certify. 
A  national  bank  may  certify. 
Effect  of  Certification. 
§  414.     If  after  Issue  of  the  Check. 

(a,  h)      It  discharges  the  drawer,  both  on  the  check  and  on  the  original 
(e,  k,  I)       debt ;  it  is  payment  as  to  him  and  as  to  indorsers  before  certi- 
fication. 
(6)  The  drawer  cannot  sue  the  bank,  though  it  refuse  to  pay  a  check 

that  has  been  certified  after  issue, 
(a)  The  bank  is  liable  as  on  a  certificate  of  deposit, 
(e)  The  holder  becomes  in  fact  a  depositor  with  the  bank  under  the 
limitation  that  his  deposit  must  be  drawn  by  the  certified 
check,  instead  of  by  checks  he  may  draw  at  will, 
(e)  Though  the  check  is  stolen,  a  bona  fide  holder  may  sue  the  bank. 
(J)  But  if  the  holder  took  wth  notice  that  the  certification  was  not 

for  purposes  of  negotiability,  he  is  subject  to  equities. 
(/)  It  is  the  officer's  duty  to  charge  the  amount  immediately  to  the 
drawer,  and  this  transfers  the  deposit  to  the  holder. 
§  414.       But  the  bank  is  bound  to  an  innocent  holder  of  a  certified  check, 
though  it  had  no  funds,  or  they  have  been  since  withdrawn,  or 
though  the  officer  exceeded  his  authority,  or  even  if  a  national 
bank  should  certify  without  funds,  it  is  probable  no  one  but 
the  United  States  could  take  advantage  of  that  fact.      (See 
Ultra  vires.) 
§  414.   {h)  The  certification  warrants  only  the  drawer's  signature  and  the 
possession  of  funds,  and  if  the  check  was  otherwise  a  forgery, 
as  if  the  amount  is  raised  before  or  after  certification,  the  bank 
is  not  bound  to  pay  the  e.xcess,  and  may  recover  it  as  money 
paid  by  mistake,  so  far  as  the  error  has  not  prejudiced  an  in- 
nocent party.     (See  Forgery.) 
Whether  e\'idenee  of  a  usage  among  banks  and  merchants  to 
(t)       consider  the  bank  bound  at  all  events,  i.e.  warranting  the 
body  of  the  check  is  admissible.   ( ?) 
Louisiana  holds  that  certification  warrants  the  amount  of  a  check 
at  the  time  of  certification,  though  it  has  been  fraudulently 
raised  before  i;)resentment  for  certification. 
§  478.       Forgery.     If  a  bank  teller  acknowledges  the  genuineness  of  a 
certification  which  in  fact  is  forged,  it  is   equivalent  to  an 
original  certification,  unless  the  mistake  can  be  corrected  with- 
out putting  an  innocent  party  in  a  worse  position  than  if  the 
teller  had  recognized  the  forgery  when  the  check  was  presented 
to  him. 
The  officer  has  no  authority  to  warrant  the  body  of  a  cheek,  and 

inquirer  has  no  right  to  rely  upon  his  representations. 
But  if  the  bank  has  knowledge,  or  easy  means  of  knowledge,  of 
a  matter  regarding  a  check,  it  must  not,  by  omitting  to  disclose 
(j)     it,  cause  damage  to  one  inquiring  with  the  cA-ident  purpose  of 
§  482  e.        acting  on  the  reply.     It  must  not  omit  such  e.xamination  of 
its  books  as  is  usual  in  similar  cases. 
(Both  New  York  cases,  the  latter  a  dictum.) 

723 


§  404  ACCEPTANCE    AND    CERTIFICATION 

If  Certified  before  Issue. 

The  drawer  is  not  discharged  until  the  certification  is  verified, 
§  415.  i.e.  until  certified  anew  ;  but  of  course  holder  must  present  in 

due  season,  as  in  the  ease  of  an  ordinary  check. 
So  an  indorser,  who  has  a  check  certified  before  indorsing  it,  is 

liable  on  it,  as  an  indorser  on  a  note  is  responsible. 
The  bank  is  not  absolutely  liable  on  a  check  certified  in  the  hands 
of  the  drawer  until  it  has  notice  that  the  check  is  in  the  hands 
of  some  one  who  can  demand  payment  of  it  from  the  drawer. 
§§  416,  417.     The  fund  is  subject  to  attachment  by  drawer's  creditors  un- 
§  415.  til  issue  of  the  check ;   and  in  case  of  bank's  insolvency  be- 

fore presentment,  the  drawer  should  be  held  upon  due  notice. 
§  417.     An  Attachment  of  the  Drawer's  Deposit. 

Will  therefore  be  good,   though  the  deposit  is  covered  by  a 
certified  check,  which  the  bank  has  reason  to  believe  is  still 
owned  by  the  drawer  at  the  time  of  service. 
§  418.     The  Statute  of  Limitations. 

Runs  against  a  certified  check  only  from  the  time  of  demand  for 
payment. 
§  419.     Mistaken  Certification. 

May  be  revoked  if  no  innocent  party  is  damaged  by  reliance  on 
the  bank's  action  ;  i.e.  if  all  innocent  parties  are  in  the  same 
position  as  if  the  bank  had  refused  to  certify  the  check  when 
presented  for  that  purpose. 

§  404.  Acceptance  of  Check  not  legally  requisite ;  nor  can  it  be 
claimed  as  a  Right.  —  The  act  by  which  the  bank  places  itself 
under  obligation  to  pay  to  the  holder  the  sum  called  for  by  a  check 
must  be  the  expressed  promise  or  undertaking  of  the  bank  signify- 
ing its  intent  to  assume  this  obligation,  or  some  act  from  which  the 
law  will  imperatively  imply  such  valid  promise  or  undertaking. 
The  most  ordinary  form  which  such  an  act  assumes  is  the  accept- 
ance by  the  bank  of  the  check,  or,  as  it  is  perhaps  more  often 
called,  the  certifying  of  the  check.  A  check  is  not  an  instrument 
which  in  the  ordinary  course  of  business  calls  for  acceptance.  The 
holder  can  never  claim  acceptance  as  his  legal  right.  He  can 
present  for  payment,  and  only  for  payment.  But,  on  the  other 
hand,  there  is  nothing  in  the  nature  of  a  check  which  intrinsically 
precludes  its  acceptance,  in  like  manner  and  with  like  effect  as  a 
bill  of  exchange  or  draft  may  be  accepted.  The  bank  may  accept, 
if  it  chooses ;  and  it  is  frequently  induced  by  convenience,  by  the 
exigencies  of  business,  or  by  the  desire  to  oblige  customers,  volun- 
tarily to  incur  the  obligation. 

§  405.  Form.  —  By  writing  "  good  "  on  check,  or  otherwise 
marking.  Verbal  acceptance  ;  if  no  funds.  Statute  of  Frauds  pre- 
vents verbal  acceptance,  though  this  is  the  subject  of  conflict. 
Statute  law.  Communicated  promise  is  an  acceptance.  So 
724 


WRITTEX    AND    VERBAL   CERTIFICATION  §  406 

charging  the  check  to  the  drawer,  or  unreasonably  detaining  it  ( ?) ; 
but  not  putting  the  check  on  cancelHng  ho(jk  by  mistake.  Dehvery 
is  essential  to  complete  certification,  and  to  create  liability  of  the 
bank  upon  it.  Conditional  acceptance.  Acceptance  to  pay  at 
future  (lay. 

§  400.  Written  and  Verbal  Certification.'^  —  Ordinarily  the 
acceptance  or  certification  of  a  check  is  performed  and  evidenced 
by  some  v/ord  or  mark,  usually  the  word  "  good",  written  upon 
the  check  by  the  banker  or  bank  officer.  But  at  common  law  this 
is  not  necessary,  and  in  the  absence  of  a  controlling  and  exclusive 
usage  in  favor  of  such  writing,  a  verbal  acceptance  may  be  suffi- 
cient.^ 

"  Any  language,^"  verbal  or  written,^''  employed  by  an  officer  of  a 
banking  institution,  whose  duty  it  is  to  know  the  financial  standing 
and  credit  of  customers  representing  that  a  check  drawn  upon  it 
is  good,  estops  the  bank  from  thereafter  denying,  as  against  a 
bona  fide  holder  of  the  check,  the  want  of  funds  to  pay  the 
same."  ^ 

A  parol  acceptance,^  or  a  promise  to  accept  a  bill  of  exchange  or 
draft,  is  valid  under  the  law  of  Illinois,  and  may  be  implied  as  well 
as  express. 

"  §  40G.  Certification  of  a  check  is  the  equivalent  of  an  acceptance. 
Smith  V.  Field,  19  Idaho  558,  114  Pac.  668,  1912C  Ann.  Cas,  354,  n. 
(1911);  Blake  v.  Hamilton  Dime  Sav.  Bank,  79  Ohio  St.  189,  87  N.  E. 
73,  128  Am.  St.  Rep.  684,  n.,  20  L.  R.  A.  (n.  s.)  290  (1908) ;  Meuer  y. 
Phenix  National  Bank,  94  App.  Div.  331  (1904),  88  N.  Y.  S.  83.  But 
an  acceptance  is  not  equivalent  to  certification  since  it  does  not  release  the 
drawer.  Milmo  National  Bank  v.  Cobbs,  53  Tex.  Civ.  App.  1,  115  S.  W. 
345  (1908). 

1  First  National  Bank  v.  Merchants'  National  Bank,  7  W.  Va.  544 ; 
Pope  V.  Bank  of  Albion,  59  Barb.  (N.  Y.)  226;  Milmo  National  Bank  v. 
Cobbs,  53  Tex.  Civ.  App.  1,  115  S.  W.  345  (1908),  and  cases  cited  post 
in  this  title. 

1"  Tlie  language  must  import  an  absolute  promise  to  pay.  First  Na- 
tional Bank  v.  Commercial  Sav.  Bank,  74  Kan.  606,  87  Pac.  746,  118 
Am.  St.  Rep.  340,  n.,  8  L.  R.  A.  (n.  s.)  1148  (1900) ;  Home  National  Bank 
V.  First  State  Bank  (Tex.  Civ.  App.),  133  S.  W.  935  (1911). 

'*  A  written  acceptance  upon  a  check  by  an  officer  of  a  bank  who  has  been 
authorized  to  accept  by  a  cashier  of  another  bank  who  had  no  authority 
to  delegate  his  power  is  no  acceptance.  United  State.-?  National  Bank  v. 
First  etc.  Savings  Bank,  60  Or.  266,  119  Pac.  343  (1911). 

^  Pope  V.  Bank  of  Albion,  59  Barb.  (N.  Y.)  226;  Milmo  National  Bank 
V.  Cobl)s,  53  Tex.  Civ.  App.  1,115  S.  W.  345  (1908) ;  Merchants'  etc.  Bank 
V.  First  National  Bank,  116  Ark.  1,  170  S.  W.  852  (1914). 

'  Sturges  r.  Fourth  National  Bank,  75  111.  595.  See  Scudder  r.  Union 
National  Bank,  91  U.  S.  406,  23  L.  ed.  245. 

725 


§  406  ACCEPTANCE   AND   CERTIFICATION 

A  conversation  by  telephone  is  admissible  to  show  an  acceptance.^" 

A  telegram  from  the  president  of  a  bank  to  a  depositor,  stating 
that  certain  funds  are  at  the  depositor's  credit,  is  not  an  accept- 
ance of  a  check  drawn  by  the  depositor  upon  receipt  of  the  tele- 
gram.^ But  a  telegram  from  one  bank  to  another,  upon  inquiry, 
that  it  holds  a  deposit  with  which  to  pay  a  check  of  a  particular 
description  to  be  drawn  upon  it  is  equivalent  to  a  statement  that 
a  check  of  such  description  is  good  and  will  be  honored,  and 
amounts  to  an  acceptance,  where  the  bank  in  reliance  thereon  is 
induced  to  discount  the  check.^ 

Even  though  an  acceptance  or  certification  must  now  in  many 
states,  by  statute,  be  made  in  writing  an  acceptance  may  be  made 
by  telegram.^ 

§  406  A.  Parol  Acceptance  and  the  Statute  of  Frauds.  —  (1) 
Where  a  person  verbally  accepts  or  promises  to  accept  a  bill  on 
some  new  and  independent  consideration,  moving  from  the  party 
to  whom  the  promise  is  made,  as  that  he  shall  buy  a  certain  bill 
already  drawn,  or  to  be  drawn,  which  he  actually  does  on  faith  of 
the  promise,  the  Statute  of  Frauds  does  not  apply.  The  promise 
is  an  original  one  on  sufficient  consideration.  "  If  A.  says  to  B., 
Pay  so  much  money  to  C,  and  I  will  repay  you,  it  is  an  original 
independent  promise ;  and  if  the  money  is  paid  on  the  faith  of  it, 
it  has  always  been  deemed  an  obligatory  contract,  though  it  be  by 
parol,  because  there  is  an  original  consideration  moving  between 
the  parties."  ^ 

(2)  When  the  acceptor  has  funds  of  the  drawer,  the  statute 
cannot  apply,  for  the  promise  is  not  to  pay  the  debt  of  another,  but 
to  pay  the  promisor's  own  debt  to  the  drawer  in  a  particular  way, 
namely,  by  paying  the  drawer's  debt  to  some  third  person.^  (See 
§  408  A.) 

3"  Godair  v.  Ham  National  Bank,  225  111.  572,  80  N.  E.  407,  116  Am. 
St.  Rep.  172  (1907) ;   Wigmore  on  Evidence,  §§  669,  2155. 

"  Maritime  Bank  v.  Union  Bank,  4  Montreal  L.  R.  (S.  C.)  244. 

6  Elliott  V.  First  National  Bank,  105  Tex.  547,  1.52  S.  W.  808  (1913). 
But  see  First  National  Bank  v.  Commercial  Sav.  Bank,  74  Kan.  606,  87 
Pac.  746,  118  Am.  St.  Rep.  340,  n.,  8  L.  R.  A.  (n.  s.)  1148  (1906).  State 
Bank  v.  Citizens'  National  Bank,  114  Mo.  App.  663,  90  S.  W.  231  (1905). 

«  Wells  V.  Western  Union  Tel.  Co.,  144  Iowa  605,  123  N.  W.  371,  138 
Am.  St.  Rep.  317,  24  L.  R.  A.  (n.  s.)  1045,  n.  (1909) ;  First  National 
Bank  v.  Muskogee  etc.  Co.,  40  Okla.  603,  139  Pac.  1136  (1914). 

1  §  406  A.     Townsley  v.  Sumrall,  2  Pet.  170,  7  L.  ed.  386. 

^  Putney  v.  Farnham,  27  Wis.  187 ;  Shields  v.  Middleton,  2  Cranch 
(C.  C.)  205 ;   Spadone  v.  Reed,  7  Bush  (Ky.)  455 ;   Besshears  v.  Rowe,  46 

726 


VERBAL    CERTIFICATION  §  407 

(3)  If  there  are  no  funds  of  the  drawer  in  the  hands  of  the  ac- 
ceptor, nor  any  consideration  for  his  promise  to  bring  tiie  case  under 
(1),  —  First,  when  the  payee  or  holder  does  not  know  the  fact  that 
there  are  no  funds,  the  law  of  estoppel  clearly  applies ;  the  acceptor 
admits  that  he  has  funds  by  the  \'ery  act  of  acceptance.  It  would 
undoubtedly  be  better  if  parol  acceptance  were  barred  out  entirely. 
Negotiable  paper  ought  to  be  protected  by  all  reasonable  means  of 
attaining  certainty  and  precision,  and  so  far  as  possible  it  should 
carry  its  character  and  condition  on  its  face.  But  as  parol  accept- 
ances are  allowed,  the  established  principles  of  law  should  be 
applied,  and  when  A.  by  such  acceptance  leads  B.  to  rely  upon  it, 
and  refrain  from  taking  such  steps  to  secure  himself  as  he  otherwise 
might,  A.  is  clearly  estopped  to  deny  the  existence  of  funds,  a  fact 
peculiarly  within  his  own  knowledge.  There  are  cases,  however, 
which  hold  a  parol  acceptance  without  funds  void  under  the  Statute 
of  Frauds,  without  inquiring  as  to  the  knowledge  of  the  holder.^ 
Such  cases  look  to  the  actual  facts  as  constituting  the  contract,  and 
not  to  the  understanding  between  the  parties.  Second,  if  the 
holder  knew  of  the  want  of  funds,  and  the  case  does  not  come  under 
(1)  or  (2),  it  may  seem  clearly  within  the  statute  as  a  promise  to 
pay  the  debt  of  another,  and  so  understood  by  both  parties ;  ^ 
but  some  authorities  strongly  defend  the  view  that  commercial 
engagements,  regulated  by  the  law  merchant,  are  beyond  the 
Statute  of  Frauds  altogether.^ 

§  407.  The  law  in  England  used  to  allow  parol  acceptance ; 
but  the  statutes  1  &  2  Geo.  IV.  c.  78,  §  2,  and  19  &  20  Vict. 
c.  97,  §  7,  require  an  acceptance  in  writing.  Some  of  the  States 
of  the  Union  have  enacted  laws  to  a  similar  effect. 

In  New  York  a  statute  requires  acceptance  of  a  bill  of  exchange 
to  be  made  in  writing,  and  the  courts  have  held  that  a  check  is  so 
far  like  a  bill  of  exchange  as  to  fall  within  this  statute,  and  that 
the  verbal  promise  of  the  bank  to  pay  it  is  of  no  effect.^     And  in 

Mo.  501 ;  Pike  v.  Irwin,  1  Sand.  (N.  Y.  )  14 ;  Spanlding  v.  Andrews.  48 
Pa.  St.  411. 

3  Pike  V.  Irwin,  1  Sand.  (N.  Y.)  14;  Manley  v.  Oeagan,  105  Mass. 
445;  Quin  v.  Hanford,  1  Hill  (N.  Y.)  82;  Plummcr  v.  Lyman,  49  Me. 
229;  Wakefield  v.  Greenhood,  29  Cal.  600. 

^Carville  v.  Crane,  5  Hill  (N.  Y.)  583;  Taylor  v.  Drake,  4  Strobh. 
(S.  C.)  431. 

5  Barker  v.  Prentiss,  6  Mass.  430 ;  Chitty  on  Bills,  p.  4 ;  Spaulding  i'. 
Andrews.  48  Pa.  St.  411  ;  Throop  on  Verbal  Agreements,  p.  159;  Pillans 
V.  Van  Mierop,  3  Burr.  1()74. 

1  §  407.     Risley   v.   Ph(Eni.\   Bank,   83  N.   Y.   318.      See   Inter-State 

727 


§  407  ACCEPTANCE   AND   CERTIFICATION 

Pennsylvania  acceptance  must  be  in  writing  where  the  amount 
exceeds  twenty  dollars.^"  In  IlHnois  the  Statute  of  Frauds  does 
not  hinder  the  parol  acceptance  of  an  existing  check.^ 

(a)  A  promise  to  pay  if  communicated  to  the  holder  and  acted 
on  by  him  as  an  inducement  in  taking  the  check,  is  an  acceptance.^ 
If  not  communicated,  it  would  be  no  acceptance.^ 

(b)  In  Morrell  v.  Wootten  ^  it  is  laid  down  that,  when  a  depositor 
directs  his  banker  to  make  a  payment  to  a  third  party,  if  the  banker 
consents  to  do  so  and  the  direction  is  made  known  to  the  third 
party,  then  the  banker's  assent  inures  to  his  benefit.  The  privity 
is  complete,  and  the  third  party  may  compel  payment  by  his  own 
suit  brought  directly  against  the  banker.  But  the  communication 
to  the  payee  is  absolutely  essential.  The  reason  that  such  stress  is 
laid  upon  this  point  is  to  be  discovered  in  the  fact  that  the  order  for 
payment  is  to  be  met  from  a  general  fund.  Where  the  order  is  for 
the  payment  of  a  particular  fund,  the  consent  of  the  beneficiary  is 
needless  ;  for  this  latter  transaction  constitutes  properly  an  assign- 
ment,^ and  since  it  is  for  his  benefit  his  assent  is  supposed. 

§  408.  It  is  an  inference  from  the  indirect  intimations  and 
language  of  many  of  the  causes  which  form  the  authorities  on  this 
point,  that  this  is  one  of  the  matters  in  which  the  analogy  of  bills  of 
exchange  would  be  regarded  as  directly  in  point,  and  probably  as 
conclusive.^  It  is  a  semble  in  the  case  of  Barnet  v.  Smith,  cited 
below,  that  the  cashier's  simple  statement  that  a  check  is  "  good  " 
is  an  acceptance  or  certification  equally  with  the  writing  of  the 
word  itself. 

Since  the  foregoing  was  written,  this  subject  has  been  discussed 

National  Bank  v.  Ringo,  72  Kan.  116,  83  Pac.  119,  115  Am.  St.  Rep. 
176,  3  L.  R.  A.  (n.  s.)  1179,  n.  (1905) ;  Van  Buskirk  v.  State  Bank,  37 
Colo.  142,  83  Pac.  778,  117  Am.  St.  Rep.  182,  (1905) ;  Ewing  v.  Citizens' 
National  Bank,  162  Ky.  551,  172  S.  W.  955  (1915). 

1°  Bank  v.  Lindeman,  161  Pa.  St.  199,  28  Atl.  1022. 

^  Nelson  v.  First  National  Bank,  48  111.  36.  See  Carr  v.  National 
Security  Bank,  107  Mass.  48. 

3  Bank  v.  Pettit,  41  111.  492.  ^  16  Beav.  197. 

5  To  this  point  are  cited  Row  v.  Dawson,  1  Ves.  Sen.  331 ;  Ex  parte 
South,  3  Swanst.  392. 

1  §  408.  Barnet  v.  Smith,  10  Foster  (N.  H.)  2.56;  Lemmon  v.  Box, 
20  Tex.  329  (bill  of  exchange) ;  Wheatley  v.  Strobe,  12  Cal.  92 ;  Fruh- 
ling  V.  Schroeder,  2  Bing.  New  R.  77 ;  Lumley  v.  Palmer,  Strange,  1000 ; 
Harwicke,  74 ;  Robson  v.  Bennett,  2  Taunt.  388 ;  Grant  on  Bankers  and 
Banking ;  Lilly  v.  Hays,  5  Ad.  &  El.  548 ;  First  National  Bank  v.  Currie, 
147  Mich.  72,  110  N.  W.  499,  118  Am.  St.  Rep.  537,  9  L.  R.  A.  (n.  s.) 
698,  n.  (1907). 

728 


VERBAL   CERTIFICATION  §  408 

by  the  Supreme  Court  of  the  United  States,^  who  seem  very 
reluctantly  to  concede  that  the  rule  has  been  established  to  the 
eti'ect  that  a  verbal  certification  is  legally  sufficient.  They  say, 
"  The  authorities  relied  on  are  mainly  acceptances  of  drafts  or  bills 
of  exchange.  .  .  .  The  highest  courts  in  this  country  and  in  Eng- 
land have  regretted  the  decisions  which  gave  original  sanction  to 
this  proposition  " ;  ^  i.e.  that  a  draft  or  bill  might  be  verbally 
accepted.  The  distinction  is  pointed  out,  that  the  written  certi- 
fication is  an  undertaking  to  all  the  world  of  such  character  and 
effect  that  the  check  so  certified  can  circulate  as  money ;  whereas, 
the  verbal  representation  is  made  only  for  the  guidance  of  the  payee 
or  holder  making  the  inquiry.'* 

Verbal  Acceptance  not  Good  in  Case  there  are  No  Funds 

(a)  In  the  United  States  Circuit  Court  for  the  First  Circuit, 
Judge  Shepley  has  gone  much  farther  still.  The  check  of  one  Beal 
was  presented  by  the  payees  to  the  bank  on  which  it  was  drawn, 
and  payment  requested.  The  cashier  replied  that  if  the  check 
should  be  presented  through  the  clearing-house  in  due  course  it 
should  be  paid.  The  payees  accordingly  deposited  it  in  their 
bank  ;  but  when  it  came  through  the  clearing-house  to  the  drawee 
bank  on  the  following  morning,  it  was  dishonored.  At  the  time 
when  the  cashier  made  this  statement  or  promise  to  the  payees, 
the  drawer  had  no  funds  in  the  bank ;  but  the  cashier  did  not  state 
this  fact,  nor  had  the  payees  any  knowledge  of  it,  vmless  they  were 
bound  to  take  notice  of  it  or  to  infer  it  from  the  fact  that  the  cashier 
refused  or  was  unwilling  to  have  the  check  paid  over  the  counter. 
Apparently  the  judge  was  of  opinion  that  this  refusal  or  unwilling- 
ness was  notice  of  the  lack  of  funds.  The  pleadings  were  in  such 
shape  that  the  question  of  the  cashier's  authority  could  not  be 
raised.  The  plaintiff  averred  the  promise  of  the  bank,  and  the 
demurrer  admitted  it.  The  court,  nevertheless,  held  that  no 
obligation  was  fastened  upon  the  bank.  The  debt  was  still  the 
debt  of  Beal,  and  the  promise  of  the  bank  was  the  promise  to  pay 
the  debt  of  another,  and  therefore  void  under  the  Statute  of  Frauds, 
since  it  was  not  in  writing.  At  any  time  until  the  checks  were  in 
fact  paid,  the  payees  could  ignore  them,  and  enforce  the  original 

2  Espy  V.  Bank  of  Cinoinnati.  IS  Wall.  004,  21  L.  ed.  947. 

3  Boyce  v.  Edwards,  4  Pet.  111.    122.  7  L.  ed.  709. 

^  Espy  V.  Bank  of  Cincinnati,  18  Wall.  G04,  21  L.  ed.  947. 

729 


§  408  ■  ACCEPTANCE    AND    CERTIFICATION 

debt  against  Beal,  which  was  not  extinguished  by  the  check  till 
the  check  itself  was  paid.  The  payees  therefore  parted  with  no 
right,  and  were  put  in  no  worse  position,  by  reason  of  the  promise. 
On  the  other  hand,  no  consideration  passed  to  the  bank.  There 
being  no  funds,  it  could  not  be  compelled  to  pay  at  the  time,  and 
the  postponement  of  presentment  was  no  consideration ;  had  the 
bank  had  funds  and  been  bound  to  pay  at  the  time  of  the  first 
presentment,  it  might  have  been  different,  for  then  the  engagement 
would  have  been  substantially  to  pay  the  drawee's  own  debt  to  the 
drawer.  "  It  cannot  be  perceived  how  any  sound  reason  can 
be  given  why  a  verbal  acceptance  or  promise  to  accept,  for  the  mere 
accommodation  of  the  drawer,  without  funds  or  value  received,  should 
not  be  treated  as  within  the  statute."  The  regret  expressed  by  the 
Supreme  Court  that  verbal  acceptances  have  ever  been  held 
sufficient  is  reiterated  ;  and  the  court  say  that  "  the  reasons  given 
for  holding  good  a  parol  accommodation  acceptance  of  a  bill  of 
exchange  do  not  apply  to  the  case  of  a  bank  check.  The  dis- 
tinguishing characteristics  of  checks,  as  contradistinguished  from 
bills  of  exchange,  are  that  they  are  always  drawn  upon  a  bank  or 
banker,  that  they  are  payable  immediately  upon  presentment 
without  the  allowance  of  any  days  of  grace,  and  that  they  are 
never  presentable  for  acceptance,  but  only  for  payment.  The 
promise  declared  on  does  not  amount  to  an  acceptance.  If  it  be 
treated  either  as  a  promise  to  accept  or  a  promise  to  pay,  it  cannot 
avail  the  plaintiffs.  No  consideration  to  support  the  promise 
appears.  The  checks  were  not  taken  on  the  faith  of  such  promise. 
The  holder  gave  nothing  and  relinquished  no  advantage  for  the 
promise."  It  was  carefully  noted  that  the  plaintiffs  were  not 
persons  who  had  taken  the  checks  bona  fide  for  value,  upon  the 
strength  of  the  promise  of  the  bank.  Much  of  the  reasoning  in  this 
opinion  is  far  from  being  conclusive  or  unanswerable.  In  this 
case  the  holder  did  not  know  there  were  no  funds,  and  it  seems 
just  that  the  principle  of  estoppel  should  be  applied  to  hold  the 
bank.     (See  §  406  A.) 

Conditional  Acceptance 

(b)  The  promise  of  the  banker  must  be  absolute.  If  it  be  con- 
tingent, or  if  it  be  other  than  a  distinct  promise  of  outright  and 
unconditional  payment,  it  does  not  bind  him  as  an  acceptance. 
Thus,  a  depositor  ordered  his  banker  to  hold  a  certain  sum  at  the 
disposal  of  A.,  and  notified  A.  of  his  action.  The  banker  likewise 
730 


VERBAL    CERTIFICATION  §  408 

notified  A.  of  the  direction  he  had  received,  and  that  he  had 
registered  it.  He  decUned,  however,  for  the  present,  to  accept 
bills  for  any  part  of  the  amount,  since  he  was  already  in  advance  to 
his  customer ;  and  positively  undertook  and  promised  only  that, 
if  remittances  should  come  forward  so  that  he  should  be  enabled 
to  comply  with  the  directions,  then  he  would  promptly  advise  A. 
The  court  held  that  no  contract  arose  with  A.,  and  that  he  had  no 
remedy  either  in  law  or  in  equity  against  the  banker.'' 

An  interesting  case  of  conditional  acceptance  arose  in  West 
Virginia.  The  U.  S.  Rev.  Sts.  §  5208,  declare  it  to  be  unlawful 
for  a  national  bank  to  certify  a  check,  unless  the  drawer  has,  at  the 
time  of  presentment  for  certification,  sufficient  funds  in  the  bank 
to  meet  the  check.  A  check  was  presented,  and  the  cashier  prom- 
ised the  holder  that  it  should  be  paid  in  case  a  draft  deposited 
for  collection  by  the  drawer  of  the  check  should  be  duly  paid. 
The  draft  was  duly  paid.  The  court  held  that  thereupon  the 
obligation  of  the  bank  to  pay  the  check  was  complete  and  binding. 
A  statute  prohibiting  certification  of  checks  when  the  drawer's 
funds  are  insufficient  does  not  invalidate  a  promise  on  the  part  of 
the  bank  to  pay  a  check  at  a  future  day,  when  the  drawer  shall  have 
enough  funds  for  that  purpose  in  its  possession.  In  other  words, 
this  was  not  a  certification  absolute,  which  would  have  been  bad 
for  lack  of  funds,  but  a  certification  contingent,  which  could  not 
come  into  force  until  the  funds  should  be  received  and  the  law 
satisfied.^ 

Acceptance  to  Pay  at  a  Future  Day 

(c)  If  the  bank  only  accepts  or  certifies  generally,  its  obligation 
is  to  pay  at  any  time  when  the  holder  may  make  demand.  But  if 
the  acceptance  is  to  pay  at  a  future  day  certain,  then  the  transac- 
tion, as  between  the  bank  and  the  drawer,  is  equivalent  to  a  loan 
of  the  amount  made  by  the  drawer  to  the  bank  for  the  period 
intervening  between  the  acceptance  and  the  date  named  for  pay- 
ment. During  that  interval  the  bank  has  a  right  to  retain  from 
the  funds  of  the  drawer  in  its  hands  a  sum  sufficient  to  meet  the 
acceptance  when  it  shall  fall  due.'^ 

5  Malcolm  v.  Scott,  .5  Exeh.  001 ;   3  Mac.  &  G.  29. 

If  a  drawee  marks  a  check  "Paid"  and  lays  it  aside  to  await  a  re- 
mittance to  cover  the  check  there  is  no  acceptance.  First  National  Bank 
V.  First  National  Rank,  127  Tenn.  205,  154  S.  W.  905  (1912). 

15  First  National  Bank  v.  Merchants'  National  Bank,  7  W.  Va.  544. 

^  Bank  of  England  v.  Anderson,  4  Scott  50. 

731 


§  408  ACCEPTANCE   AND    CERTIFICATION 

Although  acceptance  to  pay  at  a  future  day  is  valid,^  such 
promise  is  binding  for  a  reasonable  time  only.^ 

A  promise  by  a  national  bank  to  pay  all  checks  that  may  be 
drawn  upon  it  by  a  certain  person,  without  limit  as  to  time  and 
amount,  does  not  amount  to  a  certification  but  is  a  guaranty  and 
is  ultra  vires }^ 

In  Pennsylvania  a  bank  is  not  bound  by  the  verbal  promise 
of  its  president  that  a  check  will  be  paid  if  the  holder  will  retain 
it  a  few  days.^^ 

§  409.  Retention.  —  It  occasionally  happens  that  a  check  is 
presented  to  the  bank,  and  is  not  paid  upon  the  spot  by  the  bank, 
but  is  retained  by  it.  If  this  happens  without  any  distinct  con- 
temporaneous agreement  between  the  holder  and  the  bank  as  to  the 
conditions  and  purpose  of  the  retention,  it  will  not  operate  as  an 
acceptance  of  the  check  by  the  bank,  unless  the  retention  is  con- 
tinued for  an  unreasonable  length  of  time  without  explanation  on 
the  part  of  the  bank.  If  the  check  is  sent  to  the  bank  through  the 
mail,  it  has  even  been  said  that  the  bank  may  hold  it  any  length  of 
time  without  incurring  the  liability  of  an  acceptance.  For  the 
mere  fact  that  a  check  is  handed  into  a  bank  creates  of  itself  no 
obligation  on  the  part  of  the  bank  to  notify  the  holder  that  it  will 
not  be  paid.  It  is  his  duty  to  call,  after  a  reasonable  period  has 
elapsed,  and  demand  payment,  or  ask  whether  or  not  it  will  be 
paid  ;  and  after  the  lapse  of  such  time  it  will  be  the  duty  of  the  bank 
to  pay  or  to  answer  him ;  but  not  before  that  time,  for  the  bank 
always  has  a  reasonable  period  for  examining  its  accounts  before 
it  can  be  required  to  pay,  or  to  answer  whether  or  not  it  will  pay. 
In  the  case  of  Bellasis  v.  Hester  ^  such  period  was  said  to  be  twenty- 
four  hours.  In  the  case  of  Overman  v.  Hoboken  City  Bank,-  a 
check  drawn  to  the  order  of  the  plaintiff  was  deposited  in  the  Bank 
of  Commerce,  in  New  York  City,  and  was  by  that  bank  transmitted 

8  La  Banque  du  Peuple  v.  La  Banque  d'Exchange,  1  Montreal  L.  R. 
(S.  C.)  231 ;  Exchange  Bank  v.  La  Banque,  3  Montreal  L.  R.  (Q.  B.) 
232. 

8  Seventy  days  is  a  reasonable  time.  Leach  v.  Hill,  106  Iowa  171,  76 
N.  W.  667  (1898). 

10  Bowen  v.  Needles  National  Bank,  87  Fed.  430  (1898). 

11  Bank  v.  Lindeman,  161  Pa.  St.  199,  28  Atl.  1022. 

1  §  409.  1  Ld.  Raym.  280.  See,  also,  Wisner  v.  First  National  Bank, 
220  Pa.  St.  21,  68  Atl.  955,  17  L.  R.  A.  (n.  s.)  1266,  n.  (1908) ;  First 
National  Bank  v.  First  National  Bank,  127  Tenn.  205,  154  S.  W.  965 
(1912)  (statute). 

2  2  Vroom  (N.  J.)  56a 

732 


RETENTION  §  409 

to  the  Ocean  Bank  for  the  purpose  of  being  sent  thence  to  the 
defendant  bank  for  payment.  It  was  received,  by  this  means,  by 
the  defendant  bank,  October  31,  between  twelve  and  one  o'clock, 
noon,  and  by  it  was  retained  till  twelve  m.  on  the  following  day, 
when  it  was  returned  to  the  Ocean  Bank  marked  "  not  good." 
At  ten  o'clock  a.m.  on  the  day  following  the  Ocean  Bank  sent  it 
back  to  the  Bank  of  Commerce,  which  immediately  notified  the 
plaintiflFs  of  the  dishonor.  The  court  held  that  the  mere  retention 
of  the  check  by  the  defendants  did  not  constitute  an  acceptance 
by  them,  or  bind  them  to  a  payment.  The  court  said,  a  banker 
may  retain  a  check  twenty-four  hours  to  examine  his  accounts  and 
see  if  he  will  accept;  "  after  the  lapse  of  this  time  the  holder  has 
a  right  to  know  if  the  check  or  bill  is  to  be  honored  or  dishonored, 
but  it  is  his  duty  to  wait  upon  the  drawee  to  ascertain  this."  ^ 
In  the  absence  of  usage  or  mode  of  dealing,  or  circumstance  of  con- 
duct amounting  to  estoppel,  the  best  opinion  is  that  mere  retention 
will  not  operate  as  an  acceptance,  whatever  be  the  length  of  time, 
for  the  drawee  is  not  obliged  to  send  an  answer  even  when  the 
holder  sends  the  check  to  it  by  mail,  but  may  safely  wait  in  silence 
till  the  holder  makes  some  further  move."*  In  the  case  of  a  check 
sent  by  mail,  however,  it  might  seem  more  just  and  reasonable  to 
hold  that  the  bank  is  the  agent  of  the  holder  to  return  an  answer 
in  reasonable  time ;  but  w^e  must  remember  that  the  bank's  duty 
in  regard  to  checks  is  only  to  pay  them  over  its  counter,  and  it  can- 
not be  burdened  with  correspondence  in  addition  to  this  duty, 
unless  by  its  consent. 

The  New  Jersey  case  above  is  cited  in  Judge  Story's  work  on 
Promissory  Notes,  as  settling  the  law  upon  this  point.  But  it 
should  be  noted  that  the  above  doctrine  is  only  that  of  the  common 
law,  unaffected  by  the  introduction  of  evidence  relating  to  the 
understanding  and  usage  of  business  in  any  special  locality.  In 
the  case  of  Overman  v.  Hoboken  City  Bank,  the  banks  were  situ- 

3  Overman  v.  Hoboken  City  Bank,  2  Vroom  (N.  J.)  563.  Twenty- 
four  hours  is  deemed  a  reasonable  period  for  the  drawee  of  a  bill  to  de- 
liberate and  look  to  the  state  of  his  accounts.  Connelly  v.  McKean, 
64  Pa.  St.  113  ;  IVIontgomery  County  Bank  v.  Albany  City  Bank,  8  Barb. 
(N.  Y.)  399;  Bellasis  v.  Hester,  1  Ld.  Raym.  280;  Case  i-.  Burt.  15 
Mich.  82. 

••  In  Jeune  v.  Ward,  2  Stark.  326,  Lord  EUenborough  held  it  to  be  the 
duty  of  the  drawee  to  return  the  bill,  but  the  Court  of  King's  Bench 
reversed  his  ruling,  though  the  bill  had  been  retained  a  month.  Parsons 
agrees  with  the  text.  2  Pars.  B  »fc  N.  284,  and  Chitty  on  Bills,  175.  See 
Daniel,  Neg.  Inst.,  §  1619. 

733 


§  409  ACCEPTANCE   AND   CERTIFICATION 

ated  in  different  States,  and  custom  could  probably  not  have  been 
shown.  Had  all  the  banks  been  in  New  York  City,  such  evidence 
would  probably  have  been  offered.  The  matter  is  one  concerning 
which  there  is  usually  a  definite  and  well-understood  usage  in 
every  business  community. 

In  Pennsylvania  it  has  been  said :  "  If  a  bank  does  not  pay 
or  accept,  it  is  bound  to  refuse.  It  has  no  right  to  receive  and 
keep  the  check  indefinitely,  thereby  leaving  the  holder  to  suppose 
that  it  has  accepted  the  check  and  assumed  its  payment.^ 

In  Tennessee  it  has  been  held  that  acceptance  of  a  check  and  a 
promise  to  pay  it  in  accordance  with  directions  is  inferred  where 
the  drawee  bank  receives  and  retains  it  and  charges  it  to  the  account 
of  the  drawer,  who  has  sufficient  funds  on  deposit  to  meet  it  and 
who  consequently  lifts  such  check  upon  settlement  with  the  bank.^" 

In  England  it  is  held  that  a  banker  may  retain  a  check  until 
next  day  to  see  if  he  is  in  funds.  He  is  entitled  to  one  day's  time, 
and  such  delay  does  not  make  him  liable  as  for  acceptance.®  If 
funds  come  in  while  holding  the  check,  they  must  be  applied  to  it. 

§  410.  Putting  on  Cancelling  Fork.  —  Charging  Drawer.  — 
Placing  a  check  on  the  cancelling  fork  by  mistake  does  not  amount 
to  acceptance,  nor  prevent  return  of  it  on  discovering  that  it  is 
not  correct  in  form,  or  that  there  are  not  sufficient  funds.^  But 
deducting  the  amount  of  a  check  from  the  drawer's  account  is  an 
acceptance.^  So  if  the  amount  of  an  outstanding  check  is  retained 
by  the  drawee  bank  in  a  settlement  with  the  drawer,  it  is  an  implied 
acceptance.^  But  if  the  payment  or  settlement  is  by  mistake,  as  in 
case  of  payment  on  a  forged  indorsement,  the  United  States  Su- 
preme Court  deny  that  there  is  any  acceptance.     (§  474,  e,  h.) 

§411.  Delivery  necessary  to  Complete  Certification.  —  The 
bank's  liability  upon  a  certification  does  not  arise  upon  the  mere 
marking  the  check  "  good",  but  upon  the  delivery  of  the  certified 
check  to  the  holder,  or  person  who  presents  it."     If  it  receives  orders 

5  First  National  Bank  of  Northumberland  v.  McMiehael,  106  Pa.  St.  464. 
5-  Pickle  V.  Muse,  88  Tenn.  389,  12  S.  W.  919  (1890). 

6  Kilsby  V.  Williams,  5  Barn.  &  Aid.  815 ;  Boyd  v.  Emmerson,  2  Ad. 
&  E.  184. 

1  §  410.  National  Bank  of  Rockville  v.  Second  National  Bank  of  La- 
fayette, 69  Ind.  479  (1880). 

2  Seventh  National  Bank  v.  Cook,  73  Pa.  St.  483 ;  Pratt  v.  Foote, 
9  N.  Y.  466;   Pickle  v.  Muse,  88  Tenn.  389,  12  S.  W.  919  (1890). 

3  Saylor  v.  Bushong,  100  Pa.  St.  23. 

"  §  411.  In  Tennessee  there  is  no  acceptance  until  it  is  completed  by 
delivery  or  notification  and  in  the  absence  of  an  agreement  between  the 

734 


AUTHORITY    TO    CERTIFY  §  413 

from  tlie  drawer  revoking  the  check,  after  it  is  marked  but  before 
it  is  delivered,  it  delivers  the  check  at  its  own  risk  ;  if,  however,  it 
had  delivered  before  receiving  the  order,  it  would  have  been  un- 
necessary to  pay  any  attention  to  said  order,  as  it  would  be  of  no 
effect.^  A  bank  cannot  refuse  to  pay  a  certified  check  because  of 
a  countermand  after  the  certification  is  complete.- 

§  412.  Acceptance  away  from  the  Bank.  (§  IGS,  d.)  —  An 
acceptance  by  the  cashier  away  from  the  bank  is  not  valid,  and 
will  not  bind  the  bank  nor  exclude  creditors  from  holding  the  de- 
posit against  which  the  check  was  drawn  under  an  attachment 
served  after  the  outside  acceptance  was  made.^ 

§  413.  Authority  to  Certify.  —  Cashier,  president,  and  teller  '^ 
have  inherent  power,  assistant  cashier  or  any  sub-officer  not. 
Check  must  not  be  irregular*"'  or  post-dated  ; '"'  but  bank  may  be 
liable  to  innocent  holder  though  the  officer  exceeded  his  power."'' 
National  bank  may  certify  if  funds  are  sufficient,  or  accept  con- 
ditionally if  funds  are  not  sufficient. 

The  authority  of  a  subordinate  officer  to  certify  must  be  shown 
by  a  course  of  dealing  or  actual  authorization. ^    The  cashier  has 

drawer  and  drawee  for  overcheeking  and  in  the  absence  of  the  holder's 
knowledge  of  and  reliance  upon  a  custom  of  overchecking  no  liability- 
arises  by  marking  "Paid"  upon  it;  and  when  the  drawee  is  acting  in  a 
dual  capacity  of  collecting  agent  of  the  holder  and  as  drawee  there  can  be 
no  acceptance  by  delivery  until  the  bills  are  passed  through  the  books 
of  the  bank,  charging  the  account  of  the  drawer  and  crediting  the  account 
of  the  submitting  Ixink,  and  making  a  complete  transaction.  First 
National  Bank  v.  First  National  Bank,  127  Tenn.  205,  154  S.  W.  965 
(1912). 

1  Freund  v.  Importers  &  Traders'  National  Bank,  3  Hun  (N.  Y.) 
689;   76  N.  Y.  352;   12  Hun  (N.  Y.)  537. 

2  Nassau  Bank  v.  Broad wav  Bank,  54  Barb.  54  (N.  Y.)  236. 
»  §  412.     BuUard  v.  Randall,  1  Gray  (Mass.)  605. 

0  §  413.  ^luth  V.  St.  Louis  Trust  Co.,  94  Mo.  App.  94,  67  S.  W.  978 
(1902),  holds  that  the  court  did  not  err  in  refusing  to  instruct  the  jury 
that  the  teller  had  implied  authority  to  certify  checks. 

""  Even  though  a  check  is  not  signed  by  the  drawer  when  certified,  it 
becomes  binding  on  the  bank  as  soon  as  the  drawer  signs  it.  Kelling  v. 
Edwards.  UG  Minn.  4S4,  134  N.  W.  221,  38  L.  R.  A.  (x.  s.)  668  (1912). 

'"'  In  Idaho  a  check  dated  September  10th  and  certified  July  15th 
preceding  was  taken  by  a  clerk  of  court  and  it  was  held  that  such  was  a 
substantial  compliance  with  a  statute  requiring  a  deposit  of  money. 
Smith  V.  Field,  19  Idaho  .5.58,  114  Pac.  668,  1912C  Ann.    Cas.    354.  n. 

<"=  But  if  there  were  no  funds  in  the  bank  at  the  time  of  certification, 
or  if  the  certification  was  fraudulent  the  burden  is  upon  the  plaintiff  to 
show  that  he  is  a  bona  fide  holder.  Detroit  National  Bank  v.  Union 
Trust  Co.,  145  Mich.  6.56,  108  N.  W.  1092,  116  Am.  St.  Rep.  319  (1916). 

1  Pope  V.  Bank  of  Albion,  57  N.  Y.  126,  reversing  59  Barb.  (N.  Y.)  226. 

735 


§  413  ACCEPTANCE   AND   CERTIFICATION 

inherent  authority  to  certify.^  President  also  has  power  ex  officio 
to  certify  i^"  but  even  though  empowered  to  certify  by  a  by-law,  he 
cannot  certify  his  own  checks,  for  an  agent's  power  is  to  be  used  for 
the  exclusive  benefit  of  his  principal  .^  The  teller  has  been  held  ^ 
to  have  authority  inherent  to  certify,  and  it  seems  an  unavoidable 
conclusion,  as  he  is  simply  the  substitute  of  the  cashier  in  regard  to 
certain  duties  within  the  scope  of  which  this  seems  naturally  to  fall, 
it  being  his  duty  to  pay,  and  certification  being  to  all  intents  and 
purposes  payment  of  the  check.  But  an  assistant  cashier  has  no 
inherent  power  to  certify,  and  a  holder  is  put  to  his  inquiry  con- 
cerning his  authority.^ 

Check  Must  he  in  Proper  Form 

(a)  But  the  instrument  certified  must  be  a  check  in  the  usual 
commercial  form.  Where  a  check  stated  on  its  face  that  it  was 
intended  to  be  held  as  collateral  security,  the  cashier's  certification 
"  Good  when  properly  indorsed",  was  held  to  be  irregular,  and  not 
binding.^ 

And  not  Dated  Subsequent  to  Certificate 

(b)  When  a  post-dated  check  is  certified  before  maturity,  it 
carries  notice  to  all  that  the  certification  was  beyond  the  officer's 
authority.'^    Where  a  check  drawn  on  the  Bank  of  Albion  at  L., 

2 Merchants'  Bank  v.  State  Bank,  10  Wall.  648, 19  L.  ed.  1019.  "The 
power  is  inherent  in  the  office."  Pope  v.  Bank  of  Albion,  59  Barb.  (N.  Y.) 
226.  Massachusetts  alone  has  eases  contra,  and  holds  tha  t  a  usage  for  cashier 
to  certify  is  bad,  and  will  not  avail.  Mussey  v.  Eagle  Bank,  9  Met. 
(Mass.)  313;  Atlantic  Bank  v.  Merchants'  Bank,  10  Gray  (Mass.)  532. 
See  Chapter  XL,  "The  Cashier."  See  Muth  v.  St.  Louis  Trust  Co., 
94  Mo.  App.  94,  67  S.  W.  978  (1902). 

2»  Fidelity  etc.  Co.  v.  National  Bank,  48  Tex.  Civ.  App.  301,  106  S.  W. 
782  (1907). 

3  Claflin  V.  Farmers  &  Mechanics'  Bank,  25  N.  Y.  296. 

If  an  agent  of  a  bank  certifies  a  check  which  he  issues  whereby  the  funds 
of  the  bank  may  be  withdrawn  for  his  benefit,  the  person  receiving 
the  check,  in  order  to  give  it  validity,  is  bound  to  make  inquiry  from  other 
officers  of  the  bank  in  respect  to  its  validity.  State  v.  Miller,  47  Or.  562, 
85  Pac.  81,  6  L.  R.  A.  (x.  s.)  365  (1906). 

^  Irving  Bank  v.  Wetherald,  36  N.  Y.  335 ;  Farmers  &  Mechanics' 
Bank  v.  Butchers  &  Drovers'  Bank,  16  N.  Y.  1.33.  But  see  Muth  v.  St. 
Louis  Trust  Co.,  94  Mo.  App.  94,  67  S.  W.  978  (1902). 

5  Pope  V.  Bank  of  Albion,  57  N.  Y.  127. 

6  Dorsey  v.  Abrams,  85  Pa.  St.  299.  See  Fidelity  etc.  Co.  v.  National 
Bank,  48  Tex.  Civ.  App.  301,  106  S.  W.  782  (1907). 

7  Clarke  National  Bank  v.  Bank  of  Albion,  52  Barb.  (N.  Y.)  592; 
Swenson  Bros.  Co.  v.  Commercial  State  Bank,  98  Neb.  702,  154  N.  W. 

736 


EFFECT    OF   CERTIFICATIOX    AFTER   ISSUE  §  414 

dated  ^March  1,  was  cashed  by  Pope  in  New  York  on  March  2, 
the  fact  that  the  check  could  not  have  been  certified  after  date 
and  then  have  reached  New  York  by  the  time  Pope  took  it,  was 
held  to  put  Pope  on  inquiry,  and  prevent  his  recovery  as  a  bona 
fide  holder.^ 

A  bank  is  not  relieved  from  paying  an  innocent  holder  by  the 
fact  that  the  cashier  transgressed  his  instructions  to  certify  only  in 
case  of  sufficient  funds.  The  authority  of  the  assistant  teller  to 
certify  may  be  shown  by  a  course  of  dealing  between  him  and  the 
bank  and  its  customers.^ 

National   Bank   may  Certify 

(c)  In  Merchants'  Bank  v.  State  Bank  the  court  declares  that 
a  certified  check  is  not  within  the  prohibition  of  the  National 
Currency  Act  of  1864,  §  23,  forbidding  banks  to  issue  post-notes 
or  "  other  notes  "  to  circulate  as  money,  other  than  ordinary 
bank-bills.  The  act  of  ]\Iarch  3,  1869,  does  not  prevent  national 
banks  from  certifying  orally  if  funds  are  sufficient,  nor  from  accept- 
ing conditionally  to  pay  when  the  funds  are  sufficient. ^°  That 
statute  prohibits  national  banks  from  certifying  when  the  funds 
are  insufficient. 

§  414.  Effect  of  Certification  after  Issue.  —  After  the  certifica- 
tion is  complete,  the  bank  is  bound  as  a  direct  and  original  promisor 
to  the  payee  ;  it  and  he  are  parties  to  a  contract  upon  which  he  has 
his  right  of  action  directly  against  the  bank,  without  any  regard 
whatsoever  to  its  relations  with  the  depositor  or  the  state  of  the 
drawer's  account  either  at  the  time  of,  or  at  any  time  after,  the 
acceptance.^ 

233  (1915).  But  see  Smith  v.  Field,  19  Idaho  558,  114  Pac.  G68.  1912C 
Ann.  Cas.  354,  n.,  holding  that  in  such  a  case  the  bank  is  bound  to  set 
aside  a  sum  sufficient  to  pay  the  check. 

8  Pope  V.  Bank  of  Albion,  57  N.  Y.  126;    Rev.  59  Barb.  (N.  Y.)  226. 

»  Hill  V.  National  Trust  Co.,  108  Pa.  St.  1. 

i«  First  National  Bank  r.  Merchants'  National  Bank.  7  W.  Va.  544. 

1  §  414.  Keene  v.  Beard,  8  C.  B.  n.  s.  372  ;  Bullard  v.  Randall,  1  Gray 
(Mass.)  605;  Morse  v.  Massachusetts  National  Bank,  1  Holmes  (C.  C.) 
209;  Cooke  v.  State  National  Bank  of  Boston,  52  N.  Y.  96,  affirming 
same  case,  50  Barb.  (N.  Y.)  339 ;  1  Lans.  (N.  Y.)  494 ;  and  all  the  cases 
cited  on  this  general  topic,  below.  People  v.  St.  Nicholas  Bank,  77 
Hun  (N.  Y.)  159;  Blake  v.  Hamilton  etc.  Bank.  78  Ohio  St.  1S9,  87 
N.  E.  73  (1908) ;  Times  Square  Automobile  Co.  v.  Rutherford  National 
Bank,  77  N.  J.  L.  649,  73  Atl.  479,  134  Am.  St.  Rop.  811  (1909) ;  Smith 
V.  Field,  19  Idaho  .558,  114  Pac.  668,  1912C  Ann.  Cas.  3.54,  n. ;  Mer- 
chants' Bank  v.  Baird,  160  Fed.  642  (1908) ;  Fidelity  etc.  Co.  v.  National 
VOL.  1  —  47  737 


§  414  ACCEPTANCE   AND    CERTIFICATION 

The  practice  of  certifying  checks  has  not  escaped  severe  criti- 
cism ;  but  it  has  been  so  thoroughly  estabhshed,  both  among  busi- 
ness men  and  by  the  courts,  that  its  legality  can  no  longer  be  ques- 
tioned. The  Supreme  Court  of  the  United  States,  per  Swayne,  J., 
speak  of  the  custom  in  the  following  decisive  language :  "  All  the 
authorities,  both  English  and  American,  hold  that  a  check  may  be 
accepted,  though  acceptance  is  not  usual.  By  the  law  merchant 
of  this  country,  the  certificate  of  the  bank  that  a  check  is  good  is 
equivalent  to  acceptance.  It  implies  that  the  check  is  drawn  upon 
sufficient  funds  in  the  hands  of  the  drawee,  that  they  have  been 
set  apart  for  its  satisfaction,  and  that  they  shall  be  so  applied 
whenever  the  check  is  presented  for  payment.  It  is  an  under- 
taking that  the  check  is  good  then,  and  shall  continue  good,  and 
this  agreement  is  as  binding  on  the  bank  as  its  notes  of  circulation,  a 
certificate  of  deposit  payable  to  the  order  of  the  depositor,  or  any  other 
obligation  it  can  assume.  The  object  of  certifying  a  check,  as 
regards  both  parties,  is  to  enable  the  holder  to  use  it  as  money. 
The  transferee  takes  it  with  the  same  readiness  and  sense  of  security 
that  he  would  take  the  notes  of  the  bank.  It  is  available  also 
to  him  for  all  the  purposes  of  money.  Thus  it  continues  to  per- 
form its  important  functions  until  in  the  course  of  business  it  goes 
back  to  the  bank  for  redemption,  and  is  extinguished  by  payment. 
It  cannot  be  doubted  that  the  certifying  bank  intended  these  con- 
sequences, and  it  is  liable  accordingly.  To  hold  otherwise  would 
render  these  important  securities  only  a  snare  and  a  delusion.  A 
bank  incurs  no  greater  risk  in  certifying  a  check  than  in  giving  a 
certificate  of  deposit.  In  well-regulated  banks  the  practice  is  at 
once  to  charge  the  check  to  the  account  of  the  drawer,  to  credit  it 
in  a  certified  check  account,  and,  when  the  check  is  paid,  to  debit 
that  account  with  the  amount.  Nothing  can  be  simpler  or  safer 
than  this  process. 

"  The  practice  of  certifying  checks  has  grow^n  out  of  the  business 
needs  of  the  country.  They  enable  the  holder  to  keep  or  convey 
the  amount  specified  with  safety.  They  enable  persons  not  well 
acquainted  to  deal  promptly  with  each  other,  and  they  avoid  the 
delay  and  risks  of  receiving,  counting,  and  passing  from  hand  to 

Bank,  48  Tex.  Civ.  App.  301,  106  S.  W.  782  (1908) ;  Elliott  v.  First 
National  Bank,  105  Tex.  547,  152  S.  W.  808  (1913) ;  Bank  of  Ind.  T. 
V.  First  National  Bank,  109  Mo.  App.  665,  83  S.  W.  537  (1904) ;  First 
National  Bank  v.  Currie,  147  Mich.  72,  110  N.  W.  499,  118  Am.  St.  Rep. 
5.37,  9  L.  R.  A.  (n.  s.)  698,  n.  (1907) ;  Seheffenaeker  v.  Hoopes,  113  Md. 
Ill,  77  Atl.  130,  29  L.  R.  A.  (n.  s.)  205,  n.  (1910). 

738 


EFFECT    OF   CERTIFICATION    AFTER    ISSUE  §  414 

hand  large  sums  of  money.  It  is  computed  by  a  competent  au- 
thority, that  the  average  daily  amount  of  such  checks  in  use  in 
the  city  of  New  York,  throughout  the  year,  is  not  less  than  one 
hundred  millions  of  dollars.  We  could  hardly  inflict  a  severer 
blow  upon  the  commerce  and  business  of  the  country  than  by 
throwing  a  doubt  upon  their  validity." 


2 


Bank  Owes  the  Holder 

(a)  It  has  been  said  that  the  effect  of  a  legal  acceptance  by  the 
bank  is  to  place  the  holder  of  the  check  in  the  position  of  a  deposi- 
tor ;  that  in  fact  and  in  law  he  himself  becomes  thereby  a  depositor 
of  the  bank.  It  was  not  of  course  intended  by  this  remark  to 
signify  that  he  stands  precisely  on  the  footing  of  one  who  has 
opened  an  ordinary  deposit  account  with  the  bank.  For  example, 
he  cannot  draw  checks  against  the  amount  standing  to  his  credit. 
But,  like  an  ordinary  depositor,  he  is  a  simple  contract  creditor  of 
the  bank,  which  is  bound  to  pay  on  demand  to  him  or  to  his  order 
the  amount  of  the  debt.^  However  certain  it  may  be  considered 
that  in  his  character  simply  as  a  check-holder  he  has  no  right  to  sue 
the  bank  for  the  amount  of  his  check,  at  least  there  is  no  doubt  of 
his  right  of  action  after  acceptance.  The  acceptance  is  in  itself  a 
new  and  perfect  contract  between  himself  and  the  bank,  super- 
seding the  previous  peculiar  rights  of  all  parties.  It  has  been  said 
that  its  technical  operation  is  to  transfer  to  the  holder  the  drawer's 
right  of  action  against  the  bank.''  It  is  an  inference  from  the 
language  used  in  this  case,  that  the  transaction  effects  a  literal 
transferring,  in  the  sense  of  depriving  the  former  possessor  of  his 

=  Merchants'  Bank  v.  State  Bank,  10  Wall.  604,  at  p.  647,  19  L.  ed. 
1008,  1019.  See  Helwege  v.  Hibernia  National  Bank,  28  La.  Ann.  520; 
Blake  v.  Hamilton  etc.  Bank,  78  Ohio  St.  189,  87  N.  E.  73  (1908).  ^  See 
also  statement  of  Marine  National  Bank  v.  City  National  Bank,  59  N.  Y. 
71 ;    §  478,  Forgery  of  Certified  Check. 

3  Girard  Bank  v.  Bank  of  Penn  Township,  39  Pa.  St.  92 ;  Seventh 
National  Bank  v.  Cook,  73  id.,  483;  INlilmo  National  Bank  ;-.  Cobbs. 
53  Tex.  Civ.  App.  1,  115  S.  W.  345  (1908) ;  Fidelity  etc.  Co.  v.  National 
Bank,  48  Tex.  Civ.  App.  301 ;  106  S.  W.  782  (1908) ;  Smith  r.  Field,  19 
Idaho  558,  114  Pac.  668,  1912C  Ann.  Cas.  354,  n. ;  Carnegie  Trust  Co.  v. 
First  National  Bank,  213  N.  Y.  301,  107  N.  E.  693  (1915). 

The  bank  cannot  resist  payment  in  order  to  make  a  set-off  available  to 
its  depositor.     Carnegie  Trust  Co.  v.  First  National  Bank,  supra. 

•»  Commercial  Bank  of  Albany  v.  Hughes,  17  Wend.  (N.  Y.)  94.  The 
same  is  implied  also  in  the  decision  rendered  in  Dykers  t-.  Leather  Manu- 
facturers' Bank,  11  Paige  (N.  Y.)  612.  People  v.  St.  Nicholas  Bank, 
77  Ilun  (N.  Y.)  159. 

739 


I  414  ACCEPTANCE   AND   CERTIFICATION 

rights ;  that  is  to  say  that  the  right  of  action  given  to  the  holder  is 
not  coexistent  with  another  right  of  action  still  remaining  in  the 
drawer,  but  is  identical  with  it,  and  is  by  the  act  of  the  bank  passed 
over  from  the  one  to  the  other. 

Drawer  cannot  Sue  Bank.    He  is  Discharged  from  Liability  to 

Holder 

(b)  The  drawer  can  no  longer  sue,  though  the  bank  should 
finally  refuse  to  pay  the  check.  For  he  has  originally  only  a  right 
to  demand  that  the  check  shall  be  duly  paid  on  presentment,  and 
his  action  lies  for  the  damage  resulting  to  him  or  to  his  credit  from 
not  having  his  debt  duly  discharged  in  the  manner  he  has  led  his 
creditor  to  suppose  would  be  sufficient.^  But  if  the  holder  waives 
his  right  to  immediate  payment,  by  expressly  asking  for  or  even 
by  accepting  the  offer  of  a  certification  by  the  bank,  it  follows  that 
since  his  act  acquits  the  debt  due  him  from  the  drawer,  the  drawer 
can  thereafter  have  no  cause  or  basis  whatsoever  on  which  to  sue. 
The  matter  is  voluntarily  taken  out  of  his  hands  by  the  other  parties, 
who  make  their  arrangements  to  suit  their  own  convenience.  Even 
if  the  drawer  has  suggested  or  requested  the  arrangement,  the 
assent  of  the  payee  and  holder  must  be  regarded  as  at  his  own  sole 
risk.  He  is  not  obliged  to  take  the  bank's  promise  in  place  of  the 
drawer's  indebtedness.  The  promise  of  the  bank  on  the  drawer's 
account,  accepted  as  satisfactory  by  the  creditor,  discharges  the 
debtor,^"  and  at  the  same  time  deprives  him  of  all  further  concern 
or  possible  right  of  action  in  the  premises.^" 

(c)  In  Illinois  ^  and  Tennessee  are  to  be  found  cases  in  apparent 
conflict  with  the  above,  as  to  the  discharge  of  the  drawer.  But  in 
every  case  the  fact  was  that  the  certification  was  obtained  by  the 
drawer  before  he  delivered  it,  and,  as  will  be  shown  in  the  next 

5  The  court  in  Massachusetts  expressly  speak  of  the  act  of  certification 
as  "discharging  them  [the  banks]  as  debtor  to  the  drawer."  Bullard  v. 
Randall,  1  Gray  (Mass.)  605. 

5°  Carnegie  Trust  Co.  v.  First  National  Bank,  213  N.  Y.  301,  107  N.  E. 
693  (1915) ;  First  National  Bankv.  Currie,  147  Mich.  72,  110  N.  W.  499, 
118  Am.  St.  Rep.  537,  9  L.  R.  A.  (n.  s.)  698,  n.  (1907) ;  First  National 
Bank  v.  Bank  of  Cottage  Grove,  59  Or.  388,  117  Pae.  293  (1911) ;  Central 
Guarantee  etc.  Co.  v.  White,  206  Pa.  St.  611,  56  Atl.  76  (1903) ;  Davenport 
V.  Palmer,  152  App.  Div.  761  (1912),  137  N.  Y.  S.  796. 

5"  Continental  National  Bank  v.  Cornhauser,  37  111.  App.  475 ;  Born 
V.  Bank,  123  Ind.  78,  24  N.  E.  173. 

6  Bickford  v.  First  National  Bank  of  Chicago,  42  111.  238 ;  Rounds  v. 
Smith,  id.,  245;  Brown  v.  Leckie,  43  id.,  497. 

740 


EFFECT    OF   CERTIFICATION    AFTER   ISSUE  §  414 

section,  this  distinguishes  the  matter  from  the  cases  above  and 
below,  in  which  the  certification  was  subsequent  to  issue.^"  The 
lanf];uage  of  the  judges  is  much  broader  than  their  facts  require  or 
warrant,  as  is  often  the  case,  and,  so  far  as  they  apply  to  the  ques- 
tion of  subsequent  certification,  the  following  arguments  of  Mr. 
Morse  in  his  second  edition  seem  a  complete  refutation,  and  indeed 
it  is  not  at  all  probable  that  the  judges  of  Illinois  or  Tennessee 
would  hold  the  drawer  liable  after  a  post-issue  certification,  except 
by  special  agreement. 

(d)  It  is  said  by  the  judges  that  a  certified  check  does  not  differ 
from  an  ordinary  check,  except  that  the  bank  guarantees  what 
otherwise  would  be  only  assumed  ;  viz.  that  the  check  is  drawn 
against  sufficient  funds,  and  will  be  honored  whenever  payment 
shall  be  demanded.  If  payment  be  not  in  fact  made  upon  it, 
then  the  drawer  is  said  to  be  still  liable.  The  analogy  of  bills  of 
exchange  is  relied  upon,  concerning  which  the  rule  is,  that,  if  an 
accepted  bill  be  not  paid  by  the  acceptor,  it  furnishes  cause  of 
action  against  the  drawer.  The  fallacy  of  this  argument  seems 
perfectly  obvious  ;  the  imperfection  of  the  analogy  is  patent.  The 
undertaking  of  the  drawer  of  the  bill  is  that  it  shall  be  accepted 
and  paid  according  to  its  tenor.  The  undertaking  of  the  holder  of 
the  check  is  that  it  shall  be  paid  if  duly  presented  for  payment.  If 
the  bill  be  accepted  only,  and  not  paid,  the  undertaking  of  the 
drawer  is  not  fulfilled,  and  he  is  liable  accordingly.  But  if  the 
holder  of  the  check  presents  it,  and,  instead  of  demanding  that 
payment  which  alone  the  drawer  authorizes  him  to  demand,  and 
which  alone  the  drawer  engages  shall  be  made,  prefers  or  consents 
to  accept  the  certification  by  the  bank,  then  the  holder  is  clearly 
absolved  from  further  liability.  It  should  be  further  noted,  that 
the  fact  of  acceptance  is  evidence  that  paNTnent  would  have  been 
made,  or  ought  to  have  been  made,  had  it  been  demanded  at  that 
time ;  for  the  bank  has  no  right  to  certify  a  check  unless  all  those 
circumstances  exist  which  would  make  it  the  duty  of  the  bank  at 
that  same  moment  to  pay  the  check  upon  demand.  It  is,  there- 
fore, the  holder's  own  fault  if  he  takes  an  acceptance,  when  he 
might  have  a  payment.  Even  in  the  possible  case  of  a  payment 
being  demanded  and  refused,  and  certification  being  accepted  in 
lieu  thereof  by  the  holder,  it  would  seem,  upon  principle,  that  the 

*"  Since  the  text  was  written  the  distinction  stated  therein  has  been 
clearly  recognized  in  the  Illinois  case  of  Continental  National  Bank  v. 
Cornhauser,  37  111.  App.  475. 

741 


§  414  ACCEPTANCE   AND   CERTIFICATION 

drawer  should  be  acquitted  ;  for  the  holder,  by  accepting  and  enter- 
ing into  an  arrangement  not  contemplated  by  the  drawer,  may  be 
fairly  held  to  have  discharged  the  drawer.  Take,  for  instance,  the 
case  of  a  bank,  hard  pushed  for  funds,  persuading  a  check-holder 
to  accept  a  certification  in  lieu  of  payment.  The  certified  check, 
being  substantially  as  good  as  money,  probably  will  be  held  or  will 
circulate  for  a  few  days  before  it  is  returned  for  payment.  When 
it  is  returned  for  payment,  the  bank  has  failed.  What  justice 
would  there  be  in  holding  the  drawer  to  make  good  the  amount, 
when,  had  payment  been  demanded  and  insisted  upon,  it  would 
either  have  been  made,  or  he  would  have  been  entitled  to  receive 
notice  of  the  dishonor  of  his  check,  and  so  enabled  to  use  any 
means  in  his  power  to  protect  himself  ?  Obviously  this  argument 
would  be  much  weakened,  though  not  destroyed,  if  it  were  under- 
stood between  the  drawer  and  payee  that  certification  might  be 
accepted  in  lieu  of  payment,  or  if  the  usage  of  business  should  bind 
the  drawer  of  a  check  to  anticipate  a  request  for  certification  as 
being  as  probable  as  a  request  for  payment.  The  usage  of  business 
surely  does  not  bind  the  drawer  to  any  such  anticipation.  Even 
if  it  did,  it  would  not  unquestionably  follow  that  the  payee,  having 
exercised  his  option  to  take  the  promise  of  the  bank  instead  of 
money,  should  not  be  thereby  concluded  as  against  the  drawer. 
But,  in  the  absence  of  such  an  express  or  implied  understanding, 
the  argument  seems  to  be  plain  against  the  doctrine  asserted  by 
the  court  of  Illinois. 

Drawer  is  Discharged 

(e)  Our  view  has  the  authority  of  the  New  York  Court  of  Ap- 
peals, which  says  that,  so  far  as  the  drawer  of  the  check  is  concerned, 
certification  is  "  precisely  as  if  the  bank  had  paid  the  money 
upon  that  check,  instead  of  making  a  certificate  of  its  being  good  "  ; 
also,  further,  that  "  the  law  will  not  permit  a  check  when  due  to  be 
thus  presented,  and  the  money  to  be  left  with  the  bank  for  the 
accommodation  of  the  holder,  without  discharging  the  drawer."  ^ 

"  The  bank  virtually  says,  That  check  is  good ;  we  have  the 
money  of  the  drawer  here  ready  to  pay  it.  We  will  pay  it  now 
if  you  will  receive  it.  The  holder  says,  No,  I  will  not  take  the 
money ;  you  may  certify  the  check  and  retain  the  money  for  me 
until  this  check  is  presented.  The  law  will  not  permit  a  check, 
7  First  National  Bank  of  Jersey  City  v.  Leach,  52  N.  Y.  350. 
742 


EFFECT   OF   CERTIFICATION    AFTER   ISSUE  §  414 

when  due,  to  be  thus  presented,  and  the  money  to  be  left  with  the 
bank  for  the  accommodation  of  the  holder  without  discharging  the 
drawer.  The  money  being  due  and  the  check  presented,  it  is  his 
own  fault  if  the  holder  declines  to  receive  the  pay,  and  for  his  own 
convenience  has  the  money  appropriated  to  that  check  subject 
to  its  future  presentment  at  any  time  within  the  Statute  of  Limita- 
tions." 8 

Equal  to  Certificate  of  Deposit 

"  Ordinarily,  where  the  payee  or  holder  of  a  check  which  is 
payable  immediately,  instead  of  demanding  payment,  procures 
the  check  to  be  certified,  the  check  is,  as  between  the  drawer  and 
holder,  regarded  as  paid,  and  the  holder  must  look  to  the  bank 
whose  obligation  it  has  accepted  in  lieu  of  the  money ;  because, 
by  procuring  the  certification,  he  has  caused  an  amount  of  the 
drawer's  fund,  or  credit,  equal  to  that  for  which  the  check  was 
drawn,  to  be  set  apart  for  the  payment  of  that  check  and  with- 
drawn from  the  control  of  the  drawer,^"  and  his  funds  are  as  effect- 
ually diminished  as  if  the  money  had  been  paid  ;  ^^  while  the  bank 
has  given  a  negotiable  obligation  to  the  holder  of  the  check  which  is 
equivalent  to  a  certificate  of  deposit.^"  If  the  holder  of  the  cer- 
tified check  should  lose  it,  he  would  still  have  his  remedy  upon  it 
against  the  bank,  but  could  not  have  recourse  against  the  drawer 
whose  funds  had  been  locked  up,  or  transferred  to  the  credit  of 
another  party.  And  even  the  subsequent  pajment  of  the  check 
by  the  bank  upon  a  forged  indorsement  would  not  relieve  it  of  its 
liability  upon  the  contract  it  had  made  with  the  true  owner,  nor 

8  First  National  Bank  v.  Leach,  52  N.  Y.  353. 

The  drawer  is  not  discharged  when  he  procures  the  certification  and 
the  payee  does  not  assent  thereto.  Cullinan  i-.  Union  Surety  etc.  Co., 
79  App.  Div.  409  (1903),  80  N.  Y.  S.  58. 

^  The  drawer  woukl  have  no  authority  to  revoke  payment.  Blake  i*. 
Hamilton  etc.  Bank,  79  Ohio  St.  189,  87  N.  E.  73  (1908). 

8*  Central  Guarantee  etc.  Co.  v.  White,  206  Pa.  St.  611,  56  Atl.  76 
(1903);  First  National  Bank  v.  Currie,  147  Mich.  110  N.  W.  499,  118 
Am.  St.  Rep.  537.  9  L.  R.  A.  (x.  s.)  698,  n.  (1907). 

s-^  Smith  V.  Field,  19  Idaho  558,  114  Pac.  668,  1912C  Ann.  Cas.  354, 
n. ;  Seheffenaeker  v.  Hoopes,  113  Md.  Ill,  77  Atl.  130,  29  L.  R.  A.  (x.  s.) 
205,  n.  (1910). 

A  certification  of  a  check  is  equivalent  to  its  acceptance.  Meuer  v. 
Phenix  National  Bank,  87  App.  Div.  281  (1903);  id. ,94  App.  Div.  331 
(1904),  88  N.  Y.  S.  83,  affirmed  in  183  N.  Y.  551,  76  N.  E.  1100.  Smith 
V.  Field,  19  Idaho  558,  114  Pac.  668,  1912C  Ann.  Cas.  .354,  n.  But  an 
acceptance  is  not  equivalent  to  a  certification.  Milmo  National  Bank  v. 
Cobbs,  53  Tex.  Civ.  App.  1,  115  S.  W.  345  (1908). 

743 


I  414  ACCEPTANCE   AND   CERTIFICATION 

restore  to  the  drawer  the  right  to  draw  upon  the  bank  for  the  funds 
which  had  been  appropriated  to  the  payment  of  the  check  and  were 
consequently  no  longer  his."  ^ 

Certified  Check  Stolen 

Where  a  certified  check  is  stolen,  and  notice  is  given  of  its  loss, 
or  the  check  is  advertised,  still  a  bona  fide  holder  can  recover  upon 
it  from  the  bank.^° 

(/)  Chief  Justice  Oakley  said  :  "  When  the  business  of  the  bank 
is  properly  conducted,  it  is  the  duty  of  the  officer  certifying  the 
check  to  cause  it  to  be  immediately  charged  as  paid  to  the  account 
of  the  drawer ;  and  when  this  is  done,  the  sum  thus  charged  will 
remain  as  a  deposit  in  the  bank  to  the  credit  of  the  check,  and  be 
forever  withdrawn  from  the  control  of  the  maker,  except  as  a 
holder  of  the  check.  Such  a  deposit  stands  upon  exactly  the  same 
grounds  as  any  other,""  except  of  course  the  check-holder  cannot 
draw  against  it  in  parts.  A  certified  check  has  a  distinctive  char- 
acter, as  a  species  of  commercial  paper,  the  certification  constitut- 
ing a  new  contract  between  the  holder  and  the  certifying  bank; 
the  funds  of  the  drawer  are,  in  legal  contemplation,  withdrawn 
from  his  credit,  and  appropriated  to  the  payment  of  the  check, 
and  the  bank  becomes  the  debtor  of  the  holder,  as  for  money  had 
and  received. ^2  As  to  the  drawer  and  indorsers,  if  there  are  any, 
the  certification  is  a  payment  of  the  check,  and  they  are  no  longer 
liable  upon  it.^^ 

(g)  A  California  case  is,  by  analogy,  authority  to  the  same  effect ; 
wherein  it  was  held  that  the  payee,  having  presented  the  check  for 
payment,  which  was  offered,  but  having  then  decided  to  leave  the 
money  in  the  bank  for  his  own  convenience  a  few  hours  longer,  the 
drawer  was  discharged,  though  upon  the  second  demand  for  pay- 
ment, made  by  the  payee  on  the  same  day,  payment  was  refused 
by  reason  of  the  failure  of  the  bank.^^ 

9  Thomson  v.  Bank,  82  N.  Y.  6. 

10  Nolan  v.  Bank,  67  Barb.  (N.  Y.)  24. 

11  Willetts  V.  Phoenix  Bank,  2  Duer  (N.  Y.)  121. 

12  National  Commercial  Bank  v.  Miller,  77  Ala.  168;  Merchants'  Bank 
V.  Baird,  160  Fed.  642  (1908) ;  First  National  Bank  v.  Currie,  147  Mich. 
72,  110  N.  W.  499,  118  Am.  St.  Rep.  537,  9  L.  R.  A.  (n.  s.)  698,  n.  (1907). 

13  Simpson  v.  Pacific  Mutual  Life  Ins.  Co.,  44  Cal.  139. 


744 


EFFECT    OF   CERTIFICATION    AFTER   ISSUE  §  414 

Check  Becomes  a  Promise  to  Pay 

By  the  acceptance  or  certification  of  the  check,  a  new  and  specific 
engagement  is  entered  into  by  the  bank  witli  the  holder  and  his 
legal  transferees.  This  engagement  is  simply  and  unconditionally 
to  pay  to  him  or  them  the  sum  named  in  the  check  on  demand. ^^ 
The  check  ceases  in  fact  to  be  a  check,  and  becomes  a  promise  to 
pay.  Accordingly,  the  rules  which  govern  a  check  no  longer 
govern  this  instrument. 

"  There  is  no  difference  between  the  liability  created  by  a 
certified  check  and  by  a  note  of  the  bank  payable  on  demand. 
Each  is  intended  to  circulate  as  money.  The  object  is  to  enable 
the  holder  to  use  the  check  as  money.  By  certifying,  the  bank 
meant  to  give  the  check  a  currency  and  value  that  would  not  other- 
wise belong  to  it,  and  this  additional  value  can  only  be  given  by 
holding  the  certificate  to  be  an  unconditional  promise  of  pay- 
ment." ^^ 

What  Certification  Admits 

(h)  Certification  admits  the  genuineness  of  the  drawer's  signa- 
ture, and  the  fact  that  there  are  sufficient  funds.^*^  The  rule  has 
been  laid  down  in  New  York  and  Pennsylvania,  that  by  the  act  of 

1^  Girard  Bank  v.  Bank  of  Penn  Township,  39  Pa.  St.  92 ;  Farmers  & 
Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  4  Duer  (N.  Y.)  219; 
16  N.  Y.  125  ;  Meads  v.  Merchants'  Bank  of  Albany,  25  N.  Y.  143 ;  Shars- 
wood's  note  to  Byles  on  Bills,  p.  21  (Sharswood's  ed.) ;  Barnes  v.  Ontario 
Bank,  19  N.  Y.  1.52;  Biekford  v.  Plrst  National  Bank  of  Chicago,  42 
111.  238;  First  National  Bank  v.  Currie,  147  Mich.  72,  110  N.  W.  499,  118 
Am.  St.  Rep.  537,  9  L.  R.  A.  (n.  s.)  698,  n.  (1907) ;  State  v.  Miller.  47 
Or.  562,  85  Pac.  81  (1906) ;  Meuer  v.  Phenix  National  Bank,  94  App.  Div. 
331  (1904),  88  N.  Y.  S.  8,3. 

15  In  substance,  Biekford  v.  First  National  Bank,  42  111.  243. 

16  Merchants'  Bank  v.  State  Bank,  10  Wall.  604,  19  L.  ed.  1008 ;  Espy 
V.  Bank,  18  Wall.  604,  21  L.  ed.  947 ;  Phoenix  Bank  r.  Bank  of  America, 
1  N.  Y.  Leg.  Obs.  26;  Marine  National  Bank  v.  National  Citv  Bank, 
59  N.  Y.  77  ;  Rapp  v.  National  Bank,  136  Pa.  St.  426,  20  Atl.  .508  ;  Milnio 
National  Bank  v.  Cobbs,  53  Tex.  Civ.  App.  1,  115  S.  W.  345  (1908); 
Continental  National  Bank  v.  Metropolitan  National  Bank,  107  111.  App. 
455  (1903);  Bank  of  Ind.  T.  v.  First  National  Bank,  109  Mo.  App. 
665,  83  S.  W.  537  (1904);  Blake  i-.  Hamilton  etc.  Bank,  79  Ohio  St. 
189.  87  N.  E.  73  (1908) ;  Jackson  Paper  Mfg.  Co.  v.  Commercial  National 
Bank,  199  111.  151,  65  N.  E.  136,  93  Am.  St.  Rep.  113,  59  L.  R.  A.  ().57 
(1902) ;  Robinett  v.  Willow  Springs  Bank,  178  Mo.  App.  422,  163  S.  W. 
248  (1914) ;  Security  State  Bank  r.  Brantford  State  Bank,  31  N.  D.  460, 
154  N.  W.  284  (1915) ;  First  National  Bank  r.  Ravenswood  Bank.  141  Ky. 
671,  133  S.  W.  581  (1911);  First  National  Bank  v.  Union  Trust  Co., 
158  Mich.  94,  122  N.  W.  547,  133  Am.  St.  Rep.  362  (1909). 

745 


§  414  ACCEPTANCE   AND   CERTIFICATION 

certification  the  bank  undertakes  for  only  two  facts;  viz.,  the 
genuineness  of  the  drawer's  signature,  and  the  sufficiency  of  his 
account  to  meet  this  demand  ;  that  it  vouches  for  nothing  further, 
either  in  the  body  of  the  check  or  indorsed  upon  it.^^  The  Supreme 
Court  of  the  United  States  has  adopted  the  same  principle  in  the 
case  of  a  check  only  verbally  declared  to  be  good,  in  response  to 
the  payee's  inquiry  put  to  the  teller;  but  at  the  same  time  ad- 
mitted that  there  might  be  some  doubt  as  to  extending  the  rule 
to  cover  a  case  where  the  bank  had  certified  the  check  in  writing, 
and  so  sent  it  forth  upon  the  market  to  circulate  virtually  like 
money  or  a  certificate  of  deposit.^^ 

Evidence  of  Usage 

{{)  No  evidence  of  usage  among  banks  and  merchants  to  regard 
certification  as  an  obligation  to  pay  although  the  body  of  the 
instrument  is  forged,  will  be  admitted.^^  But  in  Louisiana  a  bank 
was  not  allowed  to  recover  money  paid  upon  a  check  raised  before 
certification.^*^ 

Bank  must  not  Cause  Damage  by  Failure  to  Disclose  the  Facts 
in  its  Possession  to  an  Inquirer 

(j)  But  the  ordinary  rules  limiting  the  warrant  of  a  certification 
to  signature  and  funds  only  apply  when  the  bank  has  no  knowledge 
of  the  history  of  the  instrument,  and  of  the  facts  connected  with 
the  drawing,  delivery,  indorsement,  etc.  When  a  certified  check 
is  presented  for  information,  if  the  bank  possesses  special  knowl- 
edge it  is  under  the  same  obligation  to  disclose  it  as  a  natural 
person,  when  omission  would  cause  injury  to  the  applicant,  who 
evidently  intends  to  act  on  the  reply  of  the  bank.^^ 

The  F.  Bank  certified  a  draft  payable  there.  T.,  a  holder  for 
value,  paid  the  draft  to  the  F.  in  settlement  of  a  balance,  but  the 
F.  refused  it,  saying  that  the  C.  Bank,  which  had  presented  the 
draft  for  certification,  was  then  and  had  been  for  several  days 
owing  the  F.,  and  was  insolvent.     Held,  that  the  F.  was  bound  to 

1^  Marine  National  Bank  v.  National  City  Bank,  59  N.  Y.  67,  stated 
post;  Rapp  v.  National  Bank,  136  Pa.  St.  426.  See  Continental  National 
Bank  v.  Tradesmen's  National  Bank,  173  N.  Y.  272,  65  N.  E.  1108  (1903). 

18  Espy  V.  Bank  of  Cincinnati,  18  Wall.  604,  21  L.  ed.  947. 

19  Security  Bank  v.  National  Bank,  67  N.  Y.  458. 

20  Louisiana  National  Bank  v.  Citizens'  Bank,  28  La.  Ann.  189. 

21  Clews  V.  Bank  of  New  York  National  Banking  Association,  89  N.  Y. 
418. 

746 


EFFECT    OF   CERTIFICATION    AFTER   ISSUE  §  414 

receive  the  certified  draft."  But  in  the  Court  of  Appeals  it  was 
held  that  T.  was  not  a  holder  without  notice.  The  facts  were, 
that  by  custom  of  the  banks  of  Rochester  negotiable  paper  held 
by  a  bank  payable  at  another  is  certified,  and  returned  as  an  item 
of  credit  in  its  exchange  account,  and  not  as  a  negotiable  instru- 
ment. On  December  19,  the  C.  Bank  received  from  the  F.  Bank  a 
certified  draft  for  SSOO,  which  by  custom  the  C.  was  entitled  to 
have  credited  in  its  exchange  settlement  with  the  plaintiff  on  the 
following  morning.  The  same  day  C.  transferred  said  draft  to 
the  defendant  in  settlement  of  its  exchange  account  with  the  latter. 
December  20,  there  was  a  balance  due,  after  deducting  the  SSOO 
draft,  in  favor  of  the  plaintiff  against  the  C,  which  was  then  in- 
solvent. In  settling  the  account  between  plaintiff  and  defendant, 
defendant  claimed  credit  for  the  draft.  It  appeared  that  defendant 
at  time  of  receiving  draft  knew  there  was  an  exchange  account 
between  the  plaintiff  and  the  C.  Bank,  and  had  notice  that  the  cer- 
tification was  not  for  purposes  of  negotiation,  but  only  as  a  voucher, 
and  so  was  not  a  holder  for  value  without  notice  ;  for  the  defendant 
did  have  notice  that  the  draft  had  been  perverted  from  the  pur- 
poses for  which  it  was  certified.  Held,  that  such  receipt  of  the 
draft  by  defendant  did  not  entitle  it  to  the  rights  of  negotiable 
paper,  and  that  under  the  circumstances  defendant  could  not  set 
off'  such  draft  against  plaintiff's  exchange  account. 

Drawer  Discharged 

(k)  Acceptance  of  certification  of  a  check  instead  of  payment 
releases  the  drawer,  and  renders  the  collecting  bank  responsible 
to  the  owner  for  the  amount.  The  law  presumes  damages  to  the 
OAATier ;  and  this  whether  or  not  the  bank  on  which  the  check  was 
drawn  has  the  funds  to  pay  it  when  presented.-^ 

(/)  It  is  clear,  in  any  way  we  look  at  the  question,  that  the  drawer 
is  discharged  by  certification  after  issue.  Suppose  the  bank  be- 
comes insolvent,  it  is  clearly  unjust  to  hold  the  drawer  when  the 

22  Flour  Citv  National  Bank  v.  Traders'  National  Bank,  35  Hun  (N.  Y.) 
241,  105  N.  Y.'  550.  12  N.  E.  55  (1887). 

23  Essex  County  National  Bank  r.  Bank  of  Montreal,  7  Biss.  193  (1876) ; 
Continental  National  Bank  v.  Cornhauser,  37  111.  App.  475 ;  Times  Square 
Automobile  Co.  v.  Rutherford  National  Bank,  77  N.  J.  L.  649.  73  Atl. 
479,  134  Am.  St.  Rep.  811  (1909);  First  National  Bank  r.  Currie,  147 
Mich.  72,  110  N.  W.  499,  118  Am.  St.  Rep.  537,  9  L.  R.  A.  (n.  s.)  698, 
n.  (1907) ;  Scheffenaeker  v.  Hoopes,  113  Md.  Ill,  77  Atl.  130,  29  L.  R.  A. 
(n.  s.)  205,  n.  (1910). 

747 


§  414  ACCEPTANCE   AND   CERTIFICATION 

payee  could  have  had  the  money  and  chose  to  leave  it  and  take 
the  certification ;  and  besides,  the  ordinary  rule  of  delay  in  pre- 
sentment for  payment  would  discharge  the  drawer.  If,  on  the 
other  hand,  the  bank  is  solvent,  where  is  the  use  of  two  actions,  one 
by  the  holder  against  the  drawer,  and  another  by  the  drawer  against 
the  bank,  w^hen  a  single  action  against  the  bank  by  the  holder 
will  accomplish  full  justice  ? 

It  will  not  do  to  say  that  a  check  is  a  bill  of  exchange,  and  there- 
fore the  holder  can  sue  the  drawer  if  it  is  dishonored  after  acceptance. 
The  same  argument  would  prove  that  a  check  could  be  presented 
a  day  later  by  collecting  through  a  banker  than  by  direct  collection, 
and  that  the  drawer  of  a  check  is  absolutely  discharged  by  laches. 
Such  reasoning  would  convince  us  of  almost  anything ;  for  example, 
as  a  man  is  an  animal,  he  must  have  four  legs,  since  other  animals 
have. 

(m)  The  certification  of  a  check  will  not  give  the  holder  a 
preference  over  other  creditors  upon  insolvency  of  the  bank.^^ 

§  415.  Certification  before  Issue  does  not  at  once  discharge  the 
Drawer.^  —  Until  the  certified  check  is  issued,  the  fund  cannot 
be  withdrawn  from  the  reach  of  a  garnishee  or  attachment  against 
the  depositor."  If  it  were  otherwise,  a  depositor  could  cut  off 
completely  all  rights  of  attachment  by  making  out  checks  to  cover 
his  deposit  and  retaining  them  in  his  possession.  It  is  clear  that 
the  control  and  ownership  of  the  deposit  are  still  in  the  drawer  until 
the  check  is  issued,  and  that  an  attachment  against  it  before  the 
check  comes  into  the  hands  of  a  bona  fide  holder  will  secure  the 
funds.  Of  course,  then,  when  a  holder  receives  a  check  from  the 
drawer  certified  before  delivery,  the  drawer's  liability  to  the  holder 
cannot  cease  until  the  bank  has  been  properly  notified  of  the  issue 
of  the  check. 

It  will  doubtless  be  held,  whenever  the  question  arises,  that  a 
check  certified  before  delivery  from  the  drawer  is  taken  on  the  faith 

2"  People  V.  St.  Nicholas  Bank,  77  Hun  (N.  Y.)  159. 

1  §  415.  First  National  Bank  v.  Leach,  .52  N.  Y.  350  ;  Essex  National 
Bank  v.  Bank  of  Montreal,  7  Biss.  193 ;  Times  Square  Automobile  Co.  v. 
Rutherford  National  Bank,  77  N.  J.  L.  649,  73  Atl.  479,  134  Am.  St.  Rep. 
811  (1909) ;  Blake  v.  Hamilton  Dime  Sav.  Bank,  79  Ohio  St.  189,  87  N.  E. 
73,  128  Am.  St.  Rep.  684,  n.,  20  L.  R.  A.  (n.  s.)  290  (1908)  ;  Davenport  v. 
Palmer,  1.52  App.  Div.  761  (1912),  137  N.  Y.  S.  796.  Daniel  on  Neg. 
Inst.,  §  1601. 

2  Gibson  v.  National  Park  Bank,  98  N.  Y.  87 ;  Born  v.  Bank,  123  Ind. 
78,  24  N.  E.  173 ;  Continental  National  Bank  v.  Cornhauser,  37  111.  App. 
475;   Oyster  and  Fish  Co.  v.  Bank,  51  Ohio  St.  106. 

748 


BEFORE    ISSUE  §  415 

of  the  drawer  until  notice  to  the  bank,  or  its  acknowledgment  of  the 
correctness  of  the  acceptance  and  its  continued  liability  upon  it. 

These  distinctions,  we  think,  will  disclose  the  real  force  of  the 
Illinois  cases.  In  them  the  certification  was  before  deUvery,  and 
upon  the  facts  the  decision  was  perfectly  just  and  proper,  although 
tlie  language  of  the  judges  was  broader  than  the  truth,  and  the 
judgment  was  filigreed  with  false  ornament. 

Suppose  again  that  the  drawer  has  his  check  certified,  and 
afterward  issues  it  to  H.,  but  before  the  issue,  or  before  H.  can 
with  reasonable  diligence  present  the  check  for  payment,  the  bank 
fails ;  ^  it  is  probable  that  in  such  case  the  drawer  would  not  be 
held  to  be  released  by  any  court.  The  case  differs  from  those  in 
which  the  drawer  is  held  discharged,  in  the  essential  point,  that 

3  A  decision  by  Judge  Walker,  in  the  latter  part  of  1887,  in  the  case  of 
the  First  National  Bank  v.  Born,  presents  the  point  made  in  the  text. 
On  Saturday,  Born  drew  a  check  on  Ritzinger's  Bank  in  favor  of  the 
First  National  Bank,  and  had  it  certified.  iVfterward  at  three  o'clock 
(close  of  banking  hours)  he  delivered  the  check  to  the  First  National 
Bank,  in  payment  of  a  collection  held  by  it  against  him.  On  Monday 
the  payee  presented  the  check  to  Ritzinger's  Bank,  and  demanded  pay- 
ment. Payment  was  refused,  Ritzinger's  Bank  having  closed  its  doors 
on  the  preceding  Saturday,  and  never  opened  them  after  that  day.  Born 
was  duly  notified.  After  thorough  consideration,  the  court  held  that  the 
drawer  was  not  discharged. 

In  every  case  where  that  effect  followed  certification,  it  was  clear  upon 
the  facts  that  any  other  rule  would  have  enabled  the  holder  by  his  own 
sole  act  to  enlarge  the  drawer's  liabiUty.  In  every  such  ease  the  holder 
could  have  obtained  the  money,  but  by  his  own  wish  and  act,  and  with- 
out the  consent  or  agreement  of  the  drawer,  chose  to  have  the  check 
certified.  But  when  the  drawer  liimself  secures  the  certification,  the 
case  is  different. 

The  holder  of  a  check  ought  to  have  time  to  get  to  the  bank,  and  an 
opportunity  to  receive  his  money  before  he  can  be  said  to  have  done  an 
act  to  discharge  the  party  giving  him  the  order.  "Besides,  it  is  not  true 
that  the  drawer  of  the  check  so  certified  has  put  the  money  beyond  his 
control  or  recovery  by  legal  means"  (this  Avas  the  argument  of  counsel). 
"  It  is  only  when  the  holder  is  not  the  drawer  that  sucli  is  the  case.  The 
money  is  thus  appropriated,  not  to  pay  any  particular  person,  but  to  pay 
a  particular  check.  So  the  drawer  can  get  it  certified  and  carry  it  as  long 
as  he  wants  to,  and  return  it  to  the  bank,  present  it  like  any  other  holder, 
and  receive  his  money,  or  sue  to  recover  it." 

Checks  certified  before  delivery  do  not  lose,  as  to  the  drawer,  any  of 
the  characteristics  of  uncertified  checks.  "Nor  do  they  impose  any 
greater  diligence  upon  the  holder,  who  has  the  same  time  in  which  to 
present  them  as  if  they  were  uncertified.  The  only  effect  of  the  certifi- 
cation is  to  give  the  check  additional  currency  by  carrying  with  it  the 
evidence  that  it  was  drawn  in  good  faith  on  funds  sufficient  to  meet  its 
payment,  and  lending  to  it  the  credit  of  the  bank  in  addition  to  the  credit 
of  the  drawer." 

749 


§  415  ACCEPTANCE   AND   CERTIFICATION 

the  holder  could  have  received  the  money,  but  chose  to  leave  it 
in  the  bank,  making  the  transaction  equivalent  to  payment  and 
subsequent  deposit.  Here  the  holder  never  had  the  opportunity 
of  receiving  the  cash ;  he  took  the  paper  just  as  he  would  take  the 
note  of  a  third  person ;  if  properly  presented  and  the  maker  was 
insolvent,  the  indorser  would  have  to  make  the  amount  good ; 
but  if  properly  presented  and  the  maker  said  he  could  have  the 
money  and  the  holder  said  no,  he  would  leave  it  with  the  maker, 
then  surely,  whether  the  paper  be  note,  check,  bill,  or  what  not, 
the  indorser  or  drawer  would  have  nothing  to  do  with  the  matter 
thereafter.  And  the  case  also  differs  from  that  of  payment  in 
bank  bills,  for  here  the  paper  carries  on  its  face  proof  as  to  who  is 
liable,  if  any  one  is,  while  an  equal  certainty  cannot  be  attained 
in  the  case  of  bank  bills  without  embarrassing  commerce. 

Indorsee  of  Certified  Check  Holds  Indorser 

The  drawer  who  has  a  check  certified  before  delivery  stands  in 
the  same  position  as  an  indorser  of  a  certified  check,  and  it  is 
settled  that  such  indorser  can  be  held  by  the  indorsee.'' 

In  Tennessee  we  have  a  decision,  in  1872,  that  the  drawer  who 
has  a  check  certified  before  delivery  is  liable  to  the  holder,  as  well 
as  the  bank.  (§  416.)  And  though  the  language  is  sweeping,  it 
should  be  limited,  both  in  this  and  in  the  Illinois  cases,  to  the  facts 
present  to  the  mind  of  the  judge. 

§  416.    Presentment  to  hold   Drawer.  —  To  render  the  drawer 

liable  on  a  check  that  has  been  certified  (before  issue),  the  holder 

must  present  it  within  the  business  hours  of  the  day  following  its 

receipt.     "  We  have  been  referred  to  no  authority,  nor  are  we 

aware  of  any,  in  which  it  is  held  that  the  fact  of  certification  of  a 

check  either  discharges  the  drawer  absolutely  from  liability  to  the 

holder,  or  changes  the  law  of  demand  and  notice  which  governs  the 

relation  between  the  holder  and  drawer.  ...     It  is  no  doubt  true 

that  the  credit  of  the  check  may  rest  mainly  on  the  fact  that  the 

bank  is  primarily  liable,  but  it  is  made  stronger  by  the  fact  that  the 

drawer  stands  as  surety  for  the  bank.  ...     It  is  still  a  check,  and 

because  of  its  certification  and  thereby  of  the  bank's  promise  to 

pay  it,  its  approximation  to  money  and  its  negotiability  in  market 

are  increased."  ^ 

4  Mutual  Bank  v.  Rotgre,  28  La.  Ann.  933. 

1  §  416.     Andrews  v.  German   National    Bank,  9  Heisk.   (Tenn.)  211 
(1872) ;   Sehoolfield  v.  Moon,  9  Heisk.  (Tenn.)  171.     But  see  below. 

750 


THE  STATUTE  OF  LIMITATIONS  §  418 

Drawer  Discharged  Doubly 

A  check  was  presented  four  years  after  certification,  and  pay- 
ment refused.  The  court  held  the  bank  bound  to  pay  without 
regard  to  the  drawer's  account,  and  that  the  drawer  was  discharged 
from  habiUty  both  on  the  check  and  on  the  original  consideration.- 

§  417.  Attachment  of  Deposit  that  is  covered  by  Certified 
Check. — A  railroad  comi)any  obtained  from  a  bank  a  certified 
check  for  the  amount  of  its  deposit,  payable  to  the  order  of  its 
treasurer,  and,  while  it  was  outstanding,  a  creditor  of  the  company 
in  a  suit  against  the  company  served  a  warrant  of  attachment 
upon  the  bank.  The  company's  treasurer  afterwards  deposited 
the  check  to  his  individual  account,  and  drew  against  it  from  time 
to  time  to  pay  the  debts  of  the  company.  The  bank  had  reason 
to  believe  that  the  check  was  owned  by  the  company,  and  that  the 
money  was  used  to  pay  its  debts,  as  was  really  the  case.  It  was 
therefore  held  that  the  bank  was  liable  for  allowing  the  funds  be- 
longing to  the  company  to  escape  from  the  grip  of  the  attachment.^ 

§  41S.  The  Statute  of  Limitations. — The  Statute  of  Limi- 
tations only  begins  to  run  against  the  liability  of  the  bank  at  the 
time  when  demand  for  payment  is  made.^  The  rule  is  thus  laid 
down  in  the  case  cited,  but  it  is  probable  that  if  any  tribunal 
inclined  to  hold,  in  the  case  of  any  ordinary  deposit  account,  that 
the  statute  began  to  run  in  favor  of  the  bank  from  the  date  of  the 
last  transaction  between  it  and  the  depositor,  analogy  would  lead 
the  same  bench  to  declare  that  the  statute  would  begin  to  run 
against  the  holder  of  a  certified  or  accepted  check  from  the  date 
of  the  bank's  promise  upon  it.  This  may  be  directly  inferred 
also  from  the  language  of  the  court  in  the  case  of  the  Farmers  and 
Mechanics'  Bank  v.  Butchers  and  Drovers'  Bank,  cited  below. 
The  check  itself  is,  in  its  new  form,  strictly  "  evidence  of  a  deposit 
to  the  credit  of  the  holder."  ^  All  the  rules  about  presentment  for 
payment  at  once  fall  to  the  ground.  The  holder  need  no  longer 
regard  the  condition  of  the  drawer's  account  or  balance  with  the 
bank.  The  bank  is  bound  to  withhold  enough  from  the  depositor's 
funds  to  meet  the  demand  of  the  holder  whenever  it  may  be  made. 

^  French  v.  Irwin,  4  Baxter  (Tenn.)  401  (1874). 

1  §  417.  Gibson  v.  National  Park  Bank,  98  N.  Y.  87.  See  conlray 
Bills  V.  National  Park  Bank,  47  N.  Y.  Superior  Court  302. 

1  §  418.     Girarcl  Bank  v.  Bank  of  Penn  Township,  80  Pa.  St.  92. 

2  Farmers  &  Mechanies'  Bank  v.  Butchers  &  Drovers'  Bank,  4  Duer 
(N.  Y.)  219;   16  N.  Y.  12,^). 

751 


§  418  ACCEPTANCE   AND   CERTIFICATION 

No  lapse  of  time  before  making  the  demand,  unless  it  should  be 
held  that  the  Statute  of  Limitations  had  run,  is  laches  upon  the 
part  of  the  holder,  or  infringes  his  rights  against  the  bank  on  the 
bank's  duty  towards  him.  If  in  the  interval,  no  matter  how  long 
it  be,  the  bank  has  allowed  the  drawer  by  his  checks  or  otherwise 
to  reduce  his  balance,  or  even  wholly  to  withdraw  it,  yet  the  bank 
remains  primarily  liable  on  its  original  contract.  It  must  make 
up  any  deficit  from  its  own  funds.  Even  if  at  the  time  of  accept- 
ance there  were  not  funds  of  the  drawer  sufficient  to  meet  the  check, 
the  bank  must  still  keep  its  promise.  Delay  of  two  months  and 
withdrawal  of  the  drawer's  funds  in  the  interval,^  and  again  delay 
of  one  year,'*  were  held  not  to  impair  at  all  the  liability  of  the  bank. 
Far  the  strongest  case  that  has  arisen  is  that  of  the  Girard  Bank 
v.  Bank  of  Penn  Township,^  where  the  check  was  certified  Oct. 
7,  1852 ;  the  drawer's  funds  were  not  drawn  out  until  Oct.  10, 
1854 ;  and  the  check  was  not  presented  for  payment  till  Sept.  3, 
1859.  But  the  period  of  the  Statute  of  Limitations  had  not  elapsed 
since  the  certification,  even  if  it  could  have  begun  to  run  at  all 
prior  to  the  demand,  and  the  court  did  not  hesitate  to  hold  the 
bank  liable. 

Form.      Usage  must  Govern 

This  doctrine  seems  simple  enough.  Yet  the  number  of  cases 
in  which  it  has  been  questioned  by  counsel,  and  reiterated  by  the 
court,  intimates  a  lurking  belief  in  the  existence  of  some  theory 
which  runs  counter  to  it,  and  which  is  sufficiently  sound  to  expect 
judicial  support.  This  is  doubtless  to  be  sought  in  the  form  or 
phraseology  by  which  it  is  customary  for  the  bank  to  accept  or 
certify  the  check.  This  is  not  ordinarily  done  by  writing  any 
distinct  words  indicative  in  terms  of  a  promise  or  undertaking  to 
pay,  but  simply  by  writing  on  the  check,  in  the  handwriting  of  the 
officer  competent  to  enter  into  the  contract  on  behalf  of  the  bank, 
the  word  "  Good."  Sometimes  the  officer  adds  to  this  his  own 
initials.  Sometimes  he  writes  his  own  name  or  initials  without  any- 
thing more.  Other  methods  may  be  in  use  in  various  places.  In 
England,  until  a  statute  was  lately  passed  requiring  words  im- 
porting a  distinct  promise  to  be  written  and  signed,  a  simple 
mark,  not  being  a  word  at  all,  or  otherwise  intrinsically  intelligible, 

3  Willetts  V.  The  Phoenix  Bank,  2  Duer  (N.  Y.)  121. 
*  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  4  Duer 
(N.  Y.)  219;    16  N.  Y.  125. 
5  39  Pa.  St.  92. 

752 


THE    STATUTE    OF    LIMITATIONS  §  418 

was  often  placed  upon  the  checks.®  They  are  called  in  the  English 
cases  "  marked  checks."  It  seemed  therefore  not  wholly  inapt  to 
argue  that  these  words,  initials,  or  marks,  at  the  very  most,  pur- 
ported only  to  be  memoranda  or  notes  showing  the  presentment 
of  the  check,  and  the  fact  that  at  the  time  of  presentment  no  ob- 
stacle stood  in  the  way  of  payment  by  the  bank.  In  other  words, 
they  signified  that  at  that  time  the  drawer's  balance  was  goo<l  for 
the  amount  of  the  check.  They  conveyed  information,  but  not 
a  promise.  More  meaning,  it  was  considered,  could  not  be  intro- 
duced into  them  ;  they  certainly  did  not  state  a  promise,  and  it  was 
too  much  to  let  unintelligible  letters  or  words  create  a  binding 
obligation  to  pay  large  sums  of  money,  for  which  no  consideration 
from  the  promisee  had  ever  been  received  by  the  promisor.  Neither 
could  they  be  WTenche<l  into  promising  that  the  bank  would  con- 
tinue to  keep  the  drawer's  balance  good  for  this  amount,  for  the 
sole  benefit  of  this  holder,  for  any  indefinite  period  that  he  might 
choose  to  keep  the  check  out.  To  these  arguments  the  only 
answer  was  that  the  words,  initials,  or  marks  were  to  be  construed 
by  the  light  of  the  well-known  usage  of  business ;  and  being  thus 
construed  there  could  be  no  question  that  they  were  designed, and 
were  always  clearly  understood  by  all  parties  concerned,  to  be  a 
perfected  contract  on  the  part  of  the  bank.  It  was  not  pretended 
that  they  were  WTitten  without  any  object  whatsoever,  that  they 
meant  absolutely  nothing.  Yet  among  them  all  the  word  "  Good 
was  the  only  word  or  mark  which  could  possibly  have  any  indepen- 
dent meaning ;  and  of  that  the  meaning  was  doubtful.  Since, 
therefore,  extrinsic  facts  and  banking  usage  must  be  introduced  to 
explain  them,  why  not  let  it  really  and  thoroughly  explain  them, 
and  not  merely  go  through  a  false  pretence  of  doing  so?  They 
were  a  brief  symbol,  well  understood  by  all  the  business  world  to 
signify,  and  ordinarily  accepted  as  identical  with,  an  elaborate 
promise.  The  argument  in  favor  of  the  banks  was  only  plausible  ; 
the  reply  was  incontrovertible.^  "  The  bank,  instead  of  being 
prejudiced,  is  benefited  by  the  delay  of  its  owner  in  calling  ft>r  its 
payment,  and  can  with  no  more  propriety  impute  laches  to  the 
unknown  holder  of  the  check  than  to  a  known  holder  of  an  ordinary 
deposit.  .  .  .    There  is  in  reality,  in  good  sense,  no  distinction  in 

8  Grant  on  Bankers  and  Banking,  p.  5()  el  seq.,  and  cases  cited ;  espe- 
cially Robson  V.  Bennett,  2  Taunt.  :^S ;  Stevens  v.  Hill,  5  Esp.  2A7. 
For  the  present  law  in  England,  see  Dufaur  v.  Oxenden,  1  M.  &  Rob.  DO; 
Corlett  V.  Conway.  .')  M.  &  W.  ().')."). 

^  Willetts  V.  TJie  Phoenix  Bank,  2  Duer  (N.  Y.)  121. 

VOL.  1  —  48  753 


§  418  ACCEPTANCE   AND   CERTIFICATION 

the  nature  of  the  habiUty  created  between  a  certified  check  and 
the  note  of  the  bank  payable  on  demand.  Each  is  intended  to 
circulate  as  money,  each  is  an  absolute  promise  to  pay  a  specific 
sum  upon  demand,  and  laches  in  making  the  demand  is  no  more 
imputable  in  the  one  case  than  in  the  other."  ^ 

§  419.  Certification  by  Mistake.  —  If  the  check  has  come  to  a 
bona  fide  holder  since  the  certification,  or  the  holder  would  be 
prejudiced  by  the  bank's  recovery  on  account  of  its  mistake,  the 
bank  is  estopped  from  such  recovery  ;  but  a  mistaken  certification 
can  be  corrected  before  loss  to  an  innocent  party  has  occurred  in 
consequence  of  it.^  If  the  bank  certifies  the  check  by  mistake, 
under  the  erroneous  impression  that  it  has  sufficient  funds  of  the 
drawer  to  apply  upon  it,  and  if  the  discovery  is  made  with  reason- 
able promptitude  and  immediately  notified  to  the  holder ;  if  the 
check  itself  still  remains  in  the  hands  of  the  party  who  presented 
it  for  certification,  and  if  his  position  is  precisely  the  same  after  the 
revocation  that  it  would  have  been  had  the  bank  originally  refused 
acceptance ;  if  he  has  not  lost  his  opportunity  to  charge  indorsers ; 
if  he  has  parted  with  no  collateral  security,  has  released  no  sureties, 
has  not  had  his  power  of  collection  from  the  drawer  of  the  check 
diminished  by  any  intermediate  occurrence,  —  then  it  seems  that 
it  is  not  too  late  for  the  bank  still  to  undo  its  mistake  .^  If  the 
mistake  plus  its  revocation  would  prejudice  an  innocent  party, 
there  can  be  no  recovery,  but  if  the  circumstances  are  such  that 
all  innocent  parties  are  in  the  same  position  as  if  the  bank  had 
refused  to  certify  at  first  then  it  may  be  revoked. 

8  Ibid.  132. 

1  §  419.     Bank  v.  Baxter,  31  Vt.  101 ;    Second  National  Bank  v.  West 
National  Bank,  51  Md.  128 ;   Bowen  v.  Needles  National  Bank,  87  Fed 
430  (1898) ;  National  Bank  v.  Miner,  167  Cal.  532,  142  Pac.  670  (1914) 
See  Security  Savings  etc.  Co.  v.  King,  69  Or.  228,  138  Pac.  465  (1914) 
Inter-State  National  Bank  v.  Ringo,  72  Kan.  116,  83  Pac.  119,  115  Am 
St.  Rep.  176,  3  L.  R.  A.  (n.  s.)  1179,  n.  (1905);  Baldinger   etc.   Mfg 
Co.    V.    Manufacturers'-Citizens'  Trust  Co.,    156  N.  Y.  S.  445  (1915) ; 
Union  Trust  Co.  v.  Preston  National  Bank,  136  Mich.  460,  99  N.  W.  399, 
162  Am.  St.  Rep.  370  (1904)  where  there  were  no  funds  in  the  bank  at 
the  time  of  the  certification,  and  the  statute  made  such  certification  a 
crime;   First  National  Bank  v.  Union  Trust  Co.,  158 Mich.  94,  122  N.  W. 
547,  133  Am.  St.  Rep.  362  (1909)  holding  that  the  payee  of  a  check  who 
procures  its  certification  with  notice  of  facts  making  the  certification 
dishonest. 

2  Irving  Bank  v.  Wetherald,  36  N.  Y.  335.  See  also  Watervliet  Bank 
V.  White,  1  Den.  (N.  Y.)  608 ;  Brooklyn  Trust  Co. ;;.  Toler,  65  Hun  (N.  Y.) 
187 ;  Mt.  Morris  Bank  v.  Twenty-third  Ward  Bank,  172  N.  Y.  344, 64  N.  E. 
810  (1902). 

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